All eyes on impending RFG actions
Coast food franchisor Retail Food Group may be focused on preparing its fullyear results, but all eyes remain fixed on the progress of class action lawsuits against the company.
The Southport-based company has failed to provide earnings guidance for FY19, following a disastrous halfyear net loss of $111.1 million.
Further clouding the picture for the company is the announcement last month that it had received a $160 million recapitalisation proposal from Hong Kong investment firm Soliton Capital Partners. That offer, which is subject to due diligence, would enable the company to pay down its enormous $260 million debt pile.
The Bulletin attempted to find an analyst to comment on the prospects for the Donut King owner for its full-year results expected to be released by the end of next week.
However, only one analyst could be found – Shane Bannan of Sydney-based Bligh Capital.
Mr Bannan said it is too difficult to voice any opinion on RFG’s financial performance due to the threat of the class action lawsuits hanging over it.
They include Corrs Chambers Westgarth investigating a possible class action on behalf of former and current Michel’s Patisserie franchisors believed to involve a claim amounting to tens of millions of dollars
“It is in the lap of the gods as far as the class action lawsuits go,” Mr Bannan said.
“This is no longer an investment-grade stock. The stock price could go to zero or up by a factor of four or five, but it all hinges on how these class actions go.”
It comes as RFG was forced to defend itself from accusations it sent demands for unpaid fees to Michel’s Patisserie owners just days before a crucial class action meeting on the Gold Coast.
Corrs Chambers Westgarth last week organised a meeting at the Labrador Community Centre as part of the law firm’s roadshow for its class action.
It commenced the possible class action against RFG last month on the basis it acted unlawfully when the company sold Michel’s Patisserie franchises.
The firm said former or current franchisees, who have suffered loss or damage, may be entitled to compensation as a result of the Gold Coast company’s actions.
Michael Fraser, a director of Gold Coast-based Franchise Redress, an advocacy group for franchisees, said franchisees had reported being anxious in the days leading up to last week’s meeting.
“For some reason franchisees are feeling very worried about attending these events and that seems to have happened in the days prior to the event,” he said.
Mr Fraser said some had received demands for unpaid bills from Retail Food Group prior to the meeting.
“There’s a general concern there might be a backlash (from RFG). We are not suggesting RFG is doing anything wrong. It does not affect the registration process but it does affect the physical presence of people.”
Mr Fraser said he remained confident in the litigation funder Augusta Ventures and Coors Chambers Westgarth but “cannot control” outside parties interfering in the process.
“If this is not successful in this case it can be attributed to pressure from the company or an external party causing a general fear,” he said.
The action needs “a minimum number of franchisees and a minimum collective claim value” to proceed.
Earlier this month former RFG franchisee Robert Verni stated they were close to obtaining the numbers needed to start the class action.
An RFG spokeswoman said whether franchises attended the meeting was “entirely a matter for them”.
“Like any business, RFG engages with debtors regarding amounts owing as part of normal business practice,” she said. “No letters of demand have been issued as a consequence of the meeting.”
IT IS IN THE LAP OF THE GODS AS FAR AS THE CLASS ACTION LAWSUITS GO ... THE STOCK PRICE COULD GO TO ZERO OR UP BY A FACTOR OF FOUR OR FIVE, BUT IT ALL HINGES ON HOW THESE CLASS ACTIONS GO