Hot Topics: Behind the Headlines

Jason Gehrke, Franchise Advisory Centre

Lawyers commence roadshow to promote RFG class action

Lawyers preparing a class action against beleaguered franchise parent, Retail Food Group (RFG) have travelled to several Australian cities across August to speak with former and current franchisees, according to a media report.

The class action would reportedly be based on allegations that RFG behaved unlawfully towards franchisees, causing them to suffer loss or damage, and all former and current franchisees of Michel’s Patisserie are eligible to join.

New owners for troubled swim franchise

The main trading company of beleaguered swim school chain Jump! has reportedly been sold to franchise operator Belgravia’s subsidiary, BK’s Gym & Swim, according to a media report.

The sale of Jump! entity Swim Loops may provide relief to franchisees of the struggling chain, however many are still owed money or after months or years of waiting still, do not have operational businesses. Critics of the sale have been reminded by administrators that the alternative is for the company to “cease trading and be placed in liquidation”.

Jump!’s assets were frozen under a Federal Court order in June, and it faces court action alleging that it misled franchisees through marketing and promotional materials which failed to disclose realistic timeframes for the construction of new swimming pools. The Australian Competition and Consumer Commission (ACCC) is also reportedly seeking injunctions, declarations, pecuniary penalties, and refunds for some franchisees who, despite having paid for their franchises, have been forced to wait up to two years or more to open their businesses.

Boost parent moves closer to sale or float

The multi-brand food company and Boost Juice parent, Retail Zoo, is considering a $400 million trade sale or an initial public offering (IPO) on the Australian Stock Exchange (ASX), according to a media report.

Retail Zoo operates around 650 outlets worldwide under the Boost, Betty Burger’s, Salsa’s Fresh Mex, and CIBO Espresso brands and has reportedly generated consistent double-digit sales and store growth over the past seven years. Financial institutions Citi, UBS, and Goldman Sachs, have been appointed as lead manager for a potential IPO.

Meanwhile, Boost Juice franchise founder Janine Allis is appearing on the fourth Australian season of reality TV show Survivor, which was filmed over eight weeks in Fiji, according to a media report.

1,000-plus franchise outlets to change their name

Delivery services franchise Fastway will rebrand its 1000-plus Australian and New Zealand operations to Aramex, according to a media report.

Dubai-based transport operator Aramex purchased Fastway in 2016 in a deal worth AUD$117 million (NZD$125 million), and the rebrand is seen as the final step in the acquisition. The rebranding is scheduled for completion by early 2020.

$500m sale of Australian fast-food chain

Asian private equity firm PAG Asia Capital is reported to have paid up to $500 million for chicken franchisor Craveable Brands, which operates 580 stores across the Red Rooster, Oporto and Chicken Treat brands, according to a media report.

The acquisition will add to PAG’s existing Australian franchise investment in The Cheesecake Shop, which it acquired for a reported amount of $100 million in 2016.

Craveable owner Archer Capital reportedly paid previous owner Quadrant Private Equity $450 million for the group in 2011, and in 2017 had sought to exit its investment via a public offering, however, aborted the sale due to market conditions at the time.

New owner PAG is expected to drive growth in Asia, expanding from an existing network of stores in Singapore, Sri Lanka and New Zealand.

Outback KFC franchisee campaigns for Michelin rating

The franchisee of a KFC restaurant in Alice Springs in central Australia is campaigning to have his restaurant earn a Michelin Star, despite the Michelin Guide not publishing in Australia, according to a media report.

Michelin stars are used by the red Michelin Guide to grade restaurants on their quality with one star signifying “a very good restaurant”, two stars are “excellent cooking that is worth a detour”, and three stars mean “exceptional cuisine that is worth a special journey.” Franchisee Sam Edelman believes his restaurant qualifies for two and three stars due to its remote location and the quality of the food. Currently, there are 122 restaurants in the world with three Michelin stars.

ACCC releases multilingual info for potential franchisees

The Australian Competition and Consumer Commission (ACCC) has released new and updated information for potential franchisees, including videos, not only in English, but also in Traditional Chinese, Simplified Chinese, and Hindi.

The resources include an information statement, a fact sheet, and three short videos which are designed to deliver key messages to prospective franchisees related to due diligence, seeking expert advice, and highlights some of the risks associated with franchising.

Taskforce open to consultation during Inquiry review

Federal Employment and Small Business Minister Michaelia Cash have announced that the Franchising Taskforce which will review of some of the 71 recommendations of the recent Franchise Inquiry will also consult with stakeholders “across the spectrum of the franchising sector.”

The Minister announced sector stakeholders, which includes franchisors, franchisees and advisors and suppliers, are welcome to provide input to the inter-agency Taskforce, which is being co-chaired by the Minister’s department and also includes senior officers from the Department of Treasury and the Department of the Prime Minister and Cabinet.

In a statement prepared for the Franchise Advisory Centre’s recent Franchise Leadership Forum, the Minister provided a contact email address and web page for stakeholders to contact the department about the Inquiry recommendations, and to track the Taskforce’s, progress.

Australia’s largest retail franchise partners with Franchise Advisory Centre

The Lott, Australia’s Official Lotteries, has partnered with the Franchise Advisory Centre as part of its commitment to fostering best practice in the Australian franchise sector.

With a network of more than 3800 outlets across all Australian states and territories, except Western Australia, the Lott is the nation’s largest retail franchise network, offering official lottery games from NSW Lotteries, Golden Casket, Tatts and SA Lotteries

The Lott General Manager of Lotteries Retail, Antony Moore, says a strong and growing retail franchise network is key to delivering an exceptional customer experience to Australian lottery players. The new partnership with the Franchise Advisory Council comes as the Lott is working on a range of new initiatives to boost the ongoing viability of the retail network.

Vale Rupert Barkoff (1948-2019)

American franchise legal expert Rupert Barkoff recently passed away after complications arising from surgery.

Rupert was a friend to many Australian and New Zealand franchisors and advisors, and each year from 2004 would travel from Atlanta in the United States to the Franchise Council of Australia’s national convention, wherein 2017 he was given a special award by the FCA at its Legal Symposium. Rupert practised in law firm Kilpatrick Townsend for 46 years, and as Chairman of its Franchise Team authored many articles on franchising, and organised or presented at many franchising conferences and legal forums. Each year, he hosted a dinner at the International Franchise Association (IFA) convention in the United States for all Australian and New Zealand delegates.

Rupert was instrumental in assisting several Australian brands in preparing for entry to the US market, particularly pool maintenance chain Poolwerx. His dry wit, sage counsel, boundless curiosity, and penchant for snowglobes will be missed.