Drive-through profit plan
WHAT’S better than hot cinnamon doughnuts and a coffee?
Doughnuts, coffee and wheels are the latest combination Retail Food Group hopes will drive profits for franchisees as they roll out a fleet of Donut King mobile vans.
An insatiable appetite for drive-through and delivered food this week saw Retail Food Group turn its first profit in four years, and it’s a trend executive chairman Peter George believes will continue post-pandemic.
Reporting a net profit of $1.5m – its first black ink since 2017 – RFG revealed it sold 600,000 more pizzas at its Crust and Pizza Capers stores than the previous year, with store sales growing an average 3.2 per cent across its brands.
Standouts included a 17.8 per cent sales increase at its Gloria Jeans drive-throughs and 9.1 per cent growth at its Brumby’s Bakeries.
Underlying earnings for Brumbys rose 39.1 per cent.
The sweet spots were countered by depressed results in its shopping centre-based stores including Donut King, Gloria Jeans and Michel’s Patisserie, which continued to suffer from prolonged lockdowns in NSW and Victoria.
“It was a mixed year where we had half of the businesses exceeding expectations,” Mr George said.
“Brumby’s bakeries had a cracking year as people returned to their local baker instead of the supermarket.”
RFG revealed 85 outlets had permanently closed in the past year, while 40 had closed temporarily due to lockdowns. Meanwhile, 17 new stores were opened.
It’s a positive turnaround for RFG compared to the 305 that closed in 2017-18, when no new stores launched.
There are 750 RFG outlets – a modest portfolio compared to the 2516 stores it boasted at the 2017 peak of a costly acquisition spree.
RFG’s strategy is likely to follow a consumer shift towards drive-through food, accelerated by Covid-19.
“There’s no doubt that the drive-through model is much more lucrative if you get the entry price right,” Mr George said.
“For example, a Gloria Jeans in a shopping centre might make $20,000 a week, whereas our most successful drive-through in western Sydney made $100,000 a week during Ramadan and $70-80,000 in a regular week.”
The group has been in recovery mode for more than three years, with its future hinging largely on two factors beyond Mr George’s control – Covid-19 and the Australian Competition and Consumer Commission
In the wake of a damning parliamentary inquiry into franchise operators, the ACCC brought an unconscionable conduct case against RFG, which remains before the Federal Court.
The commission alleges RFG breached Australian Consumer Law by engaging in false, misleading and deceptive conduct when it sold or licensed 42 loss-making corporate stores to incoming franchisees between 2015 and 2019.
Mr George expects an adverse finding, but the degree of adversity remains unclear, with significant fines and other penalties very much on the table.
The company has filed a detailed defence in response to the allegations and is hoping for a swift result.
He said the previous management’s model of acquisition couldn’t be further from today’s approach.