Julia Banks will never forget the panic attacks. She still
Julia Banks will never forget the panic attacks. She still
Julia Banks will never forget the panic attacks. She still finds herself waking up in the middleof the night, heart pounding and mind racing, from the stress of running a Donut Kingfranchise in Marsden, Queensland. As debts and losses mounted, Banks and her husbandJohn lost their savings and family home. “It’s pretty well destroyed our lives,” she says.The Bankses started their Donut King store in early 2015 under a franchise agreement withRetail Food Group (RFG). Gold Coast-based RFG is the country’s biggest food franchiseoperator, whose brands include Donut King, Brumby’s, Gloria Jean’s, Pizza Capers, CrustGourmet Pizzas and Michel’s Patisserie. It has a market capitalisation of about $800 millionand claims to have more than 2500 stores.The Bankses are one of hundreds of franchisees who have been financially devastated aftersigning up to one of the high-profile franchise brands under the RFG umbrella. Days afterclosing, John Banks wrote to RFG’s managing director, Andre Nell, telling him his Donut Kinghad joined the growing list of stores that had either been closed, sold at a massive discountto its purchase price or become a “ghost store” – where RFG is still on the hook for rent butthe shop does not open its doors to customers.Since listing on the ASX in 2006 at $1 a share RFG has, for most of that time, producedrecord profits, double-digit returns on equity and fat dividend payouts for shareholders. In2015 RFG stock hit $7.15. It built a reputation as a franchise amalgamator as it spent morethan $500 million in the past decade on 15 acquisitions including Crust Gourmet Pizzas,Pizza Capers, coffee chain Gloria Jean’s, Café2U, DiBella Coffee and Hudson Pacific, a foodmanufacturer and distributor. That scale has also seen it become one of the country’slargest coffee roasters, as it sells to its Brumby’s, Michel’s and Gloria Jean’s franchisees. Inan Australian franchise sector estimated to be worth $146 billion in sales, and where thereare four times as many franchisors per head here as in the US, RFG had become a seriousplayer. But it seems this phenomenal growth has come at a cost.There is systemic wage fraud as franchisees do whatever it takes to make ends meet, theuse of sham employment contracts and the underpayment of overseas workers hired onholiday visas. The evidence of gouging and underpayment comes as RFG’s balance sheet isstarting to show signs of stress. In June, a UBS note suggesting RFG may need to restate itsaccounts to meet new accounting standards sparked a market slump of 11.3 per cent.Chairman Colin Archer then issued a warning at the company’s annual meeting late lastmonth, saying that RFG had become the target of “relentless” short selling by hedge fundshoping to drive down the share price. Archer also used the meeting on the Gold Coast toannounce a company-wide review aimed at ensuring franchisees were paying staffcorrectly.2Some of the problems facing the stores
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