The company, which owns the bakeries of Gloria Jeans, Donut King and Prampi, is facing legal action for deliberately selling non-profit owners.
The Competition Monitoring Group has accused the retail food group, one of Australia’s largest multibrand ownership activities, of operating unrestrictedly and engaging in misconduct, misconduct and fraudulent practices when selling or licensing 42 loss-making stores to new owners between 2015 and 2019.
The Australian Competition and Consumer Commission alleges that the RFG withheld sensitive financial information from them and that the false stores violated Australian consumer law by making it possible or profitable.
ACC president Rod Sims told NCA Newswire that a third of the 42 stores were closed.
Documents issued to incoming owners stated that the company could not estimate revenue for a particular store, but actually knew the figures for each, the ACCC said, and were “well aware” that they had not made a profit on current or previous funding year.
“There is no way for prospective owners to know the actual financial performance of the stores. We allege that the retail food group used this when selling or licensing stores,” Mr Sims said Tuesday.
The federal court action also included allegations of violating the RFG licensing code by using the marketing fees paid by all owners for other activities – in some cases for the costs of employees who are not executives and marketing roles, and for not disclosing payments.
“According to Michael’s Pattissery Marketing Fund, the retail food group is said to have paid about $ 22 million from the marketing fund to cover a variety of operational and non – marketing costs, including the cost of replacing a business model with frozen new cakes,” the ACC said.
The ACCC did not impose charges on RFG’s other brands, such as Crust Pizza, Pizza Coppers and The Coffee Guy.
“These actions are historic and are of concern to various senior executives who are not with the company,” RFG told ASX in a statement.
It said the issues the case was considering were “relatively narrow”.
“The ACC has not pursued many of the broader and more serious allegations raised during the company’s comprehensive investigation in almost three years,” it said.
This includes the level of training and support provided to owners and the competitiveness of the prices of products offered on behalf of owners, RFG said.
The company, under its chairman Peter George, “has taken a perspective approach to improving and improving its licensing systems for the benefit of its owner partners.”
“RFG will maintain its focus on improving the owners’ current revenue, ”Mr George said.
Mr Sims said the RFG’s behavior underscores the lack of strong laws in Australia.
Under the Ownership Code, companies can impose a maximum of 3 133,000 fines.
“We have to look at the ownership laws. At the moment they are on an index with very low penalties for violating them,” Mr Sims said.
“There are issues in the ownership sector, and we may need very strong rules to prevent full-scale behavior.”
Australian consumer law violations attract fines of up to $ 1.1 million or 10 percent turnover.
Shares of RFG fell 6.59 percent to close at 8.5.