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THE situation for Retail Food Group (ASX: RFG) continues to go from bad to worse with the potenital class action against them now expanding to assist franchisees.
In December 2017, Bannister Law announced investigations for a potential shareholder class action into Retail Food Group over possible contraventions of the Corporations Act.
Bannister Law has now expanded the scope of its investigations and is exploring the relationship between RFG and its franchisees.
The class action was taken against RFG, the owner of various food franchises like Pizza Capers and Gloria Jean's Coffee, following a report from Fairfax Media which scrutinised dealings with franchisees under its brands.
Bannister Law founder Charles Bannister says a number of concerns have been raised by a multitude of franchisees, including the terms of operation, and contributions made by the franchisees including, but not limited to, marketing fees.
"Accounts by many franchisees suggests that some franchisees may have been forced into severe financial hardship," says Bannister.
"Many have been left devastated financially and personally."
Bannister Law is working with franchisees and the action group Franchise Redress to investigate the potential of a class action or other action on franchisees behalf.
Co-founder of Franchise Redress, Maddison Johnston, says a significant number of RFG franchisees have been in touch with the organisation with substantial problems.
"We've had contact from over 100 franchisees, many of whom have raised concerns around RFG's conduct," says Johnston.
"They allege issues around the company's goodwill, the viability of stores at sale and the lack of appropriate disclosure on a range of matters including the prior performance of stores at purchase."
Bannister Law and Franchise Redress encourage RFG franchisees to express interest in the potential class action with the law firm.
The embattled franchisor has had a weak start to 2018, with the group issuing a profit warning for the second time in as many months on the 9 January. RFG stated its expected NPAT for the first half will be even less than the $22 million it forecast in mid-December.
Since the Fairfax investigation went public, the master franchiser has been beset by troubles including a single-day share price collapse of more than 20 per cent on 19 December.
At the time, RFG said the media coverage, which reported scathing accusations against the group, was partly to blame for the fall in sales. It also said it was suffering from tough retail conditions in Australia.
Shares in Retail Food Group are trading down 4.13 per cent to $2.09 per share at 11.01am AEDT.
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