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A strong performance from bakeries and pizza stores has not been enough to prop up the franchise network of Retail Food Group (ASX: RFG) from depressed sales due to Covid-19.
The company announced this morning it would be consulting with personnel to either stand down or reduce the working hours of the majority of staff.
RFG notes whilst Brumby's performance has continued to exceed expectations over the past few weeks, recent trading data supports management's expectations for a significant reduction in customer count across the group's domestic franchise network.
This has been most keenly felt at outlets within shopping centres as a direct response to the Covid-19 outbreak and increasingly more stringent measures introduced by governments.
RFG executive chairman Peter George notes a strong link between the Group's performance and that of its franchise network, which has been impacted by rapid changes within the retail market.
"A large majority of our franchise partners are facing an extremely difficult trading environment, particularly within shopping centres, as consumers react to the increasingly onerous measures taken by government, and of course are focused on more immediate issues such as their and their family's health and safety," says George.
"As a responsible franchisor it is necessary for us to take a long-term and pragmatic approach to best assure the future sustainability of our franchise network for all stakeholders, to ensure our costs are reduced to match our anticipated revenues in the foreseeable future, and to best position RFG and its franchise network for a return to less challenging times.
"We remain focused on providing practical and meaningful support to our franchisee partners, including financial assistance for those who require it most, and are continuing to closely monitor the preventative actions taken by government and regulators in the markets that we operate in and their potential impact on our business."
RFG employs around 500 people directly, but there are thousands of staff employed by its franchisees around the country.
The company does not actively track the total number of staff employed by the franchisees themselves. However, in a submission to the Franchising Code of Conduct Inquiry, which released its findings in March last year, the company claimed the network employed approximately 15,000 team members across the country.
Those people were employed across more than 1,000 franchisee outlets in Australia, but in RFG's latest half-yearly results released in February it notes the store count has fallen to 984 outlets across its domestic bakery/café, coffee retail and quick service restaurant (QSR) divisions.
Updated at 10:37am AEDT on 27 March 2020.
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