The proprietor of a Michel’s Patisserie and Gloria Denims will fork out $10 million to its franchisees for alleged improper use of promoting funds and for failing to disclosure that the shops being bought to some franchisees have been loss-making.
Retail Meals Group stated on Friday it could make $8.04 million in funds to its franchisees and waive money owed of franchisees totalling $1.82 million to settle a civil penalty motion introduced in opposition to it by the Australian Competitors and Client Fee (ACCC) in late 2020.
The funds will embrace a $5 million refund to the group’s Michel’s Patisserie franchisees for charges they paid right into a advertising and marketing fund for the group.
The ACCC case was sparked by an investigation by this masthead in December 2017 that exposed the corporate and its brokers had been utilizing a crushing enterprise mannequin that was driving a few of its franchisees to the wall.
The investigation additionally revealed that in some cases, franchisees had been given incorrect, out-of-date or incomplete details about the monetary efficiency of the shop they have been shopping for off the group as a part of the franchise association. The media investigation sparked a rout in RFG’s share worth, which was buying and selling at $4.40 earlier than the stories. RFG shares at the moment are price round 7c.
The ACCC’s case had alleged that between 2015 and 2018, RFG bought or licensed plenty of company shops to franchisees. The ACCC had alleged RFG knew these shops had been working at a loss however didn’t disclose this earlier than the sale to the franchisees shopping for or licensing the shops.
The regulator had additionally alleged sure funds have been constituted of the Michel Patisserie’s advertising and marketing fund for bills that weren’t official advertising and marketing bills and had not been adequately disclosed to franchisees nor agreed to by a majority of franchisees.
RFG, which additionally owns the Pizza Capers, Crust, Brumby’s and Donut King manufacturers, stated it had made no admission as to the ACCC’s allegations within the civil penalty continuing and would pay no penalty as a part of the settlement. The franchisor has agreed to pay among the regulator’s authorized charges.