Retail Food Group, the franchisor of iconic brands including Brumby's, Donut King and Gloria Jean's, has issued a warning to store owners not to air their complaints in public or risk breaching their franchise agreement.
The memo was sent to store owners across the country on Saturday in response to a Fairfax Media investigation that revealed hundreds of stores were going to the wall as a result of a brutal business model.
One franchisee, Wayne Hong, described life as an RFG franchisee as akin to slavery.
"They treat us like dogs," he said.
Numerous franchisees claim the company spies on them and charge crippling costs, including franchise fees, which is driving the stable of brands to the ground in its quest for fatter profits.
Since the story broke at the weekend, more than 100 franchisees have come forward, describing life inside the RFG machine. Marriage breakups, retirement savings torched and bankruptcy are some of the stories being shared.
One NSW-based Michel's Patisserie franchisee told Fairfax Media: "I feel relief, something stuck in my chest for a long time and now the truth is let out."
A Crust franchisee wrote in to say: "I lost my house, my superannuation and my savings after having to put my business, a Crust Gourmet Pizza Store, into liquidation in January 2017. I now live on the aged pension."
RFG chief executive Andre Nell told franchisees in the weekend memo that RFG would look at increasing support to franchisees.
"We acknowledge that we can improve the support we provide to each of you and are committed to making this happen," Mr Nell said.
He also acknowledged the challenges they faced.
"We fully appreciate that each of you operate within a challenging and evolving retail market, particularly those of you who operate within the shopping centre environment."
He said he would keep the franchisees updated on an "action plan".
But he also warned franchisees against speaking out.
"Whilst we remain committed to working with any franchisee to resolve any concerns, queries or challenges they may have, our policy is not to publicly comment on specific Franchise Partner circumstances," he said.
RFG has appointed accountants at Deloitte to conduct a "business-wide" review of its domestic franchise operations, including Donut King, Gloria Jean's, Brumby's Michel's, Crust Gourmet Pizza and Pizza Capers, to ensure its business model was "appropriate for a retail market which remains challenging, particularly for shopping centre tenants", said Mr Nell. It is expected to take two years.
The Deloitte review will also look to address whether RFG's franchisees were underpaying staff.
Fairfax Media's investigation has uncovered systemic wage fraud as franchisees do whatever it takes to make ends meet. This includes the use of sham employment contracts, the underpayment of overseas workers hired on holiday visas and underpayment of teenagers.
The series has also delved into the business history of the man who listed RFG on the ASX: Tony Alford.
In his letter to franchisees, Mr Nell also reminded franchisees of their obligations under Australian employment law.
"For some time now we have regularly engaged with you in relation to these matters and taken many proactive steps to better inform, support and educate you in relation to your employment obligations," Mr Nell said.
"We've also supported these measures with a monitoring and supervisory framework that many of you will already have had experience with, and which Deloitte is evaluating as part of the business-wide review noted above," he said.
Franchisees were sent a separate letter detailing the company's media protocols.
"We've all invested in our brands, and consequently, have a stake in their success," the media protocol says.
"Accordingly, at RFG, we provide you with support in the event you are contacted by the media or a third party seeking information about your business, brand or franchise relationship.
"For these reasons, your Franchise Agreement requires that you obtain Franchisor approval before answering any questions asked by the media or third parties in relation to the matters noted above."
Do you know more? Contact Adele Ferguson or Sarah Danckert
