Over Sold, page-202

Whilst all the issues around the profitability of the franchisees are very important, it is the lack of transparency around the financials that is causing most of the concerns:

1. How much of the profit is from revenues versus fees from new franchisees and churn of frachisees ?Unprofitable franchisees and bad press reduce sales of new franchises and opportunities for churn. This determines sustainability of profits ?

2. How much have they loaned to new franchisees to pay the fees ? How much of this is sitting in the balance sheet as a receivable? This has been counted as profit but is unpaid. This means new franchisees are hard to get and don't have cash so are high risk if they default.

3. The Alford's sharholding is opaque. Recent changes in the share holder notices mean the Alford ownership of over 10% of the company is now distributed amongst many holders and it is hard to tell if they are selling.

4. Why did so may senior people leave over a short period ? Is it time to to get out and run ?

5. Any time a Chairman (who is also leaving) blames the shorts for their problems we should be concerned. Shorts are only successful when the target gives them a reason.

6. Managements responses to the articles have been less than convincing and not supported by any details to remove the concerns above.

7. Disregard the confirmation of guidance. SHG did that multiple times just before the were forced to do huge write offs. Not saying RFG will but don't believe it. In Feb they will probably announce that profits are down on PY. That will again out pressure in the SP.