Is there liquidity risk here? I don't see it but someone please help make the argument.
They cover interest payments 10x from EBITDA. If they cut sales by 50%, they cover interest 5x. Their business model takes a percent of sales, so no matter how profitable the franchisee are, RFG is going to have a very high margin and profitable business at almost any run rate.
The only angle on liquidity I can see is that they if someone could litigate that they have been using unfair contracts and attempted a class action on behalf of all franchisees, the award from that could significantly burden the business with a long-term obligation, and at that point they might intentionally bankrupt the business and attempt to reorganize. I don't know Australian administrative law. Is something like that possible. It could happen in the US.
RFG Price at posting:
$2.15 Sentiment: Buy Disclosure: Not Held
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