Here is another story (see below) published in the AFR late today.
It's another story about the good things Richard Hinson the new CEO is doing.
Amazingly he has just completed the first national roadshow to meet with franchisees. And surprise, surprise over 75% support the changes he is making. 4% are unconvinced and the remainder are sitting on the fence waiting for actions not words.
Also look at the outstanding results in a few trial stores for Donut King.
The turnaround is on boys and girls, though it will take some time.
Enjoy reading the article and have a great weekend.
Retail Food Group CEO Richard Hinson: 'We have to do the right thing'
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"We're all linked together in this journey". Retail Food Group CEO Richard Hinson. Peter Braig
by
Sue Mitchell
Richard Hinson's eyes light up like those of Charlie Bucket as he describes a new merchandising strategy for one of Retail Food Group's biggest brands, Donut King.
Instead of displaying doughnuts neatly lined up on racks, a dozen Donut King franchisees have started piling doughnuts – frosted, jam-filled, and sugar coated – on plates of different sizes, shapes and heights in glass-fronted cabinets.
It's a cornucopia of temptation and it's proving irresistible to customers.
Sales at one Donut King store that's part of the pilot program have risen 15 per cent, says Hinson, who is working on similar merchandising changes for Retail Food Group's other brands including Gloria Jean's, Brumby's Bakeries and Michel's Patisserie.
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Sales at one Donut King store have risen 15 per cent under a new merchandising pilot program. Supplied
"Shopping centres have over-indexed on food so there's lots of competition – what we have to do is stand out from the crowd with food that looks fantastic," says Hinson.
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"Food to me is about movement, passion and colour and if you display it in a way that actually allows you to look fuller for longer, customers are responding to that," he says.
"I'm really excited about what we can do – if we can do the Donut King pilot and get results like that around the country ... it won't happen in every case but if we get 3 or 4 or 5 per cent growth in some of these stores and if we stop the decline ... these results are going to be significant and collectively as a network that's really going to help turn us around."
Hinson has been passionate about food and retail since he started working as a trainee at Woolworths in South Australia at the tender age of 17. He topped his class and within a few years was managing his first Woolworths supermarket.
Over the last 29 years Hinson, now 46, has run snack food businesses and field sales teams for Goodman Fielder and Uncle Toby's, talked turkey on trading terms with Coles and Woolworths as an account manager for global confectionery company Wrigley and managed merchandising, marketing, distribution and logistics for grocery wholesaler Metcash in South Australia and Queensland.
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Sales at one Donut King store have risen 15 per cent under a new merchandising pilot program. Jessica Shapiro
A big challenge
Hinson's passion for food and his breadth of experience in the $100 billion food sector will be crucial if he is to succeed in his latest challenge – saving Australia's largest food and beverage franchisor.
Retail Food Group
shares have fallen 90 per cent to a record low of 40¢, slashing the company's market value from $396 million to just $74 million,
after a Fairfax Media special investigation last December revealed hundreds of franchisees were struggling to keep their businesses afloat due to rising costs, falling sales and lack of franchisor support.
The company has downgraded earnings three times since December and expects underlying profits to fall 54 per cent in 2018. It has flagged bottom line losses of $87.6 million after booking $138 million in impairment charges, asset write-downs and costs associated with closing about 12 per cent of its Australian franchised stores.
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With a $260 million debt pile which dwarfs the Gold Coast-based company's market value, distressed debt investors have started to circle and some analysts believe a capital raising or major asset sales are inevitable if the company is to survive.
"They are in an extraordinarily difficult position," said one analyst, who declined to be named.
"They're almost certainly in breach of their debt covenants and operating at the discretion of the banks," he said. "To get out of that there will have to be some miraculous recovery in franchise earnings."
Belief in brands
Hinson was hired in November – weeks before the Fairfax Media stories broke – by former group chief executive Andre Nell to run the Australian franchise business, working directly with franchisees. He started in January and was thrust into the top job in May after Mr Nell's unexpected departure.
"I came in eyes three-quarters open, before the media hit. I signed my documentation on November 27 before any really loud media noise. I had a three-month notice period with [Metcash] so I had choices to join or not to join," he said.
"The reason I joined hasn't changed. I believe in the brands Retail Food Group has, I believe that collectively we can run this business better than what's been done in the past.
"I believe that there is a real opportunity for us to create a lifestyle for our franchisees, not just a living," says the father of two.
Hinson's turnaround plan includes
slashing operating costs, reducing cost of goods for franchisees, cutting franchisee fees, building field support for franchisees, which had been decimated over the last few years, reinvigorating topline sales through better merchandising, and closing unprofitable stores when leases come up for renewal.
He's forcing prospective franchisees to obtain mandatory financial as well as legal advice, and wants franchisees to become more involved in decision making by joining the group's franchise advisory councils, sharing ideas and best practice.
Navigating franchising inquiry
Last week Hinson travelled around Australia as part of a national roadshow which drew almost 700 franchisees representing about 75 per cent of RFG's network. It's understood he is the first RFG CEO to undertake a national franchisee roadshow.
The feedback from franchisees was encouraging, he said, despite the ongoing media headlines and despite the fact that RFG, like franchisors Domino's Pizza Enterprises, Craveable Brands and FoodCo Group, have featured heavily in submissions to a parliamentary inquiry into the $170 billion franchising sector.
Several former franchisees lodged submissions criticising RFG's business model, alleging its cost of goods was uncompetitive, profit and loss statements provided to prospective franchisees were inaccurate, RFG failed to help them negotiate with landlords and failed to provide sufficient support to franchisees.
One franchisee who bought two Gloria Jean's franchisees accused RFG of unconscionable conduct and dishonest behaviour and said its business model, which was based on growing franchisee sales rather than profits, was broken.
It is understood four former RFG executives have been asked to appear before the inquiry and Hinson is also likely to make an appearance.
Hinson says existing franchisees want RFG to succeed.
According to a survey conducted after the roadshow, 75 per cent of franchisees supported the company's direction and only 4 per cent were not supportive. The rest were "neutral", probably because they are waiting to see whether words turn to action.
"We're all linked together in this journey," says Hinson, who says that after more than 20 years working for major corporations he's enjoying working with small family businesses.
"We're a business that sells food, but first and foremost we're a business that deals with people."
"We have to do the right thing, we have to help people achieve their dreams, we have to face challenges with optimism, we have to look for solutions that are mutually beneficial and we have to do what we say we're going to do," he says.
"The proof will be in the pudding. Once we get this snowball rolling the opportunity for our network and the stores is enormous. I'm really excited about what we can do."
