Ann: Response to ASX Aware Query, page-26

Be very careful. The pain has only just started for RFG. Their trading update tells us that they were relying on franchise churn to generate profit and also $5 mil for the sale of a master franchise. That tells us that the underlying profit is tanking badly or was non existent in the first place. A class action looks imminent based on today's article. In less than a week they went from confirming guidance to major downgrade.

The bigger issue now is that they have about $700 mil in goodwill for all the businesses they acquired. This I suspect will be the subject of a review and write-off now that they can't give away franchises.

Also, once they finally show the impact of IFRS next year they will show a large spike in liabilities as they have to show leases signed by RFG and sublet to franchisees.

When these things start to unravel more bad news usually follows.