Called RFG's CFO, Robert Shore on 15th March 2024. We spoke for around one hour. I called the CFO because I figured he would have his finger firmly on the pulse of the company, the next call with be with the CEO.
It's been around 15 months since RFG managed to resolve its longstanding litigation issues in its favour, although, unfortunately, the RFG name was left with plenty of mud on it. Shareholders remain cautious and the shareprice hasn't yielded much joy.
My conversation with RS was positive in its tone. Coming from Perth, I sometimes call mining CEOs who shamelessly lie through their teeth. I did not notice any of that with RS. Here are some notes.
Surprise
Given RFG's litigation history and the bad publicity that came with it, three out of five institutions on the share register have lobbied for a name change. This is likely to happen this year. "Name changes are usually a distraction - they don't amount to higher sales or better business," I said. RS explained that the RFG name was damaged to the point that it was hard to recruit staff. No doubt lots of energy is needed explaining to new franchisees that today's RFG is not what it once was. Fair points. I'm not a fan of name changes but I guess we must move on from our Union Carbide name.
Future Capital Raising
I was told it will not happen because there's no need. The last rattling of the tin was a biggie and they have more money than they need. So, no more dilution - that's good.
Share consolidation
This is not on the horizon but " ït makes sense" (RS). I got the feeling it could have traction at the next AGM when the name change takes place. We shareholders need to push for this.
Beefy's Acquisition
It's gone well, board and management are happy enough. I was told the acquisition price was enticing and after being on sale for a year, Beefys fell into our lap. My concerns that there was no land component in the acquisition was swiftly deflected because "that money could be better used for expansion." The emphasis at Beefys is on "vertical integration" from one-site manufacturing to multi-site sales. Apparently Beefies have a much lower labour cost than other brands, and I guess that's a good thing. I forgot to ask how quickly Beefys can be rolled out elsewhere.
Dividend
There is no doubt the reinstatement of the dividend will happen. But not just yet. RS expressed concern that skipping or lowering a dividend usually attracts negative attention from instos. It looks like we will not get a div this year with funds earmarked for other purposes. Regular divs bring legitimacy - the sooner divs can be reinstated, the better.
Other Stuff
According to RS, we tick all the boxes as far as sales hurdles go. He says instos on the register are happy with progress. I was a bit disappointed that SOL, our white knight and cornerstone investor, has minimal input with the company. Apparently, they call once a month or so, RS said. Given that they have pumped millions into the company, I would have expected a bit of "activist fervour" would not be misplaced. They seem content to let management do their thing and, although I disagree, that's fair enough.
Apparently plans are afoot to convert at least a few Michels to Gloria Jeans. One such conversion reported a 60% increase in sales in the first week. Elsewhere, GJs seems to be doing nicely. We are in 32 countries. There are 200 stores in Turkey alone. America is up to expectation, the UK isn't doing terribly but progress seems to be muted. Domestically, I am told they experimented successfully with faux-Japanese takeout food bowls at one Aussie GJ store and it went well. That's one way to boost GJ sales.
Twenty of the 205 DK stores are company owned. I mentioned the success of Daniel's and Brooklyn Donuts. According to RS, Donut King is not focusing on the high end gourmet market, where donuts sell for as much as $9 apiece, preferring to chase its current mass market. I was told that coffee at DK is much improved and as good as anything one can get elsewhere.
There will be more digital kiosks rolled out in RFG stores, especially the busier ones. I was also told QR code pre-orders yield greater sales than real-life orders. I guess that's the way of the future, with milennials wanting to minimize face-to-face interactions.
Ribs are available for takeout in 95 stores. This area of the business has low set-up costs and works well with pizza ovens. It is doing very well. Brumbys is struggling to find qualified baking staff. Otherwise, progress is as expected.
There you have it. I am still on the register and have no plans to leave for a few years. I firmly believe this will be a dollar stock in a decade or so with annual dividends equal to what the current share price is. But thats me, I am a dreamer. DYOR because this stock is not for widows or orphans, there will be volatility because the ride will be bumpy.
If anyone wants to participate when I call the CEO, please reach out. Maybe in a couple of months from now.
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