More bad news fro RFG/Crust Pizza, page-15

Blame is where blame lies - primarily with the company. Look at any SC food court and you’ll virtually see the entire RFG family lined up right next to each other. Not only are franchisees meant to be competing against other (unrelated) franchisees, they have also effectively been cannibalising their own wider network.

The fluidity of the likes of Michels (and similar in the bakery segment) for example has been growing for years. So too DK. All too often these 2 ahave been arranged right next to each other with absolutely zero degree of separation. That’s not the media’s fault. That’s very much the fault of an overly aggressive, expansionary and otherwise dismissive aggregator such as what RFG is. Instead of effectively competing against others who are unrelated to them, they’ve had to cannibalise their offerings as against each other. All without proper or effective HO foresight, participation or strategic involvement.

Profit harvesting might work in the early stages of growing a system but not in its evolved through to mature stages. By then, they need to be working on evolutionary development or otherwise in full cycle redevelopment (such as what Caltex is now opting to do).

Sometimes, system refresh, even reversion of control for later rebirthing, is just as important as brand refresh. But by the time then that RFG works this all out, they’ll likely be gone, subject to a takeover (process of acquisition, divestment and breakup), or just flatlined in the market and do far as their bankers are concerned.

On Monday (s/to anything else that the ASX might want to query beforehand which is entirely likely but not assured), the SP will slump significantly. If anything, especially given the effective control /oversight /business disposal control that the banking syndicate is exercising, the SP reduction will be as sharp as it will be deep with only a limited DCB to follow.

To survive, certain of the board and management (even more than what has arguably occurred) will have to depart very soon indeed. For RFG, this is now a viability, commerciality, modelling /system, governance, oversight and credibility problem (and that’s without discussing the banks). The question is whether they can weather this. In reality, and given what’s going on here, there is genuine future doubt if ongoing business /commercial viability. All this therefore likely makes for a crimson letter week, next week. Now, for the crisis management process /control mechanisms to kick in for nothing ever good comes of bankers being effectively control or maintaining perception of being control.