RFG takes former Michel’s Patisserie franchisee to court over $90k debt

A younger Gold Coast loved ones is becoming dragged to courtroom soon after their Michel’s Patisserie franchise went out of business enterprise, in what is currently being described as a “ruthless” go.

A youthful Gold Coastline family is being dragged to court by Retail Foodstuff Group around $90,000 in alleged money owed in what they think is an act of retaliation for taking part in a course-action lawsuit towards the scandal-plagued franchising huge.

Information.com.au can reveal RFG has introduced at minimum three these circumstances in the earlier three months even with earlier vowing to put allegations of franchisee mistreatment “in the past” – and customer advocates panic it may perhaps be the get started of a wave of aggressive debt assortment focusing on people who have presently lost everyday living discounts.

In March, RFG filed personal debt assortment motion in the Victorian County Courtroom from a former Gloria Jean’s franchisee trying to get $209,024.041 furthermore fascination. That circumstance is ongoing.

The exact same month, a different case from a previous Donut King franchisee submitted in the Brisbane District Court docket in February resulted in a default judgment in favour of RFG.

And in April, previous Michel’s Patisserie franchisee Younger Yoh Rho was served papers in the Brisbane Magistrates Courtroom looking for $88,549.62 plus interest.

‘Get just about every penny they can’

“We experience it is unfair that we experienced appear to the point where by we couldn’t keep on functioning our keep owing to fiscal challenges,” he told information.com.au.

“RFG often say they support their franchisees but they available no guidance at all in the 9 a long time I operated this retail outlet and are continuing to get every single penny that they can out of me.”

The 40-yr-previous was pressured to shut down his Westfield Gold Coastline keep in 2021 after Covid lockdowns proved the final nail in the coffin for the enterprise.

He originally worked as a staff member at the retail store just before taking in excess of the franchise himself.

“When I worked there it seemed like a fantastic shop, incredibly hectic, [but] when I started out functioning it I identified out there are much too several fees,” he mentioned.

Sales then began to drop by “5 to 10 for each cent, year by year” immediately after RFG designed a series of variations to the company design, like shifting from fresh new to frozen cakes.

“When my partner took over he was accomplishing quite well,” his wife Erina reported.

“At that time RFG was centered on specialty cakes. I believe when they commenced frozen to new, which is when it started out going downhill. They begun to alter the specialty cakes, where it expected far more of our labour, items like that.

“Also the goods, the good quality was lousy but highly-priced.”

The 32-yr-previous mentioned with no buyers they started to drop at the rear of on their hire for the duration of Covid, and that irrespective of their pleas RFG “didn’t seriously support us” and refused to negotiate. They paid out all around $80,000 in advance of they exited, but were not able to occur up with the remaining $88,000.

“Because we have been falling behind we had to close the retailer, the small business wasn’t building anything,” she reported.

“We could not negotiate. We gave them all that we could at that time. We retained inquiring them to negotiate but they rejected [us], they would only chat about producing a payment prepare.”

‘Targeted’ just after becoming a member of class action

The few are element of a class motion, introduced late last year, in which 130 existing and previous franchisees allege they were left monetarily ruined just after currently being compelled to provide “disgusting” frozen cakes.

Ms Rho explained soon after they gained a letter from RFG’s personal debt collectors, the legislation agency managing the course motion, Corrs Chambers Westgarth, “contacted RFG and informed them, due to the fact we are component of the course action, do you head putting that on hold?”

Soon afterwards, they ended up stunned to be served with authorized papers by RFG.

“It feels like when they discovered out we ended up element of the course motion, that is when we obtained served,” she explained. “It would seem like we’ve been qualified. It is quite unusual.”

The statement of claim suggests the few are in default of their franchise agreement soon after failing to make a section payment of their credit card debt.

“On November 26, 2021, the plaintiff’s representative produced a prepared demand for payment of portion of the debt in the sum of $12,650 from the defendants pursuant to the settlement and promise,” it reads.

“Despite the requires, [the defendants have] failed, refused and/or neglected to pay back the personal debt pursuant to the arrangement.”

Ms Rho reported they are determined to negotiate some form of reduction.

“We will have to market our automobile, probably get guidance to see what we can do to get obtain to our superannuation, it’s possible borrow revenue from family,” she said.

‘Why be ruthless with franchisees?’

Client advocate Maddison Johnstone from Franchise Redress explained RFG “seems to feel entitled to proceed harming people today who escaped their brutal franchise model”.

“It seems there is no respite as a franchisee of RFG – they will endeavour to carry on sucking you dry even when you have remaining them,” she stated.

“RFG’s conduct was so undesirable that parliament called them out. They are facing regulator motion from the ACCC. They have by no means taken obligation for the distress caused about several decades to day to day folks. As an alternative, they think it is justifiable to pursue some of their victims in court.”

Ms Johnstone claimed RFG “tells shareholders they have a franchisee initial commitment”.

“Suing franchisees is an intriguing and curious way of holding by itself to that dedication,” she explained. “If RFG has so substantially faith in their strategic route and ‘successful initiatives’, why be ruthless with franchisees?

“Suing victims tells you almost everything you require to know – not a lot has transformed at Retail Food Group.”

RFG defends ‘reasonable’ steps

In a assertion, a spokesman for RFG defended the debt selection steps and said the corporation experienced offered “significant help and assistance” to franchisees for the duration of the pandemic.

“Consistent with any other company, and if it is to proceed its thriving initiatives and aid actions … RFG will have to search for restoration of quantities legitimately owing to it by franchisees (irrespective of whether they be present or former franchisees),” he mentioned.

“We do not contemplate this to be inconsistent with our franchisee first commitment.

“To the opposite, as you would take pleasure in, it is affordable and important in the passions of RFG’s franchise community as a whole that RFG acquire diligent and ideal ways as a dependable franchisor to seek recovery of sums owed by franchise associates, as those people sums specifically add toward the procedure and progress of the community in the fascination of all franchise partners.

“RFG acts pretty and correctly towards franchise associates in relation to financial issues, such as the recovery of payments which might be owed by them.”

He denied any personal debt assortment was “retaliatory in nature”.

“The credit card debt which is the topic of the courtroom continuing from Young arose properly in advance of the class action was even commenced,” he explained.

“It continues to be remarkable and … has in no way been legitimately disputed. 

“Well immediately after our lawful and genuine collections exercise commenced in relation to that debt, the attorneys for the class motion plaintiff, Corrs Chambers Westgarth, wrote to our credit card debt collectors and asked that RFG’s collections activity be stayed indefinitely pending the willpower of the class motion proceeding – which, for the history, relates to claims that have nothing to do with the debt.”

He claimed lawyers for RFG responded and “made apparent that there was and remains no proper commercial, authorized or other foundation for RFG to stop collections activity based mostly on an extraneous proceeding which has practically nothing to do with the subject make any difference of the debt”.

“Young has since the day collections exercise commenced … neither compensated his legitimate personal debt or lifted any suitable foundation to dispute the financial debt,” he stated. “It seems that his only reaction has been to raise imprecise, inaccurate and self-serving statements with the media, in the hope this would dissuade our genuine things to do.”

$1 billion collapse considering the fact that 2017

Shares in the Gold Coast-dependent business have been all but wiped out considering the fact that allegations of mistreatment of franchisees to start with manufactured headlines in late 2017, sparking a several years-extended regulatory, legal and reputational fallout.

RFG shares after traded at very well about $7 but today are well worth just 6.2 cents, a additional than 99 per cent tumble since their 2015 peak, and all over one 14th the worth of the company’s 2006 listing rate of 87 cents.

At its top, the company experienced a market place cap of a lot more than $1 billion.

The revelations sparked a parliamentary inquiry into Australia’s franchising sector, ensuing in a collection of regulatory reforms which includes a harder penalty routine that arrived into effect previous thirty day period.

An whole chapter of the committee’s closing report released in March 2019 was focused to RFG, which it reported experienced “destroyed” the life of franchisees and “damaged the popularity of franchising much more broadly inside Australia”.

In 2020, the levels of competition watchdog launched federal courtroom motion alleging RFG experienced engaged in “unconscionable and deceptive conduct” in dealings with franchisees.

The Australian Opposition and Client Fee alleged RFG withheld important fiscal details when it marketed or accredited 42 reduction-generating corporate suppliers in between 2015 and 2019, and “falsely represented that these decline-creating outlets had been viable or profitable”.

RFG is also alleged to have improperly utilized promoting money, to which franchisees experienced contributed, to pay back for non-marketing and advertising expenses – together with to put into action the Michel’s Patisserie fresh new to frozen business enterprise product change.

The ACCC’s proceedings versus RFG are ongoing, with a scenario administration listening to scheduled on July 7.

Corrs Chambers Westgarth did not right away reply to a request for remark.

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