Former Michel’s Patisserie franchisees have hit owner Retail Food Group (RFG) with a multimillion-dollar class action, saying they were left financially ruined after being forced to sell “disgusting” frozen cakes.
The case, brought about by a group of 130 current and former franchisees, alleges RFG displayed unconscionable conduct, misused marketing funds and pressured struggling franchisees to invest more in failing stores.
In their allegations, they claim the company, which also owns Donut King, Gloria Jean’s, Brumby’s Bakeries and Crust Pizza, stopped delivering fresh food daily and forced businesses to sell lower-quality defrosted cakes and pastries instead, leading to the demise of their businesses.
In a statement, RFG denied the allegations and said it will be defending the proceedings.
However, this is just the latest in a series of scandals to rock the food giant after a journalist exposed its mistreatment of franchisees in a series of articles published by Nine newspapers in 2017.
The Australian Competition and Consumer Commission (ACCC) is also prosecuting RFG over its dealings with franchisees, claiming the food giant made false and misleading claims. Additionally, the ACCC accused the company of misappropriating funds, in breach of the Franchising Code.
Federal court filings allege RFG’s conduct was “unreasonable, arbitrary [and showed] a capricious disregard of the interests of franchisees”.
The filings said it was “in breach of RFG’s duty to cooperate to achieve the purposes [of] the franchise agreement … [including] opportunity for the franchisee to earn profits and realise a return on their investment”.
Franchisees also allege RFG failed to disclose risks to new franchisees after the changes, including “that there was no reasonable prospect of the franchisee making a profit”.