BUSINESS COLLAPSE: ‘I had to empty my kids’ accounts’
A FORMER Michel's Patisserie franchisee was forced to raid his children's bank accounts to pay off debts after the collapse of his business.
Speaking to Channel Nine's A Current Affair on Monday, Melbourne man Robert Verni told of how his entire family was "financially ruined" by Retail Food Group, the country's largest franchise operator which owns brands including Michel's Patisserie, Gloria Jean's and Donut King.
"I had to take everything out of our own life savings, my in-laws, their accounts, my kids' accounts," he said. "You put yourself in my shoes, try to tell your kids they haven't got an education, because I've got to rip money out of my own kids' accounts to help them, to pay off their debts.
"We're left with nothing but a debt of $350,000. You do that to your family where they put everything on the line for you and then that happens. I want my life back. I can't live the way we're living at the moment. Financially we are ruined."
He blamed the collapse on rent increases of up to 85 per cent, crippling fees and charges, lack of product innovation and advertising, and poor-quality products foisted on stores by RFG, which also demanded they raise prices.
Mr Verni said he was even forced by RFG to spend $150,000 on two expensive store refurbishments. "We told them we can't afford it, we can't afford it, we can't afford it," he said.
"How does a business of 11 years, the number one store in Australia in turnover, go bankrupt?" he said. Other former franchisees told of being forced to fork out $15,000 for "training sessions" with RFG - after which they still didn't know how to use the coffee machine.
Shares in RFG roughly halved in value last month, wiping $500 million off the company's market capitalisation, following a Fairfax Media expose which revealed franchisees were being driven to the wall.
RFG denied the reports but warned last month that its half-year profit was set to fall by more than 30 per cent, partly blaming the negative publicity and tough retail environment.
In a lengthy statement on Monday, RFG hit back at Channel Nine, accusing A Current Affair of "regurgitating" allegations from previous media reports. "RFG is Australia's largest multibrand retail food franchisor and is proud to support numerous small businesses across Australia," the statement said.
"We remain committed to the livelihood and profitability of each and every one of our franchise partners, as our futures are interlinked: if they succeed, then so do we.
"More than that, we are also appreciative of the incredible role all of our franchisees play in their community as employers and providers of great products which enrich the lives of our customers.
"We ask that the Australian public continue to support them, especially during this time when retail conditions are challenging. The story that aired on A Current Affair last night does not reflect these points, nor do we consider it an accurate representation of our Brand Systems or the support we provide to our franchisee community.
"We are also disappointed that A Current Affair chose only to contact us yesterday for comment after they had already started promoting their story, and then only following approaches from RFG requesting details about the story.
"In addition, although their story appears to have been in development for some time, it essentially regurgitated allegations previously raised by other media outlets which RFG has already rejected.
"Ultimately there are many successful franchisees operating within our networks. That said, we appreciate that in this challenging retail market we can improve the support we provide to each of them.
"We are committed to making this happen, and have taken, and continue to take, numerous steps to improve outcomes for our franchisee community.
"We look forward to unveiling these initiatives in the future, and sharing more of the positive stories that exist within our network so that the Australian public can appreciate that there are two sides to every story, and realise our genuine commitment to our franchisees' future success."
It comes amid growing warnings from experts for prospective business owners to do their research before buying into a franchise.
Franchises market themselves as proven business models, but some research suggests franchises fail at even higher rates than independent small businesses - and there is no shortage of horror stories.
In 2016, a former franchisee with collapsed pizza chain Eagle Boys told of how he lost his house and was forced to live in a caravan park after the failure of his Mildura store, which he had been led to believe would be a "cash cow".