RFG settles unconscionable conduct case

RFG settles unconscionable conduct
Some Michel’s franchisees are among those who will receive payments from RFG. (Source: Supplied)

The Retail Food Group will pay $5 million to some franchisees of Michel Patisserie stores as part of a court-enforceable undertaking that settles the unconscionable conduct proceedings brought by the Australian Competition and Consumer Commission.

It has also agreed to waive franchisee debts related to the purchase of some corporate stores.

ACCC Chair Gina Cass-Gottlieb said “We are pleased that RFG has agreed to make payments to certain impacted franchisees. We initially took this action because we were concerned with the alleged conduct and the impact on a number of small business operators.

“This settlement, which consists of payments to franchisees and waivers of debt totalling approximately $10 million, provides a more certain and beneficial outcome for affected franchisees than would likely result from the continuation of the ACCC’s long-running legal proceedings,” Cass-Gottlieb said.

Michel’s marketing fund

The ACCC had alleged certain payments had been made from the Michel Patisserie’s marketing fund for expenses which were not legitimate marketing expenses and had not been adequately disclosed to franchisees nor agreed to by a majority of franchisees.

RFG will compensate franchisees who paid levies into the Michel’s marketing fund between 1 July 2012 and 30 June 2017. The payments represent an agreed percentage of the marketing fees franchisees contributed to the Michel’s Patisserie marketing fund over that period.

Waiving historical debts

RFG has also agreed to make payments to, and waive historical debts of, a number of affected current and former franchisees. These franchisees had between 1 January 2015 and 31 December 2018, unknowingly bought into corporate stores that had operated at a loss – something RFG did not disclose at the time of purchase.

Payments to compensate franchisees will be based on the purchase price paid for their franchise, less any amounts of outstanding vendor finance loans.

RFG will be required to regularly report to the ACCC about the actions taken and payments made, under the undertaking.

The franchisor has also undertaken to implement a compliance program in relation the Australian Consumer Law and the Franchising Code of Conduct.

RFG will pay a contribution to the ACCC’s legal costs.