Australian Competition and Consumer Commission (ACCC) officials have started court action against Retail Food Group and allege it kept important details from franchisees when it sold 42 loss-making stores.
The ACCC on Tuesday said the group made misleading claims about the profitability of the stores, which it sold from 2015 to 2019.
The stores included Brumby’s Bakery, Donut King, Gloria Jean’s Coffee and Michel’s Patisserie.
The legal action is under way in the Federal Court, and alleges breaches of Australian Consumer Law and the Franchising Code.
Retail Food Group told the share market the allegations related to executives who were no longer at the company.
The company could not estimate the penalties at stake, but played down the issues.
It said the regulator had not pursued several serious allegations raised during its investigation of Retail Food Group of almost three years.
These allegations related to training and support given to franchisees, the price of goods sourced for franchisees, and Michel’s Patisserie’s Fresh to Frozen model.
Investors were worried. Shares were down 8.79 per cent to 8.3 cents per share at 1534 AEDT.