Retail Food Group’s franchise network has suffered a downturn in sales during the COVID pandemic, but it’s international territories see growth ahead, says General Manager-International, Grant Fischer
The COVID-19 pandemic has disproportionately affected the food and hospitality sectors. In the case of Retail Food Group (RFG) – with a concentration of our major brands in Australian metropolitan shopping centres – the sales downturn in the first-half of the current financial year was slightly offset by strong same-store sales at Brumby’s Bakery and QSR Division (Crust & Pizza Capers) stores.
As we settle into the final quarter of the 2020-21 financial year, another ‘green shoot’ in RFG’s response to COVID is emerging in our international operations. While RFG is Australia’s largest multi-brand retail food franchisor, covering eight retail brands and approximately 700 domestic franchise partners, our international reach remains impressive despite COVID-19’s impact.
As at 31 December 2020, RFG’s International division had 604 outlets, 116 of which were mobile outlets (Café2U and The Coffee Guy). Ninety per cent of the 488 fixed International outlets were Gloria Jean’s.
The global reaction to COVID has been severe in the food and hospitality industries, with other countries generally having tougher and longer lockdowns than Australia. This translated to an 84.4 per cent downturn in underlying International Division earnings (EBITDA) for the first half of the 2021 financial year. This compares with a 15.4 per cent downturn in 1H21’s underlying EBITDA earnings in domestic franchise operations, illustrating the significant impact COVID19 restrictions had on international licensed territories.
However, a number of factors have kept our global outlook positive. During COVID we have continued to implement RFG’s ‘Franchise Partner-First’ philosophy, working with master franchise partners to develop products, marketing strategies and supply chain initiatives so that when consumer and trading activity returns to more normal levels, our international network will enjoy improved levels of support and reduced cost-bases.
Our International Master Partners and USA Franchise Partners have also maintained positivity, with a notable future opening being the Gloria Jean’s outlet in Edinburgh occurring by the end of July 2021. A further 23 outlets across 10 countries are in the pipeline, planned for commencement by December 2021. In fact, despite COVID-related revenue downturns, our International network has managed to open 40 outlets, averaging one store opening every nine days across the whole network outside of Australia (even as one store has closed every four days, now slowing as the global vaccine rollout gains momentum).
In line with RFG’s corporate restructure, a lot of work has been going into how we support our master franchise partners and their subfranchisees. For years, our main supply of coffee has been out of Sydney but increasingly the system has added cost and inefficiency, especially as our networks continue to expand in the Middle East, South Asia and Europe. In April we launched our Dubai Supply Hub which is a partnered venture with one of the largest coffee roasters in the Middle East. This move reduces supply cost and lead times for 85 per cent of our international network, providing a more responsive supply chain more suited to our master franchise partners’ needs. Our current supply hub in Wisconsin, USA – which normally only services our USA stores – will also expand its distribution to send product to Western Europe, further enhancing supply chain solutions for that region.
Our coffee product range is also undergoing a facelift, with smarter-looking cups, coffee bags in four languages (instead of just English) and the launch of Gloria Jean’s first Nespresso-compatible coffee capsule in multiple coffee lines. Our International coffee operation is also moving into the premium market, going head-to-head with Starbucks’ ‘Reserve’ range with the launch of Gloria Jeans ‘Glorious’ blend.
At the same time, Donut King is developing from a primarily Australian success story to establishing a platform for becoming a global donut-and-coffee brand, with a supplier in the final stages of signing a global agreement that will facilitate worldwide distribution of the frozen base model. Once finalised, this arrangement will enable us to better respond to growing interest for the Donut King concept across potential territories such as Jordan, Oman, Saudi Arabia, India, Cambodia and the United States.
In the United States, our direct operation is undergoing significant transformation based on RFG’s ‘Franchise Partner-First’ focus. We are relocating our core support team and national office from Los Angeles to Chicago, where it will be able to better support our 60-store network which is 80 per cent based in the Midwest. Chicago is also where Gloria Jean’s originated in 1979, and the brand’s founder, Gloria Jean Kvetko herself, has been invited to officially open the office in late May 2021.
We’re also launching several products in our International markets that have been very successful in Australia, such as Kit Kat Chillers, fancy filled donuts, Grillers and mini kids packs. The fancy filled donuts recently trialled in the USA saw a 40 per cent increase in daily sales for the participating stores.
We still have a journey in front of us to shake-off the effects of COVID and drive success from our people, our products and our brands. Our International operations will be a significant part of this story.
Grant Fischer is RFG’s General Manager-International