RFG class action looms from Michel’s Patisserie franchisees

By Nick Hall | 18 Jun 2019 View comments

Scandal-plagued franchisor Retail Food Group (RFG) is facing a new battle, after law firm Corrs Chambers Westgarth announced a possible class action suit against the company.

On Friday, the firm revealed it had spent months investigating the business practices and franchisee conditions of RFG branded chain, Michel’s Patisserie.

Earlier this year, Michel’s Patisserie came under fire for deliberately selling cakes to customers months after their use-by date.

The franchisor admitted asking partners to extend use-by dates, however after reports broke, subsequently removed products from sale.

The saga looks far from over however, with the RFG class action reports coming on the behalf of former and current Michel’s franchisees. The action alleges breaches of the Consumer Law Act, with RFG acting unlawfully, causing loss or damage to franchisees.

“We intend to argue that if RFG had behaved lawfully, franchisees would not have purchased their franchises and that RFG’s conduct caused franchisees (and other persons closely associated with franchisees) loss or damage,” the company said in a statement.

Corrs Chambers Westgarth is asking current and former Michel’s Patisserie franchisees who suffered loss to come forward and register their interest.

The action is being backed by Britain’s largest litigation funder, Augusta. The Augusta backing essentially means that eligible franchisees are not required to pay to be involved in the proposed RFG class action.

Michel’s Patisserie concerns

While the class action requires a minimum number of franchisees and a minimum claim value to proceed, the volume of submissions to the parliamentary inquiry citing Michel’s does not bode well for RFG.

Michel’s and other RFG-branded chains featured prominently at the senate inquiry into the effectiveness of the Franchising Code of Conduct, with the company slammed in the resulting Fairness in Franchising report.

“This is a strategic system-wide approach to business whereby RFG’s success relied on extracting profits from its franchise systems with hugely deleterious results for franchisees,” the report stated.

Issues stemmed from RFG’s decision to convert Michel’s Patisserie outlets from a fresh bakery-made model to a frozen food business.

Several franchisees questioned the move, which ultimately led concerns over quality and delivery, highlighted by the use-by date extension scandal.

RFG class action

While rumours of a class action against RFG have been circling since 2018, a spokesperson for RFG said the brand was yet to receive anything related to recent reports.

“RFG has not been contacted by Corrs Chambers Westgarth in relation to any potential class action,” the spokesperson said in a statement provided to Inside Franchise Business.

The news of a proposed class action comes at a difficult time for RFG, as the company prepares to finalise end of financial year figures.

In April, RFG successfully renegotiated its financial covenants with lenders, avoiding a potential financiers’ review.

The move was the fourth such escape over 12 months for the company, however as news of a potential class action looms, the franchisor may not be so lucky come October 31.