Retail Food Group to shift focus from shopping centres to standalone stores as rents, retail slowdown bites

Retail Food Group (RFG) is set to move its franchise brands out of major shopping centres and into standalone shopfronts and drive-through stores, in a bid to survive the tough retail climate.

RFG, which last week acquired Crust Gourmet Pizza Bars, also owns Donut King, Brumby’s Bakeries, Michel’s Patisserie, Esquires Coffee Houses, Big Dad’s Pies and Pizza Capers.

Now, the company has set its sights on moving its franchise brands out of major shopping centres and into standalone shopfronts.

It’s been reported RFG has already turned four Donut King stores into standalone venues, and is piloting standalone venues for Michel’s Patisserie and Brumby’s Bakeries.

Meanwhile, Esquires Coffee Houses will be transformed into drive-through stores, with four scheduled for this year.

RFG chief executive Tony Alford told AAP the group commenced a strategic project last year to look at non-traditional sites for its franchise brands.

“The motivation is to develop our brands such that they can be commercially sustainable for our franchisees outside of the traditional shopping centre environment,” Alford said.

“Drive-throughs, hole in the walls in strip sites and thoroughfares, are just a natural migration for the business.”

Alford said the company is determined to reduce competition from major retailers such as Woolworths and Coles.

“We are changing the dynamics for each of our franchise systems such that they can rely upon less customer traffic,” Alford said.

“How we achieve that is to increase the average transaction value of each customer that visits our outlets.”

The move appears to be paying off already. According to RFG, Donut King customers are spending an average of $2.50 more in standalone stores than inside shopping centres.

The group posted a 4.9% rise in full year profit to a record $28.5 million, from the $27.2 million in the 2011 financial year.

Earnings before interest, taxes, depreciation and amortisation (EBITDA) was $48.4 million, up from $45.9 million.

RFG isn’t the first franchisor to actively avoid major shopping centres, suggesting more franchisors could follow suit as retail conditions remain mediocre.

The Cheesecake Shop, which has more than 200 stores nationwide, avoids major shopping centres as much as possible, preferring to open stores in regional areas or on suburban strips.

“There have been a lot of retailers in the franchising sector that have complained about the high cost of rents,” The Cheesecake Shop general manager Ken Rosebery told StartupSmart in May.

“[But] we’re getting reductions in rents and improved terms… The type of locations that The Cheesecake Shop has are in regional shopping centres or suburban strip locations.”

“We have very few stores in the large shopping centres, so there is a different sort of relationship with the landlord and the tenant.”

This article first appeared on StartupSmart.