JANE LINDHE Reporter

Jane is a retail and small business writer with a special interest in emerging companies and entrepreneurs. She covered the financial services industry before moving into general business journalism and has written for The Age and The Australian Financial Review.

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Brumby’s franchisees unhappy about more than the carbon tax

Published 06 July 2012 16:00, Updated 09 July 2012 06:04

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Sometimes when a company scandal erupts, it’s a good indication that all is not well in other areas of the business. That certainly seems to be the case when it comes to this week’s furore involving national baking chain Brumby’s Bakeries and its parent company, Retail Food Group.

Franchisees are not happy and it all came to a head when Brumby’s was dragged over the coals for using the introduction of the carbon tax as an excuse to inflate retail prices. Brumby’s boss Deane Priest has since fallen on his sword and the company has apologised but franchisees are unhappy about more than just the carbon tax.

While declining to comment on the group directly, Brumby’s founder Michael Sherlock (who still owns five Brumby’s bakeries) says the stores have dropped in value since he sold it to its current owners in 2007 for about $46 million.

“Brumby’s was in very good shape when I sold it to him [Retail Food Group CEO Tony Alford] and a good investment – I’m still a franchisee. At the time it was the best investment they had.

“All I can say is the best way to invest in Brumby’s is to buy shares in RFG. The same way as, if you want to win at Crown Casino you buy Crown shares.”

Several other Brumbies franchisees, who declined to be named because of confidentiality clauses in their franchise contracts, have told BRW that while the company increased shareholder value by some 20 per cent last year, many of its franchisees feel they are not getting enough support from the franchisor.

In a memorandum to franchisees, Brumby’s has warned them not to further trash its brand. Brumby’s marketing and innovation director Tracey Catterall warned franchisees not to make negative comments about the chain to customers.

“Every negative comment made by a franchisee or staff member just gives customers a further reason not to shop at any Brumby’s store, which only hurts fellow franchisees’ livelihood,” she wrote.

She also said franchisees should not display political propaganda and reiterate to customers that “it is you [franchisees], rather than Brumby’s management, who will be most directly affected should they choose to shop elsewhere”.

RFG has not returned BRW’s calls.

Further reading

How to prevent a CEO crisis

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