Profits jump – How Foodco is weathering the retail storm

By Nick Hall | 08 Nov 2018 View comments

Despite a difficult year for the franchise sector domestically, Foodco, the group responsible for QSR brands Muffin Break and Jamaica Blue has reportedly bolstered its profits.

In a financial report lodged with corporate regulator, ASIC on October 30, Foodco revealed that revenue had grown by $1.4m or 2.1 per cent over the financial year, with profit after tax up to $4.1m, according to reports from the Australian Financial Review (AFR).

The positive results come just weeks before the findings of the parliamentary inquiry into the Franchising Code of Conduct, in which Foodco featured prominently, are handed down.

In September, Foodco managing director Serge Infanti fronted the inquiry, defending the company against allegations of misconduct made by a Jamaica Blue franchisee.

The managing director advocated further due diligence on the franchisee part, suggesting that it was up to the franchise partner to “ask for the details”.

Unlike fellow under-fire food retailing franchisor, Retail Food Group, which reported a $306.7m loss in August, Infanti and Foodco have bounced back, despite a slow in franchise inquiries.

Speaking with Inside Franchise Business, Infanti acknowledged that while the past year had been challenging, the company was committed to further strengthening its franchise network.

“We’re pleased Foodco enjoyed growth this year, despite a challenging retailing environment,” he said.

“This is testament to our global diversification, the hard work of our franchisee partners, the continuing strength of the Muffin Break and Jamaica Blue brands, which we have owned and operated for approximately 30 years, and the significant investment that goes into them to ensure they are relevant and attractive for today’s consumers.”

Throughout the inquiry, Infanti has been vocal in his opposition of shopping centre landlords, suggesting the imbalance of power has placed many Foodco franchisees under immense pressure.

“One of the biggest challenges we see is the power imbalance with landlords, who are often increasing rents while footfall is stagnant, and more and more food outlets are added to shopping centres.  That’s why we work tirelessly to support our franchisees, so we can enjoy shared success,” he said.

Infanti confirmed that rising leasing costs were a primary concern for the franchisor, suggesting stronger legislation could be implemented to stem the control shopping centre landlords currently hold.

A combination of poor retail conditions, an imbalance of power in leasing negotiations and low consumer sentiment is threatening to stifle growth within the sector, with Infanti and Foodco hopeful the December findings will address the concerns.

“Unfortunately, the banking royal commission and the parliamentary inquiry into franchising has stalled business retail growth at a time when retail is struggling and consumer confidence is at low point in Australia,” he said.

“We hope that any proposed changes to the franchising code strikes a fair balance between protecting the rights and interests of franchisees and the rights of individual businesses to operate freely in a market that creates jobs and consumer choice through competition, innovation and entrepreneurship.”