The Donut King franchisor, Retail Food Group, is disposing of its central manufacturing facility in order to concentrate on developing and managing retail franchise systems. The south east Queensland facility will be sold in January 2009 to Allied Mills and the $9.5m proceeds will be used for debt reduction. A long term supply agreement guaranteeing continuity of product supply to Donut King franchisees has an initial 10 year term with franchisees benefiting from the mill’s commodity risk management capability which will insulate them from sudden price variations, said Retail Food Group’s ceo Tony Alford.
“RFG and Allied Mills have enjoyed a successful association dating back to the late 1980s with the latter supplying the proprietary Donut King and bb’s caf pre-mix products,” Alford said. “These transactions provide significant opportunity to further enhance RFG’s long term strategic supply chain relationship with Allied Mills and its association entities including collaboration in relation to the development of both donut and other pre-mix products for introduction to all four of RFG’s franchise systems.
“Other benefits accruing to franchisees from the transactions include continuity of product supply, lowest possible unit costs, ongoing product development and margin certainty arising from negotiated product price reviews being limited to once per annum.”
Allied Mills is the largest manufacturer of human consumption flour and flour related ingredients in the Australian milling industry. Managing director Joe Di Leo said “Our company has held a strong supply partnership with Retail Food Group for close to 20 years. It is exciting to see this partnership evolved into an acquisition of RFG’s central manufacturing facility.”
The manufacturing facility, which has been dedicated to the manufacture and wholesale supply of donut and bakery products to franchisees, was only established during the financial year 2007 at Yatala within the Gold Coast-Brisbane corridor.