Southport-based Retail Food Group (RFG) has received a positive reception from the markets amid speculation they plan to sell Crust Gourmet Pizzas to a prominent regional equity investor.

After their CEO resigned after just six months in the job, the embattled franchisor has said they will be “seeking to reduce its debt by various means, including the investigation of the possible sale of assets.”

What’s going on here?

Equity Investor PAG Asia Capital is believed to be in talks with RFG to purchase Crust Gourment Pizzas, Australia’s third-biggest pizza chain. It is estimated to be worth about $100 million.

Shares in RFG went up 22 per cent at $0.36 after initial reporting from the Australian Financial Review (AFR) indicated negotiations were underway for the sale of the pizza franchise.

What does this mean?

For a business which owed 3 and half times more than it’s underlying earnings, the sale may come down to being a necessity.

It’s no secret that franchisors (and RFG) have received a lot of bad publicity lately, which has likely negatively affected their ability to attract potential franchisees.

It will be interesting to see if there will be any other RFG-owned brands thrown into the mix of the Crust sale. Their biggest earner is their bakery and cafe brands including Brumby’s Bakery, Donut King and Gloria Jeans.

For PAG, this means they will have another established chain alongside The Cheeescake Shop, to bolster their Australian portfolio.

Why should I care?

Some franchise businesses have found it extremely difficult to balance consumer tastes, challenging retail environments, increasing rent and franchisee management.

This could be a beginning of a trend among established franchisors to sell profitable assets to stay afloat as a result of a challenging retail environment and public backlash due to questionable behaviour towards franchisees.

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