RFG Annual Report 2007 - Retail Food Group

Managing Director’s
Report
The Company’s fi nancial performance continues to be supported by new and innovative marketing programs across the Donut King and the bb’s
café systems. Encouragingly, increases in average transaction values and excellent growth in average weekly sales in the bb’s café system were
able to partly offset fl at average weekly sales growth in the Donut King system.
OUTLET EXPANSION
During the 2007 financial year, 37 new Donut King and bb’s café outlets were commissioned—exceeding the
Company’s Prospectus forecast and 2006 financial year new outlet opening result by 12 and 10 outlets respectively.
The Company’s long standing policy to manage outlet growth in a consistent, sustainable and conservative manner resulted in a level of outlet
growth not previously achieved. As at 30 June 2007, RFG had 360 franchised outlets, including 289 Donut King outlets, a net increase of 24
outlets on the previous year, and 71 bb’s café outlets, a net increase of four outlets on the previous year.
In the current year, the Company is well progressed in its new outlet commissioning program, with the commissioning of 13 outlets to the
10 October 2007 (being fi ve Donut King, fi ve Brumby’s, and three bb’s café outlets). The Company’s forecast for FY2008, including Brumby’s,
is for growth in excess of 50 outlets.
At customer interface level, the extensive refurbishment program for bb’s café was widely embraced by franchisees in FY2007. The bb’s café
brand’s outlet level make-over will continue to support the system’s conservative and sustainable growth strategy.
A crucial part of the Company’s outlet expansion strategy is multi-unit, and increasingly, multi-system ownership. Whereas the former was
well supported during the 2007 fi nancial year with approximately 50% of new outlets being awarded to existing franchisees, we anticipate that
multi-system ownership will also increase given the addition of the Brumby’s system and the impending acquisition of the Michel’s system.
Additionally, RFG has continued its drive for excellence in areas such as franchisee cost reduction and capital effi cient capacity increases. The
Company continuously invests resources on menu enhancement, improved technical support, delivery reliability and lead times, and managing
volatility. New products are another focus in our drive for excellence, with signifi cant energies directed towards research and development,
product enhancements and extensions, supply arrangements and strategic alliances.
GROWTH STRATEGIES
During the past year, Retail Food Group continued to refine its management, training and support systems in order to
drive franchise growth and franchisee wellbeing.
RFG’s growth strategy also continues to focus on broadening its revenue base and streamlining supply arrangements for its franchisees.
At the conclusion of FY2007 RFG had completed the commissioning of its Central Manufacturing Facility (CMF) and Coffee Roasting Facility
(CRF). Building upon on a successful pilot program, the CMF is currently delivering consistent high quality product to South East Queensland
franchisees and is now in the process of launching the programmed rollout to franchisees in North Queensland, and thereafter, Northern New
South Wales.
A further initiative which will be driven during the 2008 fi nancial year is the establishment of a ‘frozen blank’ pilot program. This program will
enable expansion of CMF product distribution to interstate and remote franchise operations. Franchisees have welcomed this development
which, when fully operational, will enable every Donut King franchisee to acquire CMF product.
After extensive testing of taste profi les and coffee blends, the CRF has also commenced national distribution of roasted coffee beans to
RFG’s franchisees.
The CRF, which is conducted under a joint venture arrangement, will ultimately blend and roast coffee for the Donut King, bb’s café and Brumby’s
systems together with existing customers of the Company’s joint venture partner and prospective third-party bulk roasting clients.
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Retail Food Group Annual Report