Retail Food Group's shares plunge to a 10-year low

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Retail Food Group's (RFG) shares sunk on Monday, hitting its lowest mark since 2008 on their return to trade. Shares plummeted almost 50 percent to $1.03 in early trade then rebounded slightly.

The shares were down 32.1 percent or 65.5 cents at $1.385. Shares in the franchise owner were suspended on Wednesday for failure to release its first-half results in a timely manner.

The company cited "declining shopping centre performance," "unsustainable rent" and a "sharp decline amongst domestic franchise sales and renewals" as primary reasons for its "disappointing performance." It plunged by 43 percent in early trade, and among the worst-performing stock by a long shot on Monday.

RFG declared a first-half loss of $87.8 million due to $138 million in provisions and write-downs. It also suspended its dividend and announced that it would close some stores next year. The company plans to shut down hundreds of stores by mid-2019, but RFG did not state how many stores from each of its franchises would be closed down. It owns Crust Pizza Bar, Michel's Patisserie, Gloria Jean's, Donut King and Brumby's Bakery franchises.

Two profit warnings have been released by the company. After reports claiming that RFG was harshly treating franchisees, it has been hit with a potential class action.

It is believed that the media coverage of RFG has resulted in its share price falling sharply since early December. The company did not speak about claims of systemic wage fraud, exploitation and underpayment of workers in its most recent ASX announcement. It also did not address the potential class action from Bannister Law. But after the allegations that lack of support resulted in systemic underpaying of staff and made franchisees suffer, RFG reportedly vowed to boost compliance on wage payments.

Bannister Law represents franchisees who allege they were forced into severe financial hardship because of RFG's business model which reportedly demands exorbitant fees.

Managing director Andre Nell recognised on Friday that RFG had to do more to assist franchisees. "It is clear from the review process that RFG needs to reset its business model and enhance its support to franchisees," reports him as saying. He added that RFG's future growth and profitability are directly linked to the health and sustainability of its franchise network.

RFG has 2,450 outlets. Its debt to earnings ratio has been lifted to 3 times for the next 12 months under the new terms, according to the ABC.