Allegations of widespread wage fraud have sunk troubled franchising giant Retail Food Group to the bottom of the S&P ASX 200, putting it at risk of being dropped from the benchmark index.

RFG's shares shed 7 per cent to $2.65 on Monday, their lowest value since August 2012, after Fairfax Media reported claims of wage underpayment within its franchisee network.

Retail Food Group's shares fell to their lowest value in more than five years. Credit:Jessica Shapiro

Shares in the company behind the Gloria Jean's, Donut King, Brumby's Bakery and Crust Pizza chains have fallen almost 40 per cent in little over a week after Fairfax Media first revealed that the company's sharp business model was driving franchisees to the wall.

RFG had a market capitalisation of $830 million at the end of June, but that has fallen to $487 million with a free-float market capitalisation of $390 million, which is the lowest of any company on the S&P ASX 200 index according to Bloomberg data.