Former Michel’s Patisserie franchisee Devi Trimuryani has agreed to be lead plaintiff in the proposed class action after losing hundreds of thousands of dollars when she signed a franchise agreement in 2012 for $200,000, including legal fees and training. “I need the justice and this is the way… even though I’m a caterpillar – nothing – and RFG is a dragon, I can take them down, get justice. That’s why I want to be lead plaintiff. Justice for the group, not just me. Everyone who RFG treated like me,” she said. In August 2018, depressed and owing debts of more than $100,000, Trimuryani walked away from the business, which was located in Charlestown, Newcastle. I’m a caterpillar – nothing – and RFG is a dragon, I can take them down, get justice. Devi Trimuryani “It has ruined my life," Trimuryani said. “I can’t even word it in English… my marriage, my financials. I can’t sleep, I’m in a depression because everyone is chasing me for money. I never thought my life was going to be this hard by owning a business in Australia, because I can’t get justice until now.”

Trimuryani is one of hundreds of franchisees who lost a fortune after buying an RFG franchise, which includes Gloria Jeans, Brumby’s, Pizza Capers, Crust, Donut King and Michel’s. In a statement RFG said it had not been contacted by Corrs in relation to any potential class action. Loading It comes as RFG is preparing to close its books for the June 30 financial year with speculation that it will soon tap shareholders to raise equity to help pay down debt. It is also trying to sell some assets to reduce debt, which was recently renegotiated with the banks. Since December 2017 when a media investigation by The Sydney Morning Herald and The Age exposed a brutal business model that was pushing hundreds of franchisees to the wall, RFG’s share price has fallen from $4.40 to close at 16 cents on Friday. It has had a revolving door of executives, a series of earnings downgrades, including a $111 million loss for the six months to December 31 as sales plunged and stores closed across the brands.

The scandal triggered a parliamentary inquiry into the $170 billion franchise sector, which released a report in March. The inquiry singled out RFG and its current and former directors and executives for the regulators to launch investigations into potential insider trading, tax avoidance, directors’ duties and market disclosure. The parliamentary report said it considered the RFG business model was “high risk”, relying on buying new brands, stripping out costs, “exploitative fee-gouging” of franchisees and slashing services. “This is a strategic system-wide approach to business whereby RFG's success relied on extracting profits from its franchise systems with hugely deleterious results for franchisees,” the report said. A key focus of the class action was RFG’s decision in 2015 to move the Michel’s business from a fresh bakery model to a frozen food model, where cakes, biscuits and pies were delivered frozen instead of being delivered fresh daily. Franchisees complained that the frozen model resulted in declining quality, higher prices and falling sales, which caused financial devastation to many of them.

They said the products were often delivered damaged, which made them difficult to sell. “They aren't good enough and they are expensive," one franchisee said. Another franchisee said deliveries weren’t as regular, which also reduced sales. Wayne Hong, a former Michel’s franchisee who closed his store last year and suffered huge financial losses, said he lodged complaints to RFG about the poor quality of the products he had to sell. “Chocolate ganache cakes were cracked and some tasted bad,” he said. Former Michel's Patisserie franchisee Wayne Hong lost a fortune. Credit:Eddie Jim Last month The Age and The Sydney Morning Herald revealed how RFG instructed Michel’s franchisees to ignore expiry dates on packaging and adopt a new shelf-life extension date, ranging between two and six months. The extensions triggered the NSW Food Authority to refer RFG for investigation to its counterpart in Queensland, where RFG is headquartered.

RFG subsequently issued a statement to the ASX saying it was recalling any products that had an extended shelf-life from sales. It used the old PR 101 trick of trying to say it was only a few products and that safety wasn't an issue. But it missed the point. Insiders claim the expiry time shift was an act of desperation by RFG to avoid writing off old stock which would have had an adverse impact on its finances. One insider said RFG ordered products from suppliers at agreed quantities and prices. The products were then frozen and sent to distribution centres where they were sent to franchisees after an order was placed. One thing is for sure, RFG has a lot of issues on its plate as it navigates investigations by regulators, a possible class action and nervous banks.