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3 reasons I own Retail Food Group Limited shares

Franchise owner Retail Food Group Limited (ASX: RFG) is a company most Australian consumers will be familiar with. While they might not recognise the name, I can guarantee they’ve tried the products.

Donut King, Michel’s Patisserie, Gloria Jeans, Crust Pizza, Brumby’s, and more are among the franchises that Retail Food Group owns and licenses to franchisees. Here are the 3 main reasons I like the business:

  • Attractive consumer brands

The brands largely speak for themselves, in my opinion, with many frequented by customers on a daily or weekly basis. Although sensitive to lower consumer confidence and discretionary income, I don’t believe they’re that sensitive since purchase sizes are typically quite small and, in many cases, addictive.

  • Vertical integration

Retail Food Group owns industrial-scale coffee roasting and baking facilities, and is in fact one of the largest coffee roasters in Australia. Franchisees are obligated to buy their products from the company’s facilities, plus the company can expand into other areas like selling coffee pods for coffee machines.

  • Ability to grow

The company has a long track record of growing profits and dividends – this is a business that knows how to grow a franchise’s footprint. With the addition of Gloria Jeans to the stable, and expansion into overseas markets, Retail Food Group could become steadily bigger over time.

I’m not expecting jaw-dropping growth but steady, incremental expansion would deliver attractive growth. On top of that, Retail Food Group pays a 5.3% dividend, fully franked, at today’s prices.

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The Motley Fool Australia's parent company Motley Fool Holdings Inc. owns shares of Retail Food Group Limited. Motley Fool contributor Sean O'Neill owns shares of Retail Food Group Limited. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.

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