Retail Food Group Limited aims for 3,500 outlets

Credit: tenaciousme

Retail Food Group Limited (ASX: RFG) is aiming to add around 1,000 more outlets to its franchise network, according to a recent report.

The master franchisor for Gloria Jeans, Pizza Capers, Crust Gourmet Pizza, Michel’s Patisserie and Brumby’s Bakery (among several others) already has operations in 69 countries and territories with 2,530 stores across its brands.

In the 2016 financial year, the company saw 258 new outlets commissioned of which just 112 were opened in Australia. Net outlet growth (excluding those closed) was 84, 88 more than in FY15.

RFG has had a momentous year in 2016, and we think now is the perfect time to expand our family as we look towards our next major milestone – 3,500 outlets worldwide,” Retail Food’s CEO Gary Alford said on Monday, according to AAP.

He added, “We’ve seen a lot of industries on a downward trend, particularly in mining and manufacturing, but retail remains steady and can provide great returns for a motivated and competent operator.

The company is apparently offering up to $25,000 off the up-front costs to encourage people to consider opening a franchised outlet to help boost the store network.

Along with franchising operations for its cafes and quick service restaurants, Retail Food also operates a substantial wholesale coffee roasting business and recently announced the acquisition of Hudson Pacific Corporation (HPC). HPC runs a Victorian procurement, warehousing and distribution business, a dairy-add facility and a central bakery manufacturing chilled/frozen product.

The acquisition should complement the group’s existing operations and is likely to supply products to its franchise network, which should benefit the franchisees as well.

Of course, Retail Food Group is not the only Aussie food company expanding offshore. Collins Foods Ltd (ASX: CKF) recently announced the acquisition of 11 KFC restaurants in Germany, taking the total number of KFC stores it operates to over 200.

Domino’s Pizza Enterprises Ltd (ASX: DMP) has 714 stores in Australia, 453 in Japan and another 816 already in Europe, including adding 484 stores to the network in FY16.

Foolish takeaway

Retail Food Group is already aiming for underlying net profit growth of around 20% in FY17, with HPC contributing 8%. But shares are still trading on an undemanding P/E of 17x FY16 earnings and paying a dividend yield of 4.3% at the current price of $6.41.  This could be an opportunity for Foolish investors.

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Motley Fool contributor Mike King has no position in any stocks mentioned. You can follow Mike on Twitter @TMFKinga

The Motley Fool Australia owns shares of Retail Food Group Limited. 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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