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.
