Retail Food Group Delivers Resilient 1H26 as $7M Transformation Plan Begins
Retail Food Group posts resilient 1H FY26 as transformation plan takes shape
Retail Food Group (ASX: RFG) delivered a resilient performance in 1H FY26 despite challenging consumer conditions, with domestic network sales reaching $254.6 million, down just 1.0% on the prior period. Core brand metrics demonstrated underlying strength, with network sales up 0.8%, same-store sales up 0.2%, and average weekly sales rising 0.9%. The company store strategy reset is now 70% complete, with transitions or exits agreed or finalised, whilst a February 2026 debt refinancing with WH Soul Pattinson provides funding certainty through to August 2027.
The resilience of core brand metrics in a difficult retail environment demonstrates underlying brand strength and improving network quality, which underpins RFG’s franchise-based earnings model. Management has commenced a transformation plan targeting $1.2-1.8 million in cost savings in 2H26 and $5.0-7.0 million in FY27.
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Understanding franchise-based retail food earnings
RFG generates revenue through three primary channels: franchise fees collected from outlet operators, coffee distribution to its network, and company-operated stores. Network sales represent the total sales generated across all franchise outlets, whilst underlying revenue reflects RFG’s direct income from royalties, supply, and company stores.
Improving franchise partner profitability matters significantly for RFG’s long-term earnings. Healthier franchise partners lead to better store retention, network expansion, and more stable recurring royalty income. When franchise partners struggle, the network contracts and RFG’s revenue base shrinks. The company’s strategic focus on supporting franchise partners through operational improvements and better procurement aims to strengthen this foundation.
Financial snapshot and cost transformation underway
The 1H FY26 financial performance reflected ongoing strategic adjustments, with underlying revenue reaching $51.7 million (down 1.3%), underlying EBITDA of $9.2 million (down 43.1%), and underlying net profit after tax of $3.5 million (down 65.2%).
| Metric | 1H26 | 1H25 | Change |
|---|---|---|---|
| Network Sales | $254.6m | $257.1m | -1.0% |
| Underlying Revenue | $51.7m | $52.4m | -1.3% |
| Underlying EBITDA | $9.2m | $16.1m | -43.1% |
| Underlying NPAT | $3.5m | $9.9m | -65.2% |
The earnings decline was driven by compressed coffee margins as RFG supported franchise partners by delaying wholesale price increases, slower-than-expected ramp-up of new Beefy’s stores, and international hub setup costs. Management has responded with a transformation plan targeting $1.2-1.8 million in cost savings in 2H26 and $5.0-7.0 million in FY27. A coffee price increase effective March 2026 is expected to restore margins in the second half.
Whilst earnings declined, management has identified clear cost-out initiatives and margin recovery levers for 2H26, including improved coffee procurement and reduced company store drag.
Core brand performance breakdown
The Café, Coffee, Bakery (CCB) segment reported network sales of $182.8 million, with same-store sales down 0.4% but average weekly sales up 4.0%, indicating improving outlet quality. The Quick Service Restaurants (QSR) segment delivered network sales of $71.8 million, up 2.8%, with same-store sales up 1.6%. Crust recorded same-store sales growth of 2.2%, benefiting from easing competitor discounting, whilst Beefy’s posted same-store sales growth of 4.6%. Network quality improved as low-performing stores exited the system.
The QSR segment’s return to growth and Crust’s outperformance suggest competitive pressures in the pizza category are easing, which supports improved franchise economics and retention.
Growth catalysts on the horizon
Firehouse Subs represents RFG’s most significant organic growth opportunity. The first Australian store is scheduled to launch in Q4 FY26, with lease negotiations well advanced and key suppliers in place. Management has committed to investing US$4 million per year for the first three years, rising to US$5 million in years four to six. The long-term target is 15 stores in three years and 165 stores in 10 years.
Internationally, the new Türkiye supply hub went live in February 2026, with three orders already processed. The hub is positioned closer to master franchise partners in Istanbul, offering road freight options that reduce delivery times and enable more regular ordering cycles. A dedicated Head of International joined in September 2025 to drive network expansion.
The Gloria Jean’s “Glorange” store refresh continues to deliver results, with refurbished outlets reporting sales lifts of 24-31% versus prior periods. Five additional stores are scheduled for refresh in 2H26.
Management Commentary
“In challenging economic conditions our focus is shifting to supporting our franchise partners through operational process improvements, enhanced procurement and supply chain, and a back-to-basics marketing strategy targeting core customers.”
Balance sheet and debt refinancing
Cash reserves stood at $16.7 million at 26 December 2025, down from $26.0 million at June 2025. Of this, $11.3 million is restricted cash held for marketing funds, bank guarantees, and Firehouse commitments. In February 2026, RFG refinanced its senior debt facility with WH Soul Pattinson, securing a new 19-month $41.2 million facility, including an additional $7.5 million drawdown, with the term extended to August 2027.
The refinancing removes near-term balance sheet uncertainty and provides RFG with capital to execute its transformation and growth strategy, including the Firehouse Subs rollout and cost-out initiatives.
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FY26 outlook and guidance
Management reaffirmed FY26 underlying EBITDA guidance of $20-24 million. During the first eight weeks of 2H26, core brand network sales were down 5.5% (driven by outlet closures), but same-store sales declined only 0.2%, indicating underlying brand resilience. Gross margins are expected to improve in 2H26 from the March 2026 coffee price increase and better green bean procurement. Company store cash outflows are expected to reduce following 1H26 transitions.
Key outlook drivers for 2H26 include:
- Coffee price increase effective March 2026
- Cost-out initiatives delivering $1.2-1.8 million in savings
- Reduced company store drag as 70% of planned exits complete
- International hub now operational
The maintained guidance range suggests management sees a path to improved 2H26 earnings, supported by margin recovery and cost discipline. The company store strategy reset, now 70% complete, is expected to contribute a $5 million+ cashflow improvement in the medium term as loss-making outlets are transitioned or exited.
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