Retail Food Group (ASX: RFG) has announced a Retail Food Group debt refinancing, securing a $41.2 million facility with Washington H. Soul Pattinson & Company Limited (WHSP). The 19-month agreement replaces the company’s existing debt facilities, which were set to mature in April 2026, and provides an additional $7.5 million drawdown capacity to support execution of RFG’s Enhance & Grow strategy.
The new facility matures on 31 August 2027, removing near-term refinancing uncertainty and providing balance sheet stability as the company navigates challenging retail trading conditions. Executive Chairman Peter George stated the refinancing offers “balance sheet certainty and scope to further pursue our strategic roadmap”, with WHSP continuing as both lender and long-term shareholder.
| Facility Term | Details |
|---|---|
| Term | 19 months, maturing 31 August 2027 |
| Total Facility Size | $41.2 million |
| Additional Drawdown | $7.5 million |
| Interest Rate | BBSY Bid + 9% margin |
| Establishment Fee | $1.2 million (capitalised) |
| Covenants | Quarterly testing of net leverage ratio, interest coverage ratio, minimum liquidity |
| Security | First ranking security over all Australian assets, subsidiaries and undertakings |
| Distributions | WHSP consent required prior to RFG distributions during facility term |
The refinancing removes immediate capital structure pressure and allows management to allocate resources toward brand development, franchisee support initiatives, and the anticipated Firehouse Subs rollout without triggering equity dilution in the near term.
First Half Earnings Reflect Challenging Retail Conditions
RFG expects to report first half fiscal year 2026 (1H26) Underlying EBITDA between $9.0 million and $10.0 million, representing a decline from $16.0 million in the prior corresponding period. The variance reflects the cycling of non-recurring items that bolstered the 1H25 result, including $2.7 million in insurance recovery proceeds and a $1.5 million reduction in lease provision releases compared to the prior year.
Domestic Network Sales reached $254.6 million in 1H26, down 1.0% year-on-year despite difficult retail trading conditions in the second quarter, non-core brand outlet closures, and the implementation of RFG’s company store reset strategy. Domestic Same Store Sales Growth of 0.2% was driven by the QSR segment (+1.6%) and Beefy’s (+4.6%), which offset weakness across other CCB brands (-0.7%).
The 1H26 result was further impacted by:
- Slower than anticipated contributions from newer Beefy’s outlets
- Delays in commissioning the recently established Turkey supply hub
- Franchisee support initiatives, including maintaining wholesale coffee prices despite rising green coffee bean costs
- Challenging trading conditions during the second quarter of fiscal 2026
While the headline Underlying EBITDA figure marks a material year-on-year decline, the resilience of QSR and Beefy’s same-store sales growth demonstrates underlying brand strength in RFG’s core categories. Adjusting for the cycling of one-off items, the underlying trading performance reflects a more modest operational deterioration than the raw EBITDA comparison suggests.
Brumby’s Bakery Retained Following Strategic Review
RFG has concluded a strategic review of its Brumby’s Bakery business and elected to retain the brand. The review attracted interest from multiple parties, but management determined the available divestment options did not meet the threshold for shareholder value creation.
Executive Chairman Commentary
“While Brumby’s attracted considerable interest from multiple parties, we were ultimately not convinced that the options available would be in the best interests of shareholders, franchisees, or team members at this time. Brumby’s remains profitable and is an important contributor to RFG’s performance, with this decision providing certainty for all brand stakeholders,” said Peter George, Executive Chairman.
The decision provides operational continuity for Brumby’s franchisees and retains a profitable earnings contributor within the RFG portfolio. Management retains optionality to revisit divestment strategies if market conditions or strategic priorities shift in future periods.
Cost Initiatives and FY26 Guidance Point to Second Half Recovery
RFG is implementing cost realignment initiatives expected to deliver $1.2 million to $1.8 million in savings during FY26, scaling to $5.0 million to $7.0 million on an annualised basis in FY27. The restructuring will incur an estimated $2.0 million in one-off statutory costs during the current fiscal year.
Based on these initiatives and anticipated improvements in trading conditions, RFG has issued full-year FY26 Underlying EBITDA guidance of $20.0 million to $24.0 million. The guidance implies a material uplift in second half performance relative to the first half, supported by:
- Cost savings beginning to flow through from restructuring initiatives
- Anticipated improvement in coffee business performance following Turkey hub commissioning
- Launch of the first Firehouse Subs store, expected in FY26
- Continuing focus on product innovation, brand refresh, and marketing to support franchisee profitability
The FY27 annualised savings target represents meaningful operating leverage if achieved. However, investors should monitor execution closely, particularly given the challenging retail environment and the company’s reliance on franchisee-level profitability improvements to support network growth.
Understanding Underlying EBITDA in Franchise Business Models
Underlying EBITDA is a non-IFRS financial measure commonly used by franchise operators to present operational performance by excluding one-off items that do not reflect ongoing business performance. For RFG, Underlying EBITDA excludes one-off expenses and provisions, restricted domestic marketing funds, costs associated with mergers and acquisitions, trading results from company stores being transitioned as part of the company store strategy reset, and costs associated with the Firehouse Subs rollout.
Underlying EBITDA refers to earnings before interest, taxes, depreciation, and amortisation, adjusted to remove items management considers non-recurring or non-operational. Franchise businesses often report this metric because it strips out volatility from asset sales, store transitions, and brand development costs that can obscure underlying trading trends.
RFG will provide a full reconciliation between its underlying and statutory results when it releases 1H26 results on 26 February 2026. Investors should review this reconciliation carefully to assess the quality of earnings and the sustainability of adjustments made to reach the underlying figure.
Growth Catalysts on the Horizon
RFG’s medium-term growth strategy centres on disciplined investment in differentiated brand opportunities and operational improvements across its existing portfolio. The company expects to open its first Firehouse Subs restaurant in FY26, marking entry into a differentiated QSR category with a focus on flagship site selection and supply chain finalisation.
The Turkey support hub, established to service RFG’s international coffee operations, is expected to commence operations imminently. Once operational, the hub is positioned to improve coffee business margins by reducing logistics costs and enhancing supply chain efficiency in a key growth market.
Management Outlook
“RFG’s brands each offer a compelling customer value proposition, and the actions we are taking are focused on helping to improve franchisee profitability, and in turn, RFG shareholder value. The first Firehouse Subs store is expected to launch in FY26, with a continuing focus on flagship site selection and supply chain finalisation. Combined with an anticipated improvement in the performance of our coffee business, including the imminent commencement of operations at our new Turkey support hub, we expect to see earnings improve going forward,” said Peter George.
The Firehouse Subs rollout represents a strategic pivot toward a differentiated QSR offering in the competitive Australian market. Execution risk remains elevated given the brand’s limited market presence domestically, but successful flagship store performance could provide a scalable growth platform beyond FY26.
RFG will provide further operational and financial details when it releases its 1H26 results on 26 February 2026.
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