Facing a triple whammy of challenges, can cake-to-coffee chain Michel’s Patisserie survive

Article by Benedict Brook /
News.com.au /
March 11, 2018 /
Click here to view original /

THEY can be found in just about every shopping centre in Australia and at some point almost all of us have indulged in a slice of chocolate mud cake.

But Michel’s Patisserie is facing unprecedented challenges with some predictions it won’t be long before it heads to the great bakery in the sky.

Scores of outlets are up for sale, there are claims quality has plummeted and an unfolding franchising squabble is impacting the chain.

A branding expert has derided Michel’s as “naff” with all the uniqueness of a “production line”.

While a former Michel’s franchisee has told news.com.au it would be a “shock” if the chain keeps going and bluntly said “they don’t deserve to survive”.

Retail Food Group, the owners of Michel’s, told news.com.au they were “absolutely committed” to the Michel’s brand and were looking to revitalise it built around its “French cafe heritage”.

Michel’s troubles come against a background of a miserable retail market with cutthroat competition and consumers that seem reluctant to open their wallets.

In the last few months Gap has departed these shores and Myer has dumped its chief executive. While dining has been less affected by the discretionary downturn, it’s hardly an easy business environment. Sizzler has downsized, global chain Starbucks has always struggled in Australia and Michel’s stablemate Gloria Jeans is repositioning its brand.


It’s along way from 1998 when Noel Roberts and Noel Carroll started Michel’s as a bakery in Hornsby in northern Sydney.

Through franchisees, the chain quickly grew serving eager customers its now famous cakes alongside pastries, pies and coffee. In 2007, it became part of the Retail Food Group (RFG) bringing it under the same company as Gloria Jean’s, Donut King and Brumby’s Bakery.

But in recent years RFG, and Michel’s in particular, have found the going tough. From around 360 outlets, Michel’s now has just 240.

Last week, RFG shares plunged as the company announced a loss of $89m for the first half of 2018 and a writedown against the value of its brands of $138 million. The largest single writedown was $45 million against the value of Michel’s.

The group also announced around 200 stores would close reducing its footprint by 13 per cent. But investment bank UBS said on Thursday it expected around 460 RFG outlets would be shut in Australia by 2020, reported Business Insider. Although this might be offset by international openings in China and the Middle East.


News.com.au has seen that at least 60 Michel’s franchisees are looking to sell up and have their outlets on the market.

It comes as no surprise to former Michel’s Patisserie franchisee Robert Verni who, with his family, ran a store at Robina Town Centre on the Gold Coast, from 2014 to 2017.

Previous to that he ran a BB’s Cafe franchisee, also an RFG brand, for eight years before the company asked his firm to convert the outlet to Michel’s at a cost of around $150,000.

“There’s no way in the world they can survive and they don’t deserve to,” he told news.com.au.

The reputation of RFG, and its brands, has been hit by claims the company did not support its franchisees leaving some, like Mr Verni, to go to the wall.

Mr Verni, 44, said he closed his Michel’s after suffering a nervous breakdown due to the pressure he was under. He told news.com.au he has now moved city, undergone counselling and had to restart his career after his family lost $800,000 on the venture, an amount that also included rent hikes from the shopping centre.


“I was working seven days a week, 12-14 hour days, and I still couldn’t survive. I had no wages for 15 months, I lost my home, my super, money set aside for my kid’s bank accounts and my parents who are in their eighties had to put $350,000 against their home.”

Mr Verni is not the only franchisee with grumbles about their relationship with RFG. However, the company has rejected accusations it didn’t support its franchises, it said many continue to be very successful, but has admitted it could have done more.

“Our success depends on the success of our franchise partners. If they thrive, so do we, and we are committed to finding ways to better support them, their staff and customers,” they said in a statement earlier this month.

Mr Verni said even after he shelled out to convert his business to Michel’s, deliveries were so erratic and the quality of the food so bad when RFG swapped to frozen cakes that he had to regularly give customers refunds.

“When it was fresh cakes, before I converted, it was brilliant but when they become frozen there was nothing but problems,” he said.

“The cakes were terrible quality, there were hairs in them, they were damaged, and scores wouldn’t arrive. The cakes were all over the boxes, the customers noticed and wanted their money back.

“If they survive with the quality they are providing it will be a shock.”

On the Product Review website Michel’s scores 1.7 out of 5 with 72 of around 107 reviews rating the chain as “terrible”.


RFG has announced that it plans to revitalise “Michel’s French cafe heritage,” despite the fact it has never operated in France. One of these has opened in Mr Verni’s old stomping ground of Robina.

But a trends expert isn’t convinced the push will work.

Dr Lauren Rosewarne, of the University of Melbourne, told news.com.au eating habits had changed since Michel’s could wow the country with a Black Forest Gateaux.

“The whole model of the franchise relies on a customer being able to go into any branch and have the same sausage roll and the same sandwich [but] as a culture we’ve developed a more discerning palate.

“Franchising is a model that once worked but now leaves many diners feeling like food is coming off a production line. It seems stale and anachronistic,” she said.

That rigidity of the menu was in stark contrast to local bakeries and cafes which, in Australia, have had surprising staying power against corporate chains.

“Diners want their food experience not to merely be Insta-worthy, but to be special, to be unique, not be akin to the processed offerings of a factory,” Dr Rosewarne said.

“The idea of going into a clearly-not-very-French cafe-bakery-hybrid seems a little naff. Particularly in big cities with strong cafe cultures, the idea of franchises and the same-sameness of their offerings seems passé.”

Mr Verni certainly won’t be heading into a Michel’s anytime soon and he’s encouraged others not to.

“People shouldn’t be going to the stores and buying that product. I feel sorry for [the franchises] but at the end of the day we’re hoping for a parliamentary inquiry into [RFG’s treatment of franchisees] and we want people to get compensated.”

A spokesman for RFG told news.com.au they recognised work was needed to make the brand an ongoing success.

“RFG is absolutely committed to the Michels brand. The 2018 re-positioning includes new menu items to emphasise our French cafe heritage and will enhance consumer relevance.”

The company has previously asked customers to back its brands. “We ask that the Australian public continue to support them [franchises], especially during this time when retail conditions are challenging,” a RFG spokesman previously said in a statement.