Donut King master licence agreement for China

Written on the 8 July 2008

Leading Australian retail food brand manager and franchisor Retail Food Group Limited (‘RFG’) today announced that it had finalised the terms of a Master Licence Agreement (‘MLA’) with Shanghai based Mak Brands Limited concerning the proliferation of the Donut King franchise system within the Peoples Republic of China.

The China Master Licence Agreement: 

• grants exclusive rights in respect of the Donut King system for the territory of Mainland China
• is performance based for an initial term of 20 years
• provides for the payment of an initial licence fee on execution together with an ongoing
  royalty stream
• and imposes a strict performance criteria on the licensee requiring establishment of a minimum
  20 outlets within 5 years from commencement and thereafter 8 new outlets per annum

RFG Chairman John Cowley said, “the MLA represents a significant event for RFG as a Listed company in that it is the first to contemplate expansion of the Donut King system beyond
Australia’s borders”.

“The MLA also represents the realisation of the last of the seven strategic growth drivers identified in RFG’s May 2006 Prospectus, further confirming the Company’s resolve and ability to deliver sustained value for shareholders and other stakeholders”.

RFG CEO Tony Alford said “the international expansion and commercialisation of RFG’s Donut King, BB’s Café, Brumby’s Bakeries and Michel’s Patisserie franchise systems had always been high on RFG’s agenda given our view that each possess significant potential for foreign market application”.

“However, the Company has historically been unwilling to licence its systems, and risk dilution of brand value, unless it was able to partner with a robust licensee capable of applying sufficient resources, franchising expertise and resolve to ensuring the success of such a venture. Mak Brands satisfies each of these pre-requisites”, Mr Alford said.

Mak Brands founder and Managing Director, Paul Mak said “Donut King is a successful and iconic brand within Australia and we are thrilled to have the opportunity to establish and expand the concept throughout China”.

“Plans are already underway to establish a flagship outlet on Nanjing Road, Shanghai by the end of 2008”, Mr Mak said, “we have identified additional sites and by the end of fiscal year 2009 are confident that ten to fifteen outlets will have been established within East China, providing a firm platform for future growth”.

“In close consultation with RFG, and following extensive market and consumer research, we intend to subtly adapt the Donut King system to meet the sensibilities, taste profiles and
expectations of the Chinese market whilst retaining the system’s signature branding and products - such as the hot cinnamon doughnut”, Mr Mak said.

RFG CEO Tony Alford said “the MLA generates both immediate and ongoing revenue in the form of an initial licence fee payable upon agreement execution, and by virtue of ongoing royalties which are calculated by reference to a percentage of outlet retail sales”.

Mr Alford also noted that “RFG remains motivated to further the proliferation of its franchise systems on the international stage. In this respect negotiations continue in connection with the grant of two further international master licence agreements”.

Once finalized, the outcome of each of those negotiations will be disclosed to the market.

Learn more about Donut King franchise opportunities here.