Michel's trials online delivery for cakes

Cake and coffee brand's latest digital investment comes as parent company announces store closures and impairment charges off the back of tough retail conditions

Australian café chain, Michel’s, is claiming an Australian first for franchise café brands after launching an online home delivery service for cakes.

News of the trial came just days after Michel’s parent company, ASX-listed Retail Food Group (RFG), announced an $87.8 million net loss after tax in its first half and plans to close up to 200 stores across the country.

RFG’s national network of QSR brands includes Michel’s, Gloria Jeans, Crust, Donut King, Brumby’s and Pizza Capers.

Launching a home delivery service is about keeping up to speed with increasingly digital, stay-at-home customers, Michel’s brand manager, Tom Elliot, said. The three-month trial is already underway across three franchise-operated stores and will run until 13 May.

During this time, weekly sales and customer counts across trial stores will be monitored in order to gauge engagement and success. A flat $5 delivery fee will be added to the bill and the service is available on purchases over $30.

“A major component of the Michel’s strategy moving forward is to investigate new, particularly digitally focused, methods to increase customer count and sales,” Elliot said. “The purpose of this trial is to test a cake delivery ecommerce solution that will offer customers the option to easily purchase products without having to visit a store for pick-up.”

To offer the home delivery service, Michel’s is using Stripe technology, a payment gateway safe for customers and cost-effective for franchisees, a spokesperson said. The brand has also created a dedicated microsite, with all digital advertising for the promotion being geo-targeted to users surrounding the three stores.

The company claimed it’s one of many digital firsts in its history. Last year, Michel’s launched 3D image printers in cafes across Australia.

“We understand that consumers are leaving their homes less and relying on online delivery services more, so it makes perfect sense for us to capitalise on this trend through our new cake delivery concept,” Elliot added.

RFG has experienced a tumultuous first half, reporting a 31.8 per cent drop in half-year profits to $24.7 for the six months to 31 December 2017. This, combined with nearly $138 million in costs thanks to an $84m brand systems impairment charge, inventory write-downs and the store closure program, left the organisation with whopping 282 per cent fall in EBITDA and net loss after tax of $87.8 million for the first six months. This was despite a 20.8 per cent rise in total revenue for the first-half to $195.5 million.

Read more: 7 steps Retail Food Group’s digital chief is taking to transform marketing

In its financial statement, RFG blamed tough and ongoing retail market trading conditions, especially within increasingly competitive shopping centre locations, along with onerous lease conditions and a sharp decline in franchise sales and renewals off the back of internal management challenges. RFG managing director, Andre Nell, said it was time to take decisive action.

“We have had to make some tough decisions about our business model, our franchise network and the value of some of our assets,” he said in a statement last week. “The key to improving our performance is to simplify what we do. We have all the assets we need to deliver our diversified business strategy. Now we need to make sure we make the best use of those assets.”

A number of acquisitions made in recent years had added opportunity but also complexity to the mix, the company stated in its financial report. A key focus of the business-wide review is reducing duplication and inefficiency, better integrating support structures, and improving alignment of company resources with “core revenue drivers”.

“As the company progresses its business-wide review, consideration will be given to further structural improvement to better ensure RFG is applying resources more effectively,” Nell said. “This includes further review of our broader brand strategy and portfolio.”

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