Retail Food Group (RFG) has moved to purchase the Donuts Coffee & Muffins (DCM) chain and plans to reacquire the Brumby’s Bakeries master franchise territories for North Queensland and New Zealand.

The purchase is subject to contractual terms and finalisation of due diligence enquiries, however, the Group is expected to take full ownership by January 2010.

The DCM franchise system is a direct competitor to Donut King and operated 23 coffee and donut outlets predominantly in NSW. There are currently 37 outlets within the Brumby’s North Queensland territory and a further 19 in NZ.

RFG already owns the Donut King, Michel’s Patisserie, Brumby’s Bakeries and BB’s café franchises.

CEO Tony Alford said the DCM stores would be eventually be rebranded to Donut King stores.

"Assimilating DCM within the Donut King network will accelerate total Donut King outlet population growth while affording DCM franchisees the opportunity to partake of the benefits that accrue from membership in a nationally established and iconic retail franchise brand," Alford said.

Brumby’s North Queensland master franchise territory is the best performing Brumby’s territory in Australia. "The acquisition of the New Zealand master territory completes the re-acquisition of all master rights in that country so that the whole of the network therein is now ‘company managed’.

“The transaction will deliver the equivalent in terms of EBIT contribution of an additional 26 new Brumby’s Bakeries outlets," Alford said.

“Given the outlets forming part of the North Queensland and New Zealand master franchise territories already form part of the Brumby’s Bakeries system, integration of subfranchised outlets under RFG’s franchise service and operational support systems will be seamless in comparison to that which would apply if an independent network had been acquired.

“We would therefore anticipate little structural or other change in terms of the operational and other service support mechanisms afforded to franchisees within these territories," he said.

For the six months ending 31 December 2009, RFG's net profit after tax is expected to be in the range of 10 per cent to 15 per cent over $11.05 million for the same period last year.

“New outlet growth has been tempered by a tightening of new franchisee enquiry, lack of shopping centre development resulting in reduced prime site opportunities and stricter lending practices adopted by lenders," Alford said.

"We have therefore adjusted our growth strategies to accommodate these factors whilst pursuing non-traditional site and potential acquisitive outlet conversion opportunities."