Australia’s largest multi-brand retail food franchisor and leading wholesale coffee roaster, Retail Food Group Limited (RFG) has announced that it has partnered with Tian Jin Sen Yong Tai Co Limited, to establish a joint venture for the purposes of exploiting the Gloria Jean’s Coffees and It’s A Grind Brand Systems within the People’s Republic of China.

Tian Jin Sen Yong Tai is a subsidiary of Chinese based GouBuLi Group Co Ltd, established over 150 years ago as a small stuffed-bun shop in Tianjin, outside of Beijing, China. The GouBuLi Group has grown to become one of the pre-eminent catering brands on the Chinese mainland. The company operates more than 30 high-end restaurants across the country, and is also involved in the food-processing, logistics and training industries. GouBuLi Group Chairman, Mr Yan Sen Zhang, also involved in the Chinese Pharmaceutical industry, where he is the controlling shareholder of both TianJin Tong Ren Tang and Tian Jin Hong Ren Tang, brands which have over a 200 year old heritage.

RFG owns the Donut King, Brumby’s Bakery, Michel’s Patisserie, bb’s Café, Esquires, Gloria Jean’s Coffees, It’s A Grind, The Coffee Guy, Café2U, Pizza Capers Gourmet Kitchen and Crust Gourmet Pizza Bar franchise systems. In addition, the Company is a significant wholesale coffee roaster supplying existing Brand Systems and third party accounts under the Evolution Coffee Roasters Group, Caffe Coffee, Roasted Addiqtion, Maranatha Import Export, Café Palazzo and Barista’s Choice coffee brands.

RFG coffee expansion

Australian Food News reported in October 2014 that RFG had acquired Gloria Jean’s Coffees, which was founded in Chicago in the US in 1979, and established in Australia pursuant to a Master Franchise arrangement in 1996. Gloria Jean’s Coffees is now a leading international specialist coffee house franchise, with approximately 800 outlets established across 40 countries. The Gloria Jean’s empire in Australia and elsewhere has been controlled by Mr Nabi Saleh. Australian Food News reported in November 2014 RFG had continued to expand its coffee portfolio and entered into in a Share Purchase Agreement to acquire Di Bella Coffee, with settlement scheduled for 31 January 2015.

The Gloria Jean’s China joint venture

RFG said Tian Jin Sen Yong Tai was already successfully operating two Gloria Jean’s Coffees outlets in China, and that the GouBuLi Group has been successfully operating a restaurant chain in China under the GouBuLi Brand, which has annual revenues of RMB1billion (c.AUD$197m).

Under the agreement, RFG will be possessed of a 20 per cent interest in a specific purpose joint venture vehicle (JV Vehicle), with the remaining 80 per cent to be held by the Tian Jin Sen Yong Tai. The joint venture arrangements also contemplate:

• The grant, subject to usual and ordinary conditions, to the JV Vehicle of an exclusive, perpetual and royalty free licence to use the Gloria Jean’s Coffees and It’s a Grind intellectual property within the Territory for the purposes of the joint venture;
• The payment to RFG by Tian Jin Sen Yong Tai or its associates of an initial licence fee of AUD$6m;
• The JV Vehicle being funded solely by Tian Jin Sen Yong Tai and retained earnings;
• Assignment to the JV Vehicle of existing master franchise agreements within the Territory, which are currently represented by six (6) outlets, in addition to the two outlets presently operated by Tian Jin Sen Yong Tai;
• Subject to relevant taxes and programmed debt repayments commencing in FY19, application of net profits of the joint venture equally to: (a) expansion of the business within the Territory; and (b) dividends paid to the joint venture participants consistent with their interest in the JV Vehicle; and
• The establishment of a further joint venture vehicle for the purposes of establishing coffee roasting operations to service the Territory, such vehicle to be owned in equal shares by RFG and Tian Jin Sen Yong Tai (or their associates).

Initial license fee already received in full

RFG CEO Tony Alford noted that the initial licence fee of AUD$6 million had been received in full, and that the parties were in the process of implementing the terms of the joint venture.

“The joint venture represents the culmination of a twelve month engagement between the Gloria Jean’s Coffees Brand System, Tian Jin Sen Yong Tai Co Limited and their respective associates, and affords RFG immediate revenue in terms of the initial licence fee paid, together with scope for future earnings by way of profit share and supply-side opportunity,” Mr Alford said.

“Importantly, the joint venture unites RFG with a substantial and motivated local partner, well able to apply sufficient resources, retailing expertise and resolve to ensure the success of the enterprise,” Mr Alford said.

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