Because a company owned store is not run the same way as a franchisee. They would have special provisions for staff that are fundamentally different, they would have a raft of charges that carry premiums, etc. Personally I generally don't care how somebody is running that specific store, I am going to apply my own numbers. Other stores are for comparison, so you can see what the cost of goods are, relative rents, costs relative to turnover, etc. A due diligence should be about truly understanding the business and how they are run generally, not just that specific business.
Further my point was about comparing costs between businesses, not turnover.
In closing I have written on this forum a number of times, that there are a lot of people who shouldn't own businesses, they do not have the right mindset or business understanding. Buying a loss making business is relative to the changes and investments you are going to make, do they have the right staff, do they have the right cost controls, are they in the right position, can it be profitable, etc are all factors that go into the decision making process.
All of my friends who own food businesses have advised me that this has been the worst year for food trading, in their 20 year history of owning businesses. So my very strong view on this company is that RFG are terrible managers, they have under invested in the brands and have squeezed them for all they are worth - coupled with one of the worst trading periods for an extended period of time, accordingly businesses that are under capitalised are failing.
Over the medium term there are one of three (3) outcomes that will occur moving forward:
1. RFG fixes their drama and the underlying businesses improve.
2. RFG fails and somebody else purchases the businesses (or a takeover)
3. RFG meanders thru and nothing changes.
Based on the above options, the trick is to not own the bottom 30% of stores, anybody in the middle / top of stores will do ok - because the position of the business will deliver a result combined with a product.
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