Yum Brands, the parent company of Taco Bell, KFC, Pizza Hut and The Habit Burger Grill, has temporarily closed 7,000 restaurants around the globe and issued guidance that the impact of COVID-19 pandemic on same-stores sales will grow progressively worse through mid-summer.
The Louisville, Ky.-based restaurant company stated in a regulatory filing that same-store sales for the quarter ended March 31 will decline in a range of mid-to-high single digits. However, because the duration of the crisis is unclear, the company said same-store sales are likely to slide even more for the quarter ended June 30.
In an equity research note released Wednesday, BTIG estimated that Yum’s March same-store sales will be down 20% to 25% “with a steeper decline in the last 10 days.”
The plunge in sales comes as jurisdictions around the world have ordered restaurants to close dine-in operations, limiting sales to delivery, carryout or drive-thru.
The company has more than 50,000 restaurants, and recently acquired The Habit Burger Grill, a fast-casual burger chain based in Southern California.
All four brands have switched to a “low contact” to-go model, serving customers through delivery, drive-thru or curbside pick-up, where available. Though brands like Starbucks have shut down carryout service, Yum Brands said all of its chains are still participating in carryout, where permitted. Some Taco Bell restaurants have stopped serving breakfast.
Still, the company said about 7,000 restaurants around the globe have had to temporarily cease operations completely. That includes 1,000 Pizza Hut Express units in the U.S., a brand that was already experiencing financial woes prior to the pandemic.
Despite the U.S. closures, Pizza Hut and its franchisees announced earlier this week the need to hire 30,000 more employees for permanent positions such as cooks, shift leaders, restaurant managers and virtual call center agents.
With the United Kingdom in lockdown, more than 900 KFCs have also closed in that region. On Monday night, McDonald’s closed all of its restaurants in the United Kingdom and Ireland.
Like many other publicly traded companies stockpiling cash, Yum Brands has firmed up its cash position as a precaution amid the novel coronavirus outbreak. On March 24, the company borrowed $525 million from its revolving credit facility.
“We and our franchisees have also experienced significant store closures and instances of reduced store-level operations that have resulted in reduced operating hours and dining-room closures,” Yum stated in the filing. “In markets where governments have imposed restrictions on travel outside of the home or where customers are practicing social distancing, restaurant traffic has also been significantly impacted.”
Yum said it believes that it has enough liquidity to support its operations and meet financial obligations. Borrowing money is a precautionary measure “to preserve financial flexibility in light of current uncertainty,” the company said.
Yum Brands said it is helping franchisees navigate by keeping off-premise operations open in the safest manner possible for employees and consumers.
Pizza Hut, for example, is offering contactless delivery in the U.S. and 48 countries internationally. The feature allows consumers to have delivery drivers leave pizzas at the door. KFC and Taco Bell locations in the U.S. are offering contactless delivery through Grubhub, the company’s exclusive third-party operator.
“We are also working with franchisees who need more access to capital and are in good standing with the company to provide assistance, including grace-periods for certain near-term payments where necessary,” the filing said.
As for employees, Yum said workers employed at company-owned KFC, Pizza Hut, Taco Bell and The Habit Burger Grill restaurants will get paid if they are required to stay at home, or if they who work at a restaurant that is closed. Payment will be based on their regularly scheduled hours during their time away from work.
"Yum is actively working with its franchise partners to encourage a similar approach," the company said.
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