Burger King owner Restaurant Brands International (RBI) is advancing $70 million in cash to its U.S. franchisees as part of a massive effort to keep its operators afloat during the coronavirus shutdown.
In an open letter, RBI CEO Jose Cil said the cash and rebates will provide each eligible restaurant with thousands of dollars to navigate the coronavirus shutdown.
The cash advances are part of a package of franchise assistance, including breaks on rent and remodel requirements, that are designed to help operators stay in business.
“We are one of the largest franchisors of restaurant brands in the world and we take our responsibility to ensure the financial health of our restaurant owners very seriously, particularly during difficult times,” Cil said in his letter. “We are working closely with all our restaurant owners around the world to make sure they have access to appropriate sources of liquidity in order to sustain their businesses throughout the crisis.”
RBI, which also operates Popeyes Louisiana Kitchen, said it is taking significant steps to ensure that its employees aren’t working sick.
For instance, the company said it is sending 15,000 infrared thermometers to all of its restaurants “to confirm that team members are healthy as they arrive for shifts,” Cil said. The company has also put in place “comprehensive social distancing procedures” and is taking steps to sanitize high-contact surfaces with greater frequency and making hand sanitizer available for employees and customers.
RBI’s efforts, particularly on the franchisee assistance front, are important given the company’s size. Its chains operate more than 27,000 restaurants around the globe. Franchisees own nearly all of them.
Some of the operations challenges for its largest franchisees were highlighted earlier this year when Carrols Restaurant Group, Burger King’s biggest U.S. operator, said it planned to slash capital spending to save cash to pay off debt.
Many franchisors have taken some steps to protect their operators as closures of dining rooms and reduced traffic have hammered sales. Rent deferrals and royalty relief have become commonplace, as have breaks on capital spending.
RBI is the first franchisor to say it plans to send cash to franchisees. The company said it is advancing cash payments and rebates “so they have this much-needed cash when they need it most.” The company also said it is looking for other payments due to restaurant owners later in the year that can be advanced now.
The efforts “have allowed us to unlock thousands of dollars in immediate liquidity per eligible restaurant,” Cil said.
RBI has also temporarily converted its rent structure for Tim Hortons in Canada and Burger King in the U.S. and Canada to 100% variable rent, rather than a combination of fixed plus variable rent. The company is also deferring rent payments and is contacting landlords to ask for additional assistance.
Remodels will be delayed “until we have greater visibility into the severity and duration of the crisis,” the company said.
And the company has created Restaurant Owner Liquidity Support Teams across all of its brands to work with operators and help them with loan repayment schedules. These teams will help operators apply for federal stimulus dollars, “which we believe will provide significant support to our restaurant owners.”
Cil said the company and its operators have provided C$40 million to an employee support fund in Canada to pay employees for up to 14 days if they come down with the coronavirus.
Company-operated Burger King and Popeyes locations will also provide up to 14 days of paid sick leave, though franchisees operate the bulk of the system’s restaurants. Workers at corporate stores will also receive a special bonus this month.
To pay for all of this, RBI said it has drawn down $1 billion from its revolving loan fund, giving the company $2.5 billion in cash on hand to get through the crisis.
“This has provided us the flexibility to confidently support our restaurant owners and employees throughout this uncertain time and maintain our focus on supporting our brands for the long term by making the right decisions today,” Cil said.
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