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McDonald’s warns of the potential impact of the pandemic

The burger giant expects closures and sales declines to impact its financial results, though it can’t predict how much.
Photograph by Jonathan Maze

The global coronavirus pandemic isn’t leaving the world’s largest restaurant chain unscathed.

McDonald’s Corp. said Wednesday that COVID-19 and the resulting store closures or service reductions could have a “material” negative impact on its financial results this quarter, though it cannot predict how much.

“As we cannot predict the duration or scope of the COVID-19 pandemic, the negative financial impact of our results cannot be reasonably estimated, but could be material,” the company said in a federal securities filing Wednesday.

McDonald’s said it is working with franchisees around the world “to evaluate operational feasibility and support financial liquidity” during this period. That financial support could include deferrals on the rent franchisees pay to the company.

McDonald’s controls its franchisees’ real estate and takes a percentage of operators’ revenues as rent. The company does not make offers for rent deferral often—it offered to defer the rent owed by New York City operators following the Sept. 11 terror attacks, for instance.

Globally, many of the chain’s markets have been impacted by the coronavirus pandemic. Restaurants are closed in France, Italy, Spain and the United Kingdom. Many other markets, including Australia, Canada and Germany, have limited service to the drive-thru, delivery and takeaway.

That includes the U.S., where “substantially all” of the chain’s nearly 14,000 locations have closed their seating areas. In some cases, the restaurants either have limited hours or limited menus.

All of the chain’s restaurants are operating in Japan, however, and in China, 95% of the chain’s restaurants are open.

McDonald’s also updated its “risk factors” to feature the impact from the current pandemic.

Publicly traded companies have to disclose various risk factors to their business in their annual report. These risk factors include both internal and external risks to the business.

“We expect the COVID-19 pandemic to negatively our financial results and such impact could be material to our financial results, condition and prospects based on its longevity and severity,” the company said in its filing.

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