Edit
Financing

Yum Brands says 7,000 of its global restaurants are closed

The owner of KFC, Taco Bell and Pizza Hut says it is taking steps to shore up franchisees’ finances and has accessed its credit line.
Photograph: Shutterstock

Yum Brands said the coronavirus pandemic has led to the closure of about 7,000 restaurants around the world, including more than 1,000 Pizza Hut Express units in the U.S., as the company takes steps to shore up its franchisees’ finances.

The owner of KFC, Taco Bell and Pizza Hut suspended its share repurchase program and borrowed another $525 million on its revolving credit line to provide it with the cash to get through the coming months.

“The COVID-19 pandemic continues to impact the operations of our restaurants in numerous markets around the world,” the Louisville, Ky.-based fast-food operator said in a federal securities filing Tuesday.

Yum said it expects same-store sales in the quarter ended March 31 to decline in the “mid-to-high single digits” worldwide but noted that it cannot forecast sales because of the uncertainty on the “duration and severity” of the outbreak.

But, it said, “We currently expect COVID-19 to impact our same-store sales for the quarter ended June 30, 2020, more significantly than it is impacting the current quarter due to the increasing number of markets currently impacted.”

The 7,000 closures represent about 1 out of every 7 Yum Brands restaurants. The company’s three chains operate 50,000 global restaurants overall. In addition to the 1,000 Pizza Huts in the U.S., KFC in the UK has closed more than 900 restaurants.

In the U.S., the chain’s operations have been limited to drive-thru, delivery and carryout as states ban dine-in service. “We are working with franchisees in impacted markets to help navigate business continuity in the safest manner possible,” the company said.

Franchisees operate 98% of Yum Brand’s locations, and the closures are expected to hammer many operators’ finances. The company acknowledged in its filing that it is taking steps to help franchisees. The company mentioned providing operators with “grace periods.”

“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 company said.

In a press release on Wednesday, Yum also said it is allowing franchisees to defer all 2020 capital obligations for remodels and new unit development through the end of the year. That was the first time a franchisor has acknowledged that it would put off requirements for capital spending and new units for its franchisees.

The company noted that it will pay workers at company-operated stores who are required to stay home or who work at closed restaurants. It said it is working with operators to take a similar approach.

Yum said that the impact of sales within a market depends on the severity and duration of the outbreak, “as well as that market’s reliance on dine-in sales.”

Yum did say it is seeing some recovery in markets first impacted by COVID-19, notably China.

Yum is the first major restaurant chain to forecast its same-store sales for the first three months of the year, though others have reported existing sales that fell off a cliff by the end of the second week of the month.

Numerous restaurant companies have been giving breaks to operators as they navigate that period, either by deferred or discounted royalties and ad-fund payments. McDonald’s Corp. said it is offering deferred rent to some of its franchisees to help them through the coronavirus shutdown.

UPDATE: This story has been updated to add new information from Yum Brands.

Want breaking news at your fingertips?

Get today’s need-to-know restaurant industry intelligence. Sign up to receive texts from Restaurant Business on news and insights that matter to your brand.

Trending

More from our partners