Trump Encourages Fast-Food Brands to Keep the Drive Thru Open

    Subway franchisees also recently asked corporate for financial relief.

    The 2019 Drive-Thru Performance Study

    iStock

    Quick serves might be better equipped to handle the downturn than other restaurants.

    A day after recommending that citizens stay away from dining inside restaurants, President Donald Trump said he spoke with several restaurant companies Tuesday, encouraging them to keep their drive-thru lanes open.

    CNBC reported that a handful of major brands participated in a conference call with Trump, including McDonald’s, Yum! Brands, Restaurant Brands International, Chick-fil-A, Wendy’s, Subway, and Papa John’s. 

    More than 40 percent of states have temporarily closed dining areas in restaurants. In each of those cases, restaurants are still allowed to operate carryout and delivery. 

    MORE ON COVID-19:

    STAY UP TO DATE WITH OUR CORONAVIRUS LANDING PAGE

    WHERE FAST FOOD FITS IN THE COVID-19 CRISIS

    WHAT CUSTOMERS ARE SAYING ABOUT THEIR BIGGEST FEARS

    WHY FULL SERVICE IS GETTING HIT THE HARDEST

    CORONAVIRUS CRISIS COMMUNICATIONS FOR RESTAURANTS: A CHECKLIST

    According to CNBC, one executive asked the White House to support a fund that would provide extra cash flow to help small businesses. A source said Trump responded by saying, “I think you’re really going to like what we’re doing.” 

    “We discussed the important role that the drive-thru pick-up and delivery service can play in the weeks ahead,” Trump said during a briefing. “They have been fantastic. They have been absolutely fantastic. They’ve been doing it already, but they’re keeping it open, smaller staffs. Very capable people, very capable companies.” 

    Subway, which was experiencing financial difficulties prior to the coronavirus outbreak, is facing frustration from its franchisees in particular. 

    The New York Post reported that the North American Association of Subway Franchisees sent a letter to CEO John Chidsey, asking for financial relief from weekly fees. Subway has just over 23,650 units in the U.S., which is down from 2015, when it ended the year with 27,103—more than Burger King, Wendy’s, Taco Bell, and Pizza Hut combined. The restaurant chain had 24,798 locations at the end of 2018. 

    According to The New York Post, the North American Association of Subway Franchisees represents roughly 23,500 store operators. The letter, sent over the weekend, referenced fees that add up to 12.5 percent of their sales.

    Franchisees said they were charged weekly dues, per the publication, as scheduled Monday. In addition to an 8 percent royalty for branding rights, franchisees also give Subway 4.5 percent of their weekly sales to an advertising fund.

    Franchisees said sales have dropped between 40–80 percent in recent days, according to the New York Post.

    An anonymous Subway franchisee told the publication: “The problem is, even if Subway said, ‘We are going to suspend royalties,’ I’m not sure that is going to save people. “Our rent will still be there,” as will utilities and insurance payments.

    Added a franchisee in response to the association’s letter to Subway: “Stores are closing and franchisees are going bankrupt. All we get are crickets. This is more serious than anything else. Stop royalties NOW.”

    The International Foodservice Distributors Association sent a letter to Trump Tuesday as well, urging the administration to work with Congress to develop legislation to relieve businesses under distress. 

    In the letter, Mark Allen, president and CEO of the Association, said that foodservice distributors typically operate at a 2 percent margin or less, meaning a large change in sales can have a significant impact. He also noted that the foodservice distributor industry is valued at $280 billion, including 15,000 distribution centers, 350,000 employees and more than 153,000 vehicles. 

    "With many institutions closed and restaurant sales limited to carry-out and drive through windows, business has declined rapidly and substantially. Yet distributors and their restaurant customers still incur significant day to day expenses such as rent payments and they must continue to make payments on any loans they may have incurred," Allen said in the letter. "While IFDA supports Congress’ action to require paid sick leave to ensure employees receive income if they contract the virus, these payments can be difficult to make without any revenue coming in."

    McDonald’s said in an SEC filing that it was considering rent deferrals for its franchisees, also noting that “negative financial impact to our results cannot be reasonably estimated."

    CNN reported discussions centered on an $850 billion economic stimulus package that includes aid to small businesses, although that plan has received pushback from Democrats. 

    Treasury Secretary Steven Mnuchin also indicated that the White House wants to send checks to Americans immediately. Mnunchin didn’t disclose an amount and said he will discuss that matter with Republicans, although $1,000 has been floated by several pundits. 

    “We’re looking at sending checks to Americans immediately and what we’ve heard from hardworking Americans, many companies have shut down, whether it’s bars or restaurants, Americans needs cash now and the president wants to get cash now,” Mnunchin said during a briefing. “And I mean now, within the next two weeks.”