Keg Refunds, Relaxed Rent: Companies Work to Ease Partners’ Pain

(Bloomberg) -- Molson Coors Beverage Co. is offering “keg relief programs” to reimburse bars for flat beer. McDonald's Corp. has relaxed rent collection from shuttered stores. Dunkin' Brands Group Inc. is getting on calls with its franchisees' lenders.

These extraordinary measures show that supply chain issues go well beyond keeping goods and ingredients flowing. In the age of Covid-19, companies also have to make sure they still have places to sell their products. So with an eye on helping these franchisees and retail partners get through the pandemic, many businesses are sacrificing short-term profit for long-term survival.

For companies that have tapped credit lines and halted capital spending to preserve cash, the pain is measurable and acute. Molson Coors estimates the cost of reimbursements to closed establishments for kegs that can't be used or sold before they lose their fizz will total $50 million.

McDonald's Chief Executive Officer Chris Kempczinski said on an earnings call Thursday that the company has done a “stress test” for all franchisees on their liquidity needs and has a “full suite of tools” to support them. Kevin Ozan, the chief financial officer, said that this includes converting franchisee rents to variable ones, based on their sales, “so the restaurants that have been closed effectively aren't paying rent.”

Dunkin', which is fully franchised, has extended terms on payments for royalties, advertising and deferred rent on corporate-owned properties. The company said it's working with lenders and suppliers to help franchisees get more flexibility and liquidity. CFO Kate Jaspon said “most lenders have been extremely supportive” by deferring payments or extending lines of credit.

Creating a ‘Bridge'

David Gibbs, CEO of Yum! Brands Inc., said yesterday that the company was acting to help franchisees “bridge to the other side of this crisis.”

Yum, which owns the Taco Bell, KFC and Pizza Hut brands and is 98% franchised, said it's giving owner-operators that are in good standing up to 60 extra days to make royalty payments, while deferring capital obligations for remodeling and new development for up to a year. The company is also helping franchisees work with landlords and understand what government programs are available.

“We reassured our franchisees we would do everything in our power within the constraints we are all facing to help them and their team,” Gibbs said.