Because of chaotic and uncertain market conditions caused by the coronavirus pandemic, McDonald's (MCD -0.53%) stated today that it might defer rent payments for its franchisees to help them maintain liquidity during the disruption. The company made this statement in a recent report filed with the SEC, in which the Golden Arches cited rent deferrals as just one example of the ways it might aid in bolstering franchisee resilience.
McDonald's report noted that while about 95% of its Chinese restaurants are operating again, and nearly 100% are fully open for business in Japan, the situation elsewhere around the world is much less rosy. The company declared that "the negative financial impact to our results cannot be reasonably estimated, but could be material" and observed that the length and final effects of the pandemic are unpredictable at this point.
Giving franchisees a temporary reprieve from paying rent may be critical to keeping restaurants in existence in countries like the U.K., Spain, and France, where all outlets are completely shut down. McDonald's franchises in other countries are eking out what profits they can with drive-through and delivery service. International markets operating on this limited basis include Australia, Canada, and Germany, and the SEC report notes that in the U.S., drive-through, takeout, and delivery are the only current service options at "substantially all" locations.
McDonald's says that along with the rent pause and other franchisee liquidity measures, it is working with suppliers to ensure that its supply chain continues to run safely and without interruption.