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Yum! Brands Suspends Stock Buybacks, Announces Plan to Aid Franchisees

By James Brumley - Updated Mar 25, 2020 at 4:47PM

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The fast-food chain operator has already seen sales suffer, and expects they will get worse -- which will be rough on its franchisees.

Yum! Brands (YUM 2.82%) is making a major effort to keep its network of franchised Taco Bells, KFCs, and Pizza Huts afloat until the coronavirus outbreak abates. The company announced on Tuesday it has suspended its $2 billion stock repurchasing program. In addition, the company has borrowed $525 million via a revolving credit agreement, money that it intends to use to assist struggling restaurant owners.

Many of them are likely going to need it. Of the more than 50,000 quick-service restaurants in its network, roughly 7000 have been temporarily closed in response to the pandemic. Those that remain open are experiencing a dropoff in customer traffic -- natural, given that much of the world is in the midst of voluntary or mandatory lockdowns that have limited restaurant visits.

Fast food drive-through window

Image Source: Getty Images.

A large number of fast-food restaurants still offer drive-through service, while others have added or expanded delivery services. Yum! chain Pizza Hut is looking to hire 30,000 permanent workers, including drivers, to meet the surge in demand for off-premise eating.

Its efforts to adapt to the new conditions won't fully offset the impact of the pandemic on Yum!'s sales, though. Management also said this week that they expect same-store sales for the quarter ending this month to be down by a mid- to high-single-digit percentage, and that they anticipate sales will worsen further in Q2.

Even small setbacks within the lower-margin quick-service restaurant business can prove devastating for a franchisee, and the vast majority of Yum!'s 18,000 U.S. restaurants are franchisee-owned.

In addition to its larger chains, Yum! also owns WingStreet -- a chain it co-locates within some Pizza Hut restaurants -- and the recently acquired The Habit Burger Grill.

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