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Morning Briefing for pub, restaurant and food wervice operators

Tue 5th Nov 2019 - Update: Steve Easterbrook, Shake Shack
Easterbrook to keep stock awards worth circa $37m; McDonald’s global chief people officer also quits: Steve Easterbrook, who was fired over the weekend as chief executive of McDonald’s for having a consensual relationship with an employee, will be allowed to keep stock awards worth more than $37m as well as about $675,000 (£524,000) in severance pay. McDonald’s announced that it would pay Easterbrook 26-weeks severance. Easterbrook, who had been chief executive of McDonald’s since March 2015, made $15.9m in 2018, including a salary of $1.3m salary and the rest in stock and option awards and bonuses. He will get to keep unvested stock options worth about $23.5m and possibly benefit from grants of restricted shares tied to the company’s performance that are worth roughly $13.8m at their target payouts, according to calculations by Bloomberg. He’s also eligible for a pro-rated bonus for his work in fiscal 2019. The UK-born Easterbrook has also signed a non-compete agreement effective for two years in which he will not be able to work for a competing company. The list of companies included under this term features Burger King, Five Guys, Checker’s, Tim Horton’s, Pizza Hut, Kentucky Fried Chicken, Subway, Chick-fil-A, Chipotle, Domino’s Pizza, Starbucks, Caffe Nero and Costa. Easterbrook is also eligible for 18 months of health benefits. At the same time, the UK-born David Fairhurst has stepped down as the fast food chain’s global chief people officer. Fairhurst had been with the chain for 15 years and worked closely with Easterbrook when he was chief executive of McDonald’s UK. Fairhurst was promoted to the company’s highest human resources position by Easterbrook in 2015. McDonald’s company declined to comment on the nature of his departure. The brand’s new chief executive, Chris Kempczinski, will have an annual base salary of $1.25m, with a target-based bonus of 170% of his annual base salary. On the back of Easterbrook’s sacking, McDonald’s shares fell over 3% on Monday.

Shake Shack disappoints with lacklustre like-for-like sales growth: Shake Shack has reported like-for-like sales increased 2% in Quarter Three, the three months to 25 September, to fall short of the consensus estimate for a gain of 2.9%. Traffic was up 1.2% during the quarter. Restaurant-level operating margin fell to 23.1% of sales versus. 25.8% a year ago and 24.1% consensus. Average weekly sales for domestic company-operated Shacks decreased to $80K compared to $69K for the same quarter last year, primarily due to the addition of newer Shacks at a broader range of average unit volumes. Looking ahead, Shake Shack expects FY19 revenue of $592M to $59M versus a prior view for $585M to $590M and $600M consensus. The company expects 38 to 40 new company-operated Shack openings. Randy Garutti, chief executive, said he was “pleased” with the company’s revenue performance during the third quarter and its same-store sales growth of 2%. “This has been the biggest development year in Shack history as we’ve grown our presence around the country and internationally in the new markets of Mainland China, Singapore, the Philippines and Mexico. In 2020, we will continue to expand even further within key domestic and international markets,” he added.

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