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Tue 5th May 2020 - Update: Furlough scheme, Steve Easterbrook, coronavirus impact
Chancellor: There will be no ‘cliff-edge’ cut off for furlough scheme: The chancellor Rishi Sunak has said that he is preparing to phase out the Job Retention Scheme (JRS) as the economy begins to unlock, but promised no ‘cliff edge’ cut off to the furlough scheme. Around 6.3 million employees in the UK have been ‘furloughed’, meaning the government is paying 80% of their wages. According to research by the Office for National Statistics (ONS), eight in ten workers in the hospitality sector have been furloughed as a result of the coronavirus crisis. The chancellor has already extended the JRS once to the end of June, and is under pressure to do so again. Various business groups have warned of mass redundancies, including those representing the hospitality sector, unless taxpayer support continues beyond the end of June. The chancellor said: “To anyone who’s anxious about this I want to give them reassurance today that there will be no cliff edge to the furlough scheme. I am working as we speak to figure out the most effective way to wind down the scheme and ease people back into work in a measured way.” Hospitality Union founder Jonathan Downey said: “This is great news and very reassuring to hear two months ahead of the current end date. Between now and 30 June, we must start to get people back to work in safe environments. Fewer on furlough = It’s more likely the scheme can be extended for longer to those not allowed to work.” At the same time, Ed Miliband, the former Labour Party leader and current shadow business and energy secretary, called on the government to provide a second wave of support for businesses that have to remain closed for longer, including an extension of the furlough scheme and more help for the hospitality sector.

Questions raised over Easterbrook’s $44m departure: McDonald’s is facing shareholder opposition over its handling of Steve Easterbrook’s dismissal, with an influential advisory group criticising an exit package for the former chief executive estimated to be worth circa $44m. Ahead of McDonald’s annual meeting this month, Glass Lewis said it had “substantial concerns” about the departure terms for Easterbrook, who lost his job last November after he had a romantic relationship with a colleague. The Financial Times stated: “The consensual relationship violated the US company’s policies. The Englishman, who led the Chicago-based chain for more than four years, was let go on a ‘without cause’ basis, making him eligible for a series of lucrative benefits to which he would have otherwise not been entitled. On top of a separation payment worth $700,000 and prorated incentive plan shares worth $3m, Easterbrook’s leaving package included a right to exercise options that were due to vest in the next three years and a share of restricted stock units the board had granted him. The deal could be worth more than $40m, according to figures from remuneration data company Equilar. As part of the arrangement, Easterbrook agreed not to work for rivals such as Burger King and Subway for the next two years, disparage McDonald’s on social media, or give interviews about his tenure without the agreement of the company’s general counsel. Glass Lewis has recommended investors vote against the company’s executive pay, and also against the re-election of director Richard Lenny, the Conagra Brands chairman who chairs McDonald’s remuneration committee.”

Taco Bell to reopen a further six UK sites: Mexican restaurant brand Taco Bell will reopen a further six sites in the UK for delivery only later today (5 May). As revealed previously by Propel, the 45-strong brand reopened three sites – in Plymouth, Cardiff and Devonshire Street in Sheffield, last week. It will now also reopen its sites in Leeds, Reading, Brighton, Nottingham, Colchester and York. Orders can be placed through both Deliveroo and UberEats. Taco Bell said it is also planning to reopen its drive-thru restaurants and its Click and Collect programme in the coming weeks. A Taco Bell UK spokesperson said: “Following careful consideration and planning we have made the decision to reopen nine of our UK restaurants for delivery only. We know there’s still an appetite for food that’s accessible, affordable, and craveable. To do this responsibly, we have created new social distancing processes for team members and our delivery partners to ensure an end-to-end contactless experience and enhanced our restaurant safety procedures.”

Peter Backman – there are three stages to coronavirus impact: Sector analyst Peter Backman has argued there are three stages to coronavirus impact. In his weekly update, he states: “In my conversations with restaurants and pub operators there seems to be a coalescing view that there are three stages to the impact of coronavirus on the sector and on this occasion I very much agree. The first stage is the one we are in now and it will last until lockdown restrictions are lifted sufficiently for people to be allowed to visit restaurants and pubs. The second stage is from then until consumers feel comfortable about visiting these places – and that is likely to have to wait until there is a vaccine or some mitigation of the effects of the virus. The third stage is from then onwards in what many are referring to as a ‘new norma’. But within each of these stages there is a moment of truth of critical importance. The first moment of truth will arrive at the end of June when rents are due. In March, a large percent went unpaid: will those landlords who were somewhat understanding last time, remain so? How much debt is building up in this particular part of balance sheets? And, at the same time, the furlough scheme runs out – unless it is renewed in some form or other; so there are questions about whether to hang on to staff (even if they can be afforded). And finally, looking at balance sheets and how they can cope without any meaningful revenue, the ‘average’ restaurant probably runs out of cash / balance sheet reserves anyway at this point (or earlier). So, we should expect a wave of corporate failure in the weeks leading up to the end of June. Indeed, this is already happening with advisors already called in by Azzuri Group, Byron, Prezzo, and several more. The second moment of truth is the time when lockdown restrictions are removed or, at least, relaxed. Do restaurants risk opening when they don’t know what the demand is going to be? And how will distancing rules affect their capacity and therefore their viability? This topic is getting plenty of airtime and its relevance will become pressing when restrictions are removed. The third stage is the happy one when the threat from the virus is extinguished. That is many months, probably years away, and a lot of damage will have been done. But the moment of truth will arrive for those who are left, when they will have to address issues around their long-term future.”

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