A handful of large fast-food chains, including Subway Restaurants, are reducing the fees they charge their store operators as the coronavirus outbreak grinds restaurant business to a halt.
Subway CEO John Chidsey told the chain’s 23,500 locations on Monday night that the Milford, Conn., company will halve its royalty fees this week — from 8 percent to 4 percent. It will also forgo the 4.5 percent of revenue payments it collects from store operators for the advertising budget over the next four weeks, sources said.
Chidsey made the move after the North American Association of Subway Franchisees, which advocates on the behalf of Subway store operators, sent a letter to the CEO over the weekend begging for “relief,” as The Post exclusively reported on Monday.
Subway, which does not own any of its stores, “had been discussing how to best support franchise owners during this unique time,” prior to seeing the letter, a spokeswoman said Wednesday.
McDonald’s, which closed dining rooms at its 13,850 US restaurants on Monday, is also considering financial aid for franchisees in the form of rent deferrals, it said in a recent regulatory filing.
“We are working with franchisees around the world in order to evaluate operational feasibility and support financial liquidity (e.g. rent deferrals) during this period of uncertainty,” the filing said.
The fast-food chain behind the Big Mac declined to comment, but a source with knowledge of its thinking said it’s also considering reductions to its royalty fees.
Montreal-based MTY Food Group, owner of Thai Express, also said it would stop collecting royalties from its franchisees for four weeks starting Tuesday, March 17, the company said.
Fast-food chains are being forced to reduce the fees they charge franchisees as public officials have ordered restaurants close in some states, including Washington and New York, to contain the spread of COVID-19. Takeout orders are still allowed in some states, like New York, but fears of contagion have tanked the to-go orders business, too.
Restaurant consultant John Gordon says he thinks other fast-food chains will also soon be forced to reduce fees to help keep their suffering franchisees afloat.
“It’s always the big chains that start the trends.”
Requests for aid could also intensify at chains that offer temporary relief. Subway franchisees, for example, are expected to push for more than one week of royalty fee reductions until the pandemic clouds lift, sources said.
Restaurant bans combined with the public’s growing fear of food cooked by strangers has sent restaurant stocks plummeting. McDonald’s shares are down 38 percent in the last month, while shares of Restaurant Brands International, which owns Burger King and Tim Hortons, are off 58 percent over the same period.