The COVID-19 outbreak and related economic impacts are taking a toll on the MTY Food Group. The parent of Kahala Brands and dozens of other quick-service brands, has laid off half of its workforce, according to a business update provided today. Kahala includes well-known brands, including Pinkberry, Coldstone Creamery and Baja Fresh Mexican Grill. The company also requested an extension of its quarterly financial reporting 45 days beyond the April 14, 2020 deadline, permitted by an exemption allowable by Canadian securities regulatory authorities.
In addition, MTY Food Group reported it had closed 2,100 restaurants across its restaurant franchise network, including 144 corporates stores, not including Papa Murphy units. While it reduces capital and operational expenditures to a minimum, MTY Food Group will also lower the salaries of leadership team members on a temporary basis. At the end of 1Q 2019, the company operated and franchised 7,377 restaurants, with 55 percent of those units in the United States.
“MTY is extremely thankful to all its business partners, financial institutions, landlords and the authorities that are for the vast majority of them making significant sacrifices to help MTY and its franchise partners weather the storm and bounce back when the situation goes back to normal,” said Eric Lefebvre, chief executive of MTY.
The Montreal, Canada-based franchisor had previously postponed collection of royalties for four weeks starting March 16. It is now outlining additional areas of the business that will be impacted while suspending dividend payments:
- Expected credit losses on accounts receivables, loans receivables and lease receivables
- Impairment of franchise rights and trademarks
- Impairment of goodwill
- Provisions for closed stores, litigations and disputes
- Fair value adjustment on the $100 million credit facility interest rate swap
- Changes to lease liability
Photo credit: MTY Food Gorup
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