McDonald's to shutter all stores in UK, Ireland

Dive Brief:

McDonald's will close all of its 1,270 restaurants in the U.K. and Ireland by 7 p.m. on Monday "at the latest," according to a company Twitter post on Sunday. Prior to the announcement, the fast food giant had already closed in-store guest seating, but was still accepting takeout and drive-thru orders.
"Over the last 24 hours, it has become clear that maintaining safe social distancing whilst operating busy takeaway and Drive Thru restaurants is increasingly difficult," McDonald's UK and Ireland CEO Paul Pomroy said in a statement.
The company employs 135,000 restaurant workers in the U.K., and employees at corporate-owned stores will receive full pay for their scheduled hours until April 5, McDonald's told BBC News. By this date, McDonald's believes the U.K. government's financial aid package, which was announced on Friday, will cover 80% of employees' wages. The chain expects U.K. franchisees to also pay employees for the next three weeks.

Dive Insight:

McDonald's impending closures in the U.K. and Ireland follow Prime Minister Boris Johnson's call for restaurants and pubs to close on Friday. The chain isn't the only major restaurant shuttering its stores in these markets, either — chicken chain Nando's has closed all of its 400 U.K. stores, and coffee retailer Costa Coffee will close its 2,000-plus U.K. stores by the end of Monday as will Subway and sushi chain Itsu.

But now that McDonald's has chosen to cease operations entirely in these markets, other chains will likely follow its lead. How the company handles employee compensation, supply chain management and distribution of its perishable inventory, and whether franchisees choose to pay workers through April 5, could also serve as a blueprint of things to come in the U.S.

Though no major American restaurant chains have closed entirely, nearly 40 states have mandated that restaurants shift to delivery- and carryout-only operations to quell the spread of the novel coronavirus. As layoffs sweep through the industry as a result, President Trump signed a relief package into law last week that requires companies with 50 to 500 employees to give workers two weeks of paid sick leave. McDonald's reportedly pushed against this measure, according to Business Insider, out of fear that it would undermine franchisee profitability. The chain has rolled out 14-day emergency paid sick leave at its corporate-owned stores, but employees at operator restaurants can currently only cash in up to five days of paid time off each year.

This focus on franchisees, rather than employees, could hint at how workers at operator-owned stores will be treated both across the pond and at home. On a call with the White House on Monday, McDonald's executives said that the restaurant wouldn't collect effective rent for March and base rent in April and May to help ease franchisees' financial burden.

And that financial burden will only grow. When Starbucks temporarily closed its China stores in February, comparable store sales slipped 78%, and the company expects comparable store sales for the region will be down 50% for all of Q2. This translates to a revenue loss of $400 million to $432 million for the quarter.

There's no way of knowing how long McDonald's U.K. stores will be closed, and if the fallout will be as great as what it and other major chains suffered in China due to coronavirus closures. But the chain needs to be aware of its brand perception. Fight for $15 has already demanded more protections and benefits for U.S. McDonald's workers in light of coronavirus, and backlash like this will only intensify if employees feel neglected during this tumultuous period.