Tim Hortons parent company Restaurant Brands International Inc. has decided it will not apply for the government’s 75-per-cent wage subsidy for any of its corporate staff, saying that big businesses are not the best focus for the funding.
The Toronto-based fast-food company, which also owns Burger King and Popeyes, lobbied the federal government to expand its subsidy from the 10 per cent first announced earlier in March. RBI argued that its franchisees, which employ most front-line restaurant staff, are small businesses in need of support. Its decision applies only to corporate employees, not franchisees.
Details of the new plan were released last week, offering 75-per-cent support on the first $58,700 of each employee’s wages, for businesses that have lost at least 30 per cent of their revenue as a result of the COVID-19 pandemic.
“There are a lot of businesses that are hurting right now in Canada, and the government’s generous support needs to be focused on them,” RBI chief corporate officer Duncan Fulton said. “We don’t believe that this wage subsidy … needs to extend to large corporations.”
The support was designed to persuade companies suffering from the fallout of the economic slowdown to keep more people on the payroll. A number of companies, including many in the retail industry, have been deemed “non-essential” services and forced to shut their doors.
Retailers have coped with store closings in many cases by temporarily laying off workers. But fast-food chains, including Tim Hortons, have remained open. RBI has told staff it will not use layoffs or pay cuts to cope with any declines as a result of COVID-19.
RBI would not confirm how much revenue has declined. But even though fast-food chains are still serving customers, traffic has slowed as more people shelter at home.
McDonald’s Canada and Starbucks Canada both declined to confirm their plans regarding the wage subsidy on Tuesday. Both chains closed most of their restaurants in Canada more than two weeks ago, offering drive-through or delivery services only.
Toronto-based Canadian Tire Corp. Ltd. declined to outline its plans. In an e-mail, Montreal-based convenience-store chain Alimentation Couche-Tard Inc. said it is “evaluating the government support available” in all jurisdictions where it operates, and will decide whether or not to apply.
RBI employs roughly 350 people at its head office in Toronto, and more than 1,000 people in its supply chain, such as distribution-centre workers and truck drivers. More than 450 people work at the head office in the U.S., managing Burger King and Popeyes. RBI also has employees at its corporate-owned restaurants, of which there are roughly 25 in Canada and more than 100 in the United States.
Even as revenue dips, the company has cash to sustain the payroll at the corporate level. In 2019, RBI had $1.4-billion in free cash flow. In a letter last week, chief executive Jose Cil confirmed that the company has also drawn down a $1-billion revolving credit facility, and last week the company launched a $500-million bond offering.
While Mr. Fulton said that optics were not a consideration in its decision to forgo government wage assistance for corporate salaries, its cash on hand, combined with the fact that the company earned $1.1-billion in net income last year, could expose RBI to criticism if it did decide to apply.
But some businesses say that the wage subsidy is a lifeline. Vancouver-based Aritzia Inc., which employs 2,106 people across Canada, has closed all of its stores, but has not laid off any of its staff or introduced pay cuts, and is continuing to pay store staff based on their typical hourly wages. Revenues are down significantly and the retailer plans to apply for the subsidy.
“I wish I could tell you that we didn’t qualify, but we do qualify” CEO Brian Hill said. “The purpose and intent of what [the government] did worked perfectly with our aspirations of financial continuation for our people. It’s certainly a meaningful contribution.”
The company is hoping businesses may be able to begin ramping up operations again around July, but is planning for the financial effects of COVID-19 to last through the rest of the year. Aritzia has been communicating to customers that all proceeds from e-commerce sales go toward that continued financial support for its staff.
“Unfortunately, it has not come close to making up for shuttering 100 stores, but it has had a meaningful effect,” Mr. Hill said. “Without [customer] support – even with the government support – we would not be able to do this.”
With a report from Nicolas Van Praet
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