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Tracking the Dining Dollars: What POS Data Has to Say About the Impact of COVID-19 on the US Restaurant Industry

George Mihalos, Cowen’s FinTech Analyst and Andrew Charles, Cowen’s Restaurants Analyst, speak with Jordan Thaeler, Founder of WhatsBusy. WhatsBusy partners with point of sale (POS) companies to track transaction data for over 50K restaurants, largely based in the US, that vary in size from SMBs (50% of database) to large enterprise chains (remaining 50%). This discussion focuses on year-over-year sales figures, regional trends, and how restaurant segments have been affected.

Press play below to listen to their discussion.

Transcript

Speaker 1:                       Welcome to Cowen Insights, a special look at the Coronavirus and its effects on sectors across the economy as well as the policy arena. You will hear the latest insights from leading experts about where things stand and what’s around the corner.

Tamira:                            [00:00:30] Good morning. Welcome to Tracking The Dining Dollars: What POS data has to say about the current state of the US restaurant industry conference call. I would now like to pass the conference over to your host, George Mihalos with Cowen and company. Thank you. You may proceed Mr. Mihalos.

George Mihalos:             Great. Thank you, [Tamira 00:00:48], and good morning, everyone. Thank you for joining us for our digital dining call this morning. My name is George Mihalos. I’m the fintech analyst here at Cowen and I’m going to be co-hosting today’s call with my colleague restaurant analyst, [00:01:00] Andrew Charles. We’re very pleased to have with us today, a very good friend of our franchise, Jordan Thaeler. Jordan is the president of the data science firm, WhatsBusy. He also operates the reforming retail blog, which is just a wealth of information for all things. Point-of-sale, acquiring, and just SMB data in general. So highly recommend you guys check that out if you don’t already. Jordan, thank you for your time this morning.

Jordan Thaeler:               Yeah. Thanks, George.

George Mihalos:             Great. To kick [00:01:30] things off, before we get into what the sales data is specifically saying, why don’t you help us frame where this info is coming from? How many restaurants does WhatsBusy touch? What kind of data are you [inaudible 00:01:45] and aggregating? And is there anything we should be thinking about in terms of the geographic footprint of the data?

Jordan Thaeler:               Yep. So we partner with POS companies. Every time you go into a restaurant, you probably swipe your credit card [00:02:00] or you pay with cash and there’s a big box there. It’s a glorified PC. We partner with a lot of those companies to extract data and perform data science and produce products, usually merchant facing products in a white label capacity. We are heavy with the North American, especially US, footprint. So we have actually over 50,000 restaurants that are contracted, but in terms of live data, we have a little over 50,000 that we actually see in the systems. And it [00:02:30] spans from the SMB operator in QSR, fast casual, table service, fine dining, all the way up to some very large and public enterprise chains across casual dining and QSR.

George Mihalos:             Okay. So why don’t we dive right into it. Maybe at an aggregate level, what is the sales data telling you in this space? What are the trends you’re seeing through the month of March and maybe how does that compare to what you were seeing in the industry just a month prior?

Jordan Thaeler:               [00:03:00] Yeah. So it’s, I think, no surprise, right? It’s taken a real nose dive. I’d say, you break it out by segment, so fine dining is basically dead and I think it’s because nobody wants to spend $50 for a steak to-go. So those establishments are really struggling. I think casual dining is right behind that. So when we look at our data across average check sizes, casual dining outfits are not doing nearly as well as QSR. QSR Seems to be the best performer. They’re down about 50% year [00:03:30] over year data.

                                         I’d say looking at the data over the past month, you actually had pretty good sales data coming into January and then halfway through February. And then you started seeing a decline. And now I think it’s going to… Summarize this. QSR down 50%, casual dining down around 75, and fine dining’s down 99 to 100%. It’s basically dead.

                                         And in terms of geographic distribution, the major metro areas are [00:04:00] being impacted more, so a downtown New York, downtown San Francisco, downtown Seattle has crawled to a halt. Everything that we see there is down to 10 to 15% of revenue year over year. And some of the more suburban areas are doing a little better, where you might see some of these restaurants that are maybe down 60% to 65% instead of down 80, 90%. I don’t know if that’s going to remain that way. I don’t know if these quarantines eventually branch out [00:04:30] into the more suburban markets and they start to see the same impacts that a restaurateur in downtown New York feels. But if you look at week over week data, it’s just continuing to slide to an asymptote, which is basically 0% of sales. It’s pretty bad.

George Mihalos:             That’s extraordinarily sobering. Andrew, why don’t I turn it over to you and you can kick off your questions?

Andrew Charles:             Great. Thanks, George. And Jordan, this is all extremely helpful. For restaurant investors on [00:05:00] the call, you kind of started off about quick service versus full service. Can we get a little bit more of a background in terms of recognizing that the data started to fall off in March? I’m sorry, mid February, excuse me. In mid February, when the data started to fall off. Can you give us kind of the week over week of March to help contextualize what you’ve seen so far so we can think about how much more potentially could fall?

Jordan Thaeler:               Yeah. So it’s been down. You look at the February data… I’d say starting mid February, sort of Valentine’s Day, you start to see declines of seven to 10% a week. And then in the month of March, especially [00:05:30] the last two weeks, it’s just really come down 20% week over week. So it’s falling pretty precipitously over the past 14 days. And I mean, I would expect that to continue to fall further. The good news is we get data updated to us, in some cases, real time, but in general, every day. So we continue to watch the trends, but it’s not looking good.

Andrew Charles:             That’s sobering, but helpful. And then have you looked at the data between chain and independent [00:06:00] performance? I think you mentioned, just for background, for those on the call, about 50% of those 50,000 plus restaurants or chains, 50% are small, medium sized businesses. So can you help kind of segment the performance by those two, if you looked at it? I would think the trends are stronger for chains. As we’ve seen [inaudible 00:06:18] in the case of periods of economic deterioration in the past in the 2001 to 2002 period, as well as in the 2008 to 2009 period, chains seem like they did outperform the independents.

Jordan Thaeler:               So for QSR, it’s [00:06:30] a little easier. We know what brands we get. Those are well tagged. When we start to go into casual dining in particular, it’s sometimes hard to know, is this an independent, is this part of a 10 unit chain or a 20 unit chain? Generally when we look at the QSR data though, the chain restaurants are outperforming peers in QSR that seem to be independents. So we’ve not done a very good job normalizing all that data and backtracking, does this come from a franchisee of some brand that we are unaware of? Or is this just a mom- [00:07:00] and-pop shop that’s running a QSR operation? But the chains do seem to be doing better. I think it’s accurate.

Andrew Charles:             Yep. Just for context for those one the call, Wendy’s did announce this morning that their… Week of March 22nd, their sales were down 20% for that week and so that would certainly fit the narrative [inaudible 00:07:17] doing a little better than the down 50 aggregate for the quick service restaurants. That’s helpful, Jordan. Thanks. Another question I had is that I know your data does not directly pick it up, but can you talk about what you’re hearing about deliveries [00:07:30] performance? Is third-party delivery seeing a benefit from adding more restaurant partners during this time and the benefit of a captivated consumer that’s sheltering in place? Or alternatively is third-party delivery somewhat disadvantaged by existing independent partners closing restaurants while consumers are shifting food purchases away from restaurants and into grocery?

Jordan Thaeler:               I looked at this a little last night in what I could. So part of the problem is if you take, let’s just say a McDonald’s, they’re going to have much [00:08:00] cleaner point-of-sale data than SMB. And so it’s very obvious looking at a McDonald’s dataset, “Hey, this has to-go ordering. This is off premises. This is pickup, basically.” In an SMB it’s much harder to ascertain the validity of that statement. When we looked at the data we found in general that there has been an increase in off premises dining. So, that’s picked up week over week. And if you look at it at kind of an aggregate of where it was a year ago, it’s probably up between eight and 10%, but it’s still not nearly [00:08:30] enough of a revenue contributor to make up for the downfall, obviously. So we have looked at it a little bit. I don’t know what the numbers look like coming out of a GrubHub or an Uber Eats, but I have to think that the fee structure that those companies have is now really being examined, that restaurants have some breathing room to re-examine these contracts and commercials.

                                         They’re probably hypersensitive to the 30% commissions and many of them I have to imagine are considering just doing their own online ordering or their own delivery [00:09:00] and in that ecosystem. So in the universe of point-of-sale that we live in, there are a lot of third-party, online ordering, and… Wouldn’t say delivery, but facilitators in that space and many of them have waived their fees entirely. So if you’re a restaurant and a GrubHub says, “Hey, you can use our service,” you’re probably going to go pick up an alternative and say, “Look, this other smaller company that offers something analogous on the product side is going to waive the fees for me through the next three months. I’ll just use that service instead.”

Andrew Charles:             [00:09:30] Yep. That’s helpful. Jordan, one question I just got, just out of clarification. The QSR data, does that include fast casuals as well? Do you know, just from a sense around QSR, how many of those restaurants are kind of called a six to $8 average ticket, drive-through based model versus fast casual, where it’s more around a $10 plus average ticket? Do you have that data within the QSR in terms of how that leans and just directionally, if trends you’re seeing in fast casual versus [00:10:00] traditional quick service are materially different?

Jordan Thaeler:               I did slice it like that. We looked at average check without doing a whole bunch of normalization work. And so you splice it by less than seven, less than eight, versus less than 10 or less than 12 and you find that QSR is doing better than fast casual, when we looked at the data that way.

Andrew Charles:             Okay. Do you have any numbers to call out? I know you said down 50, roughly for QSR. Is it fair to say… Can you make any conclusions around what [00:10:30] traditional QSR is versus traditional fast casual?

Jordan Thaeler:               I didn’t save my query from last night, but I want to say it was a 10% difference. So if QSR was down 50%, fast casual’s down 60%.

Andrew Charles:             Got it. Okay. That’s helpful. My last question, before I turn it back to George, is that, do you have any data on international markets like China? What I think a lot of folks are trying to do is kind of use some kind of analog or some kind of leading indicator of [00:11:00] performance to learn, how long do these trends bottom for and kind of what’s the slope of the recovery look like, once we get past the peak of this?

Jordan Thaeler:               So from the partners that we have that have exposure to APAC, it has been a V-shape recovery. So in Asia, one of our retail POS partners has reported that sales are now back to 60% of what they were pre-COVID. And one of our restaurant partners that services some very large brands in the APAC region has said that sales are [00:11:30] back to 75% of pre-COVID levels. My concern is looking at what’s happening in Asia now, some of those provinces have been in lockdown for 10, 12 weeks, and they’re starting to release the quarantines and they’re getting more infections again, because there’s no herd immunity. So I don’t know if we go back into sort of a yo-yo back to a quarantine or not. It’s just really hard to determine what’s going to happen.

Andrew Charles:             I see. So even though we kind of have an analog here of data, just the set up, if [00:12:00] you will, different in the US versus Asia, so hard to extrapolate. We could see a V-shaped recovery, but what you see in the Asian markets, where obviously they have been doing a longer sheltering, there is a V-shape after that. Is that kind of fair to summarize?

Jordan Thaeler:               Yeah. There’s a V-shape and our partners that have the APAC exposure, what we’re all looking at now is how long do the COVID positive tests in Asia rebound? To what levels do they rebound before the governments [00:12:30] step in and then quarantine people again? So we don’t know if it’s a V-shape recovery and then it stopped and hit the ceiling and the quarantine’s re-implemented and it goes back down. We don’t know. [inaudible 00:12:41] we’re watching, they’re a few months ahead of us in managing the disaster.

Andrew Charles:             Makes sense. Thanks, Jordan. George, I’ll pass it back to you.

George Mihalos:             Great. Thanks for all that color, Jordan. I did want to ask, what services or offerings, if any, are [00:13:00] you seeing your point-of-sale operator partners try to roll out to help restaurants? I know that was something that Square brought up a couple of days ago, helping them go online and the like. But curious as to what you’re seeing from the platforms?

Jordan Thaeler:               We’re seeing also a lot of ad hoc, kind of one by one, case by case, cooperation with the merchant. So every merchant’s in a unique position and some of these companies have offered relief funds where they’ve allocated some of their balance sheet to finance and help [00:13:30] some of their merchants struggle to get through the period. A lot have offered free delivery. [inaudible 00:13:35] free delivery or ordering modules, whereas these things would’ve cost 50 or $100 a month previously, those fees have now been waived for two, three, six months, in some cases, until merchants can get back on their feet. And in general, there has been an overwhelming sense of support for the industry. Everybody is really picking up their pants and doing [00:14:00] what they can to help the industry. I think it’s been very positive on the whole.

George Mihalos:             And maybe just one more question before we open it up for Q and A, and I know data science is sort of your background. Maybe this is not quite a fair question to ask, but just curious, anecdotally. Just in conversations with your partners and the restaurants they’re servicing, is there a sense from them how long they can continue operating under the sort of delivery, [00:14:30] takeout only model before the burden becomes too big and we really start getting into more and more restaurants just frankly, shutting their door for good?

Jordan Thaeler:               Yeah. So we’ve seen the data. You’ll have restaurants that are producing no revenue for three or four days and all of a sudden there’s a spike of a few thousand dollars in sales. And so we’re not sure if they’ve shut their doors and they reopened, or there’s something going on there. My sense is that most of these SMBs in particular, they have [00:15:00] no balance sheets. I think that the number I feel comfortable saying is if you go eight to 12 weeks without material revenues, even delivery revenues only, these places are going out of business.

                                         50 to 75% of those SMBs are just going to entirely close down. They can’t afford it. And I’m not convinced actually that delivery is something that these restaurants should be doing, simply because restaurants are fundamentally a low margin business, or five to 10% margin businesses at best. [00:15:30] And you need to very accurately forecast your inventory and labor needs for that operation. And you have no data to go off of now to forecast your delivery volume. And restaurants that try to remain open in some capacity are likely exposing themselves to larger losses by having overhead on payroll and inventory ordering. And I’m not convinced that economically that’s the right decision. It might be cheaper just to close up shop and deal with your rent obligations [00:16:00] and probably some of your insurance premiums.

George Mihalos:             Understood. Thank you for that color. I know it’s a very fluid situation. Just on that note,

[inaudible 00:16:12]

maybe I’ll turn it over to you and we can go through the instructions for Q and A?

Tamira:                            Absolutely. We will now begin the QA session.

Andrew Charles:             So first, a qualitative question. Can you infer from the data, or just based on anecdotes from talking to restaurants, from talking to partners, best practices that restaurants can go through right now to help deploy, [00:16:30] to help grow sales? I think you made an interesting insight on why third-party delivery may not be the best strategy right now. Anything you’re hearing, though, or anything that you can share in terms of what is something that’s been helpful for restaurants to help during this period?

Jordan Thaeler:               In terms of revenue generation at all, we’ve seen a couple things. So one, some restaurants have taken the stance that we just need to liquidate our inventory. So we become a grocery store basically, right? So we’re going to sell our meats and sell our produce and sell our alcohol [00:17:00] as a way to meet rent obligations and we’re not going to run the business. Other folks are taking the delivery stance. I think there’s probably some brands that can do that and be okay. Companies that have been very heavy and off-premises already. They’ve got an operation that’s set up to do off-premises in a material way, and they have a customer base that understands and associates their brand with off-premises dining. Other folks, I think are just getting into off-premises and online ordering as a way to bolster and generate [00:17:30] any kind of revenue. I’m not sure how sustainable that is and I don’t know if it’s going to work for a lot of those operators.

Andrew Charles:             Gotcha. Okay. I had one question. Do you see anything [inaudible 00:17:43] part data? Have you been able to tell where the industry has been hardest hit between breakfast, lunch, dinner? Anything like that?

Jordan Thaeler:               I have not. That’s a great query. I should have one of my analysts go run that.

Andrew Charles:             Okay. And this last one, I’ll just read this off to you. What do you [00:18:00] see the restart landscape looking like once the virus suppression measures start to lift in terms of enough cash availability, both the quantity and speed for independents and franchisees to restock and rehire and ride out the consumer visitation ramp up?

Jordan Thaeler:               Right. Honestly, I’m looking to China. I mean, they’re two months ahead of us in this and that’s all data that I have to go off of right now. I don’t know… Things here are piecemeal. State by state, city by city. We just [00:18:30] don’t know how it’s going to rebound, what the federal government’s going to do. Even if the federal government says everyone’s open for business tomorrow, are people still afraid to go out and dine? Are people, one, afraid of the virus, but two, afraid of the economic situation and concerned about taking dollars out of on-prem dining from restaurants and shifting at the grocery spend? I think it’s just really hard to see. China’s the only data that I have right now and we’re watching that every day, because again, they have more and more [00:19:00] positive tests of the COVID cases. They’ve unshackled some of the quarantines and we’ll see if the government steps in and puts another quarantine on the people.

Andrew Charles:             That’s helpful. George, I’ll pass it over to you.

George Mihalos:             Sure. So Tamira, any questions?

Tamira:                            Yes. The first question is from the line of William Bradley with Bradley Services Group. Please proceed.

William Bradley:             Just two observations. This morning it was published that Cheesecake Factory [00:19:30] notified all of their facilities where they rent that they’re not going to be paying April rent. So it looks like some of the larger chains are trying to push down some of their fixed expenses to the landlords until they can get through this. Whether that’s going to turn into a May or June is unknown at this point in time, but that’s the first time I’ve seen somebody doing something like that.

                                         Second observation was from a customer I was working with this weekend. I [00:20:00] found a number of restaurants that were having some kind of delivery function already in place are going back to their local hospitals and focusing on trying to promote more business to the hospitals, to feed them, feed the workers and stuff and are seeing not a full compensation of the dine-in traffic, but seeing that they’re staying steady and they’re delivering two to $300 orders to local hospitals for lunch and stuff on a regular basis because they’re overrunning [00:20:30] their internal… The hospital’s internal cafeteria services to feed them, so they’re providing a supplement for that. So I thought that was an interesting opportunity for this restaurant to try and stay alive.

Andrew Charles:             Thank you for that. Jordan, did you have any reaction to any of those two statements?

Jordan Thaeler:               The hospital one make sense. I’ve never heard of anyone doing that, but it’s logical.

George Mihalos:             Any other [00:21:00] questions on the line?

Tamira:                            Thank you, Mr. Bradley. The next question is from the line of [Davin Chu 00:32:29] with

[inaudible 00:21:08]

. Please proceed.

Davin Chu:                       Hi, there. I had a question about staffing. Do you have any data on who’s being kept, if they’re going to be laid off, of labor relations or maybe it’s a salary cut versus total firings?

Jordan Thaeler:               I don’t know. [00:21:30] There’s a company called Homebase, which does SMB payroll and labor for, I think 100,000 merchants, something around that. And they have some great data out there on the number of employees and the number of hours they’re seeing employees stop working. And they’ve even tried quantifying the number of businesses that have closed and they keep that open on a Google Docs and constantly update it. So that would be the [00:22:00] best data that I’ve seen in that capacity. We don’t know on our side. People clock in or they don’t clock in and that’s the extent of it and so if you don’t see people clock in for three days, you don’t know if they’re open or closed or temporary closed, or it’s just kind of an odd thing.

Tamira:                            Thank you, Mr. Chu. The next question is from the line of Chuck Ellis with codify.ai. Please proceed.

Chuck Ellis:                      Hi, gentlemen. Thanks for putting this on and thanks for being as informative as it has [00:22:30] been. Just to follow up to my earlier question, is there any evidence that any of you are aware of the supplier side of the industry stepping up or providing notice to their customers, whether chain or franchisee or indy on extended terms, product availability, taking products back, any kind of grace notes that indicate some planning coming into place for some restart?

Jordan Thaeler:               I’ve seen some stuff, [00:23:00] Chuck, on Google News for Cisco. I’ve not watched US Foods to see what they’re doing, but I’ve seen some response out of Cisco. Candidly, a lot of what Cisco has gone and said, they’re going to focus their supply chain more on grocers, as opposed to the on-prem business for obvious reasons.

Andrew Charles:             Right. And this is Andrew. I’ll just kind of follow up. With US Food, they made an announcement earlier this week. One thing, just in an update on Coronavirus, [00:23:30] one thing they said is they secured new opportunities to support and sell to retail outlets like grocery stores and to contracts some [inaudible 00:23:37] distribution workforce to companies experiencing increased demand. And so you are kind of seeing some pivots there. Based on our conversation with those in the industry, there really hasn’t been that much disruption though, within the actual supply. Even McDonald’s, their CEO, Chris Kempczinski, who was on a CNBC interview last Friday, said globally… And he was particularly surprised by this. But just globally, they’re just not seeing… Fortunately not seeing any global [00:24:00] disruptions within their supply chain, which is encouraging to hear.

Tamira:                            There are no additional questions waiting from the phone line.

George Mihalos:             So we’ve had one more question come in. Jordan, the question around, if there’s any way for you to parse that up. Do you have any sense what percent of SMB restaurants may have been already shut down so far? And if there’s anything to call out in any sort of major market, a metro market like New York City? [inaudible 00:24:29] [crosstalk 00:24:29].

Jordan Thaeler:               Yeah. I have [00:24:30] looked at the data. But the problem with this is, like I said, we will see zero sales for three days, four days, maybe longer in some cases. And then all of a sudden there’s a sales spike. And so I don’t know what’s going on. Is that restaurant closed or selling their inventory? I have no idea without actually calling the partner to have them call the restaurant. I don’t know.

                                         It’s also really difficult… And Chuck Ellis [00:25:00] would be able to explain this, the gentlemen two questions ago. But it’s difficult to categorize a lot of merchants by SMB or enterprise without having our partner, the POS company say, “Hey, this is data from McDonald’s or Darden.” You don’t know if the data you’re seeing is coming from a true one unit operator or it’s maybe a chain operation that has a whole bunch of different concepts under one brand and [00:25:30] that umbrella encompasses a hundred different locations so that might be considered a chain and not an independent. So it’s pretty difficult, unfortunately. The data in this industry is very, very dirty and it’s just not cleanly uniform and taxonomy.

George Mihalos:             Fair enough. Tamira, any other questions?

Tamira:                            Yes, we do have some more questions. The next question is a followup from Davin Chu with [inaudible 00:25:56]. Please proceed.

Davin Chu:                       Hi. I was just wondering [00:26:00] if you saw that any restaurants or sectors were actually doing better? If this is an opportunity for anybody?

Jordan Thaeler:               [inaudible 00:26:10] I’m not sure I follow the question. Can you maybe state it another way?

Davin Chu:                       Any sectors, restaurant groups, types… Just seeing if there’s any opportunity out there or is everybody just hunkering down and trying to get through?

Jordan Thaeler:               Everybody… I [00:26:30] have not seen one restaurant that’s had an increase in sales. On the retail side, I’ve actually seen… Strangely enough some retailers have increases in sales that are non-grocery. And again, the retail data is pretty dirty. Sometimes it’s apparel, sometimes it’s not classified. But no, I don’t think I’ve seen any restaurant data at all from anybody, enterprise, an SMB in any segment that’s actually showing a positive here.

Tamira:                            Thank you, Mr. Chu. The next question is from the line of [inaudible 00:26:59] with Point72. [00:27:00] Please proceed.

Speaker 10:                     Hi, thanks for taking the time and answering my question. I just want to touch upon the earlier comment on Cheesecake Factory. Obviously this is a one-off instance, but have you been hearing other instances where restaurants in this environment are going back and basically saying, “Look, we just can’t pay rent.” Or is this just a one-off thing? Or should we expect this to start to really show up in a bunch of other places? Have you been hearing on any of your conversations [00:27:30] with any of the merchants? Thanks.

Andrew Charles:             Jordan, do you want to kick off? Or do you want… This is Andrew. I’ve got some perspective on that. Maybe I’ll go first. So, we have heard-

Jordan Thaeler:               [crosstalk 00:27:39] I think… Yeah, you go first.

Andrew Charles:             Sure. So as we’re talking to folks throughout the industry, we are hearing that franchisors are encouraging franchisees to really be prioritizing payments towards the royalties and the ad funds. Therefore, the franchisors model isn’t impacted. We have been hearing that lenders and landlords seem to be a little [00:28:00] more apt to work with restaurants to say, “Hey, you can delay… We can defer payments. We can defer interest payments on long loans.” It does seem like there is some willingness to kind of work together on that.

                                         Look, I mean, we’re all kind of in this situation right now that we’re assuming this is all temporary and that can kind of work for the time being. But obviously that could come to a huge problem if the underlying trends continue to do this for a prolonged period of time. But we [00:28:30] are seeing early days that there is willingness from both lenders as well as landlords. And it may not be willingness in terms of just willing to do this because they want to help, but more so just they realize there’s nothing they can really do because restaurants are going to negotiate pretty hard to delay these as well. But we are hear in early days that that is kind of common throughout the industry. I’m working with landlords as well as working with lenders. Jordan, I don’t know if you had anything, maybe in contradicting that or just anything on your end that you’re hearing?

Jordan Thaeler:               I don’t know. I’m actually [00:29:00] talking to somebody tomorrow who is much more of a real estate expert in how these rent payments have been securitized And I’ll learn more tomorrow and I’ll put an article out about this at some point probably next week. I mean, look, the reality is SMBs don’t have balance sheets. They can’t afford to pay rent without revenues coming in and so it’s going to be a really interesting time for real estate over the next quarter, just to see how this works itself through this system.

Tamira:                            This question is from the line of Patrick [Bobrukiewicz 00:31:55] [00:29:30] with [inaudible 00:29:31]. Please proceed.

Patrick Bobruki…:           Yes, this is Patrick. It’s kind of a response to the real estate question there. Some of the real estate providers that I’ve talked to, a number of different franchise groups, some of the real estate providers or landlords are basically not just even deferring payments, but if the franchisee or the group renting the space is willing [00:30:00] to negotiate it appropriately, they’ll actually take… In a lot of cases they’ll take those three or four months and instead of just deferring the payments and you’re paying them later, they’ll actually extend the life of the lease by those additional months so that they don’t feel like they’re out all that extra money over the course of the next three months. So they’re still eventually going to get their money anyways.

                                         And then the other one is more of a question. Outside of the ad funds, have you guys seen [00:30:30] any of the franchisors basically saying that they’ll waive royalty fees over the next two or three months or something like that while they’re selling, by and large, in a lot of places, not prototypical food that they would sell? They’re pushing the easier things to make that can be delivered or run out to the curb or something like that. Are any franchisors basically just writing off their royalty fees outside of the ad funds?

Andrew Charles:             This is Andrew. I’ll probably go first, [00:31:00] and Jordan, feel free if you have any insights as well. But I would just say that on your statement, yes, you’re correct that part of the negotiations, just on the royalty… Excuse me. On the leasing side is to delay these payments, to defer… Add them on at the end of the lease rather than book them now. So you’re right. That is obviously a part of the negotiation right now. And then [inaudible 00:31:22], yes. You are seeing a couple of companies that have already announced this. I think at this point we’ve seen enough to kind of say this is definitely a trend throughout the industry [00:31:30] that franchisors are going to have to work for royalty relief to their franchisees, just given the dire circumstances they’re going through right now. So yes, you will see this. We’ll learn more about the limp as we go, but certainly this is something that all franchisors are pretty much forced to be working with their franchisees on.

Jordan Thaeler:               I have no comments on this. I’m not close enough to have data to make an opinion or comment.

Tamira:                            Thank you, Mr. Bobrukiewicz. There are no additional questions waiting from the phone lines.

George Mihalos:             Thank you, [00:32:00] everyone, for participating in the call today. Jordan, a special thank you to you for taking the time. And we look forward to speaking with you all and updating you in the future. Thank you.


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