BAIN - Restaurants - COVID-19 Action Planning

COVID-19: Impacts and Actions for
Restaurants and Food Service
March 23rd, 2020

AGENDA
Introduction and key context
Current impact on restaurants
Defensive and offensive responses
Appendix: Detailed crisis checklist for restaurants

Most common questions our clients ask us about COVID-19
AS OF MARCH 23 2020
Common questions Known facts

Three main drivers of COVID-19’s trajectory:
COVID-19 DRIVERS
• Epidemiology: infection rate, signaling delay, fraction of serious cases, and fatality rate
What drives COVID-19’s • Government preparedness and response: containment policies and health system preparedness
trajectory?
• Societal response: financial markets, social distancing, consumer confidence and stock outs
• Source: Same branch of coronavirus as SARS

EPIDEMIOLOGY
• Infectivity: Highly contagious – more contagious than SARS, the flu or Ebola (R0 2-3.5 - # of secondary infections
How does COVID-19 from one infected individual)
compare to other
• Case fatality rate: 0.5-4%. Less deadly than SARS and the 1918 flu[1], but more deadly than more recent flus (H1N1
epidemics?
2009, H2N2 1957)
STATUS
• 160+ countries affected
What is the current status of • 350,000+ cases confirmed (~23% in China) and 15,000+ fatalities
the COVID-19 outbreak?
ECONOMIC IMPACT
• The macroeconomic impact will depend on the progression of the disease, consumer and government response;
How will COVID-19 impact general scenario planning is too uncertain, so companies should identify possible jumps and determine key
the economy, my industry, if/when trigger-point scenarios and corresponding actions
and my business?
Note: [1] Assuming sufficient hospital capacity

Source: WHO, Johns Hopkins University, CDC, Bain Macro Trends Group analysis
HKG Restaurants - COVID-19 Action ... 3

COVID-19 impact expected to be more severe than other major epidemics from the
past century due to its high spread rate amidst greater global interconnectedness
EPIDEMIOLOGY Severity Low High AS OF MARCH 23 2020
Bird Flu, 2014-17 COVID-19 Swine Flu, 2009-10

Implications
~1,600 ~350k+ ~750M-1.4B
Case count is low, however, it
Cases has only been ~3 months since
the outbreak
SARS, 2003 Spanish Flu, 1918
~8,000 ~350M-750M
COVID-19 SARS Spanish Flu Bird Flu

~0.5% ~4% ~6.6% ~10% ~40%
Fatality rate is TBD given
number of unreported cases;
Fatality rate
more testing and information
needed
Swine Flu
~0.01-0.08%
Swine Flu COVID-19
~2.0 ~3.5
1.3-1.7 High spread rate (often
asymptomatic), including
Infectivity (R0) community transmissions,
drives global spread
Bird Flu Spanish Flu SARS
0.03-0.4 1.5-1.8 3.0
The combination of a relatively low fatality rate, fast rate of spread, and a high proportion of cases with symptoms similar to cold/flu
make this uncommonly difficult to address with containment measures
Note: R0 refers to the average number of people infected by one sick person.
Source: National Health Commission of the PRC; Lit research, Bain Macro Trends Group analysis

Active cases of COVID-19 in China have steadily declined since mid-February; in the
rest of the world, new cases are still outpacing recoveries
CURRENT S TAT U S AS OF MARCH 19 2020
Note: Includes Italy, Iran, South Korea, France, Spain, Germany, US, Japan, UK, Singapore, Malaysia, India, Taiwan, Brazil, Mexico; Excludes China
Source: Johns Hopkins University, CDC, WHO, Bain Macro Trends Group analysis

Most Western countries are on the same COVID-19 trajectory; some, such as Hong
Kong and Singapore, have taken aggressive action and managed to slow the spread
CURRENT S TAT U S AS OF MARCH 19 2020
33% daily increase
Spread slowed from initial

pace, but has picked up again
with an outbreak in Seoul
Debate over whether the spread

has slowed or there simply are
not enough tests being done
Very strict quarantine rules
and rigorous contact tracing
Rapid school closures and quarantining, strong community response
Number of days since 100th case
Source: Johns Hopkins University, CDC, WHO, Financial Times, Bain Macro Trends Group analysis

Consumer buying behavior reflects consumers’ elevated level of concern; globally,
consumer confidence has fallen
ECONOMIC IMPACT AS OF MARCH 20 2020
US consumers are seriously US buying behavior of pantry, health and Globally, consumer confidence
concerned, most have acted safety products has grown significantly YoY has started to fall
Dip in consumer confidence since 1 Jan 2020[1]
Anticipate serious
84% health impact -8% US
Pantry
loading
products
-12% Japan
Anticipate serious
87% financial impact
Health
and
safety
products
-10% UK
Have taken a concrete

89% action in response -5% France
Source: Morning Consult, Nielsen, Bain CHI survey, Bain Macro Trends Group analysis

We’ve been able to learn from markets that were the first to be severely impacted by
COVID-19
Impact varied by retail • Grocery experienced waves of stockpiling and panic-buying of daily essentials
sub-sector
• Restaurants decelerated rapidly in countries where social distancing measures were implemented; demand
for contactless delivery methods spiked for concepts that remained operational
• Discretionary categories like apparel and luxury strongly decelerated, as foot traffic plummeted at shopping
malls and other key commercial centers
Impact varied by • Consumers stocked up on necessities and key pantry and household items, such as disease prevention
consumption category products and packaged, shelf-stable food, while reducing consumption of non-essentials (e.g. beauty,
apparel, electronics, luxury products)
• Fresh became a more important component in the basket, influencing customer decisions on which
channel/retailer to shop
Consumer adoption of • Online and omni-channel delivery demand spiked, both due to social distancing measures and consumer
online channels unwillingness to risk virus exposure in public
accelerated • Many retailers were not able to meet increased demand for online fulfillment
Marketing activities • Retailers shifted marketing spend and activities to online channels, with messages tailored to suit changed
migrated online circumstances
Supply chain posed a • Production slowed down significantly due to forced extended holidays and quarantined workers
huge challenge
• Restrictions on travel networks created logistical bottlenecks – exacerbating inbound and outbound supply
chain challenges
Industries are impacted differently by COVID-19, following 4 patterns
Hit in short-term, Hit in short-term, Spiked in short-term, Spiked in short-term,

1 recover in long-term 2 bounce back or grow 3 stabilize in long-term 4 keep growth
faster in long-term momentum in long-term
Definition Demand suppressed during Demand suppressed during Demand stimulated because of Demand stimulated because of
outbreak, to slowly recover to pre- outbreak, to bounce back to even panic stockpile and staying at treatment need and staying at
COVID-19 levels higher consumption level because of home, to return to normal level home, may keep growth momentum
“revenge buying” or mindset and stabilize after outbreak because of mindset and behavior
change change
Industry • Restaurant & food service • Apparel • Offline grocery • E-commerce

examples • Transportation & tourism • Beauty product • Instant food • Online healthcare,
• Logistics • Retail health (e.g., physical entertainment, education and
therapy, dentistry, optometry) office applications
• Entertainment & education
(offline)
• Traditional retail and
commercial real estate
• Auto
Source: Lit research, Bain analysis

China’s trajectory suggests that an extreme decline in economic activity is short-
term; industries have started to recover, at varying speeds
ECONOMIC IMPACT AS OF MARCH 12 2020
Significant near-term shock from Early signs of a recovery starting

sharp contraction in activity to emerge Recovery will likely vary by sector
Increase in daily coal

Estimated China Q1 GDP decline, consumption at six major power
~-2% year-on-year groups, reaching a 5-week high in
early March
The national consumer confidence

-4.3 index fell to 65.3 in Feb, its lowest Rate of work resumption (at
level in 3 years ~90% firms with over RMB 200m in
revenue) in 11 mainland regions
PMIs also fell significantly from January to

February Highest traffic congestion levels
in most major cities since the
outbreak
Manufacturing fell from 50.0 to
-14.3 35.7
Services fell from 54.1 to 29.6; Increase in average daily

-24.5 transportation, tourism and
~65% passenger volumes on metros
catering sectors most affected across China (last week of Feb) Leading high-performers include software and
services and healthcare equipment and services
Slower to recover industries include transportation,
retail and energy
Source: China National Bureau of Statistics, TOMTOM traffic index, China Association of Metros, Lit. research, Bain Macro Trends Group analysis

AGENDA

Restaurants are facing unprecedented challenges
Deep uncertainty around the shape and duration of the current pandemic
Rapid changes to business outlook and operations as quarantine and lockdown guidance evolves
Near-term cash crunch for both brands and franchisees
Risk of “doom loop”: macro uncertainty could lead to cuts to “discretionary” consumer spend, and eventually
impact ability to invest to grow on the back-end
Marketing more important and more challenging than ever, as customers’ consumption patterns and needs
evolve
Turbulence in the internal team: impacts on morale, energy and productivity
Headwinds will impact brands differently based on brand positioning, on-premise vs. off-premise exposure, and mix
of franchise vs. company owned stores
As the impact of COVID-19 has expanded globally, in-restaurant dining has
dramatically declined in favor of carryout, drive-thru, and delivery
Rapid shuttering of dine-in areas Acceleration of demand for off-

premise
• Growing list of regions have mandated closure • Consumer spend shifting toward (contactless)
of dine-in areas at restaurants delivery and to-go
• Restaurants in unrestricted areas have closed • Third-party delivery services investing to
or limited in-person dining in the midst of gain share
declining consumer demand
• Restaurants have shifted marketing and
promotions toward to-go and delivery
offerings

Closing restaurant dining rooms and bars has become the new normal in much of
the world
NOT EXHAUSTIVE D ATA AS OF 3/20/2020
Canada
States of emergency in largest United Kingdom China
provinces have led to closure Schools closed, bars, and Restrictions are tapering
of dine-in areas of restaurants restaurants mostly closed, with down, but many restaurants
and bars; U.S. border closed officials strongly encouraging remain closed due to
citizens to avoid large workforce shortages;
gatherings and to limit contact consumer demand is
outside of the household. significantly depressed.
Germany
Bars & pubs have been closed
since March 16th; restaurants
France, Spain and Italy and cafés can stay open but
USA Strict social distancing have to close at 6 pm
Policies vary widely by measures have led most
state and municipality; restaurants and non-essential
many states have moved to retailers to close entirely
close dine-in areas for 2-4
weeks or more
Source: OpenTable, Restaurant Business Online

Full service dine-in traffic has declined dramatically, even where widespread
closures are not in place
Change in same-date dine-in reservations, 2019 to 2020
Includes online, phone, and

drop-in reservations for
restaurants using the
OpenTable reservation platform
Note: As of March 19th, 2020. Not exhaustive.

Source: OpenTable

Restaurant policies have varied but are converging as state policies evolve (US
example)
NOT EXHAUSTIVE AS OF 3/23/2020
QSR and Fast Casual Casual dining brands
• All stores limited to off-premise only • Dine-in remains open except where prohibited
• On March 20, all company-operated cafes moving to by state or local mandate
drive-thru and delivery only for at least two weeks • Enhanced cleaning procedures in place for
(no more take out) dining areas.
• Company-operated locations have closed dine-in
areas; franchisees encouraged to follow suit
• Dine-in closed in all 1,800 restaurants
• As of March 20, 50 stores in a building or facility (Eddie V's Prime nationwide as of March 20
impacted by an outbreak have closed entirely Seafood, The
Capital Grille, Olive • Takeout and delivery kitchens still operating
• Customers cannot enter stores at all and must Garden, LongHorn
with six to ten employees working per shift
Steakhouse, others)
use the drive-thru window to be served.
• All company-operated locations have closed • Dine-in closed in all restaurants

dine-in areas; franchisees encouraged to follow
suit • Heavily promoting delivery and to-go options
(including curbside pickup)
• Primarily operating as drive-thru only, though
some locations are offering to-go and delivery
• Amending hours and temporarily closing

locations, as needed
Source: Lit search

Restaurant brands are focusing more on off-premise offerings, emphasizing free
delivery and safer options
Emphasizing reduced or eliminated delivery fees Adopting new forms of delivery and pick-up
Tamper-evident
packaging
Contactless
delivery or pick-
up
Source: Lit search, company press releases

Third party delivery platforms have begun offering contact-free options and
reducing or deferring fees for restaurants
AS OF 3/23/2020
Contact-free
delivery option
Reduced fees for

restaurants
Deferred commission fees for No commissions for 30 days
for new restaurants and all Temporary pilot in SF only
independent restaurants
pick-up orders; rate reductions
for existing ind. restaurants
Reduced fees for

customers
Select restaurants running Temporarily stopped delivery Select restaurants running
Select restaurants running
short-term free delivery fees for independent short-term free delivery
short-term free delivery
promos restaurants and on orders promos; Site-wide spend $20
promos
customers working from home get $10 off
Assistance for
delivery staff
Limited to creating Grubhub Offering two weeks of financial Announced financial Created relief fund for medical
Community Relief Fund assistance to qualifying assistance up to 14 days for cost and offering 2-weeks paid
(support to impacted drivers drivers, based on last three drivers/deliverers diagnosed sick leave for infected
and restaurants) months of drivers’ earnings with Covid-19

Demand for food delivery was stable at the outset and then significantly
expanded as the crisis grew in China
• Chinese food delivery service Meituan reported ~4x the number of

4x orders vs. previous year, including both grocery and prepared food
delivery
– Meituan also reported that half their orders were for more than one While same magnitude
person, a 31% increase over previous proportions. of impact may not be felt
globally, other impacted
markets (e.g., Italy,
• Food delivery app downloads surged 80% as a portion of total South Korea) have seen
80% app downloads from the 1/13 to 2/3 upticks in off-premise
demand
– Grocery delivery apps were up 58% in the same time period
As of 3/18, US delivery
apps had not seen an
increase in active daily
• Preliminary data suggests restaurant companion apps offering users
delivery are experiencing faster rebounds in daily downloads than
their companions without delivery
Source: Apptopia, SensorTower, Statista

Restaurant stock prices have dramatically declined; full-service brands have
been hit hardest
Quick-service Fast-casual Casual dining
Example
brands
Existing off-
premise >80% off-premise (to-go, drive- ~50/50 on-premise / off-premise >85% on-premise
dining mix thru, delivery)
Moderate Moderate to Severe Extreme

Impact
DENN: Denny’s DIN: Dine Brands

MCD: McDonald’s YUM: Yum Brands CMG: Chipotle SHAK: Shake Shack DRI: Darden Restaurants Int. (Olive Garden, others)
QSR: Restaurant Brands Int. DPZ: Domino’s EAT: Brinker Int. (Chili’s, Maggiano’s)
Asian restaurant stocks have also fallen sharply; most not as far as their U.S.
peers
SELECTED PUBLIC COMPANIES
Stock price change (Jan 17th-Mar 17th, 2020)
YUM China
Yum China 11.9%
Other Eastern Brands

Fairwood 20.1%
Ajisen Ramen 32.5%
Xiabu Xiabu 41.9%

AGENDA

Restaurant brands should respond through both defensive and offensive moves
Re-inforce Go back to Engage families Maintain your Be part of the Manage cash
brand trust basics through value share of voice solution strategically
• Take proactive, • Leverage • Develop and • Amplify • Contribute to the • Flex hours,
brand-wide traditional promote offers marketing cause and engage staffing, and
actions on brand equities for groups and messages with the menu to
safety - and talk in a time of families around community (e.g., maximize cash
about it! uncertainty (e.g. convenience food donations, flow
remind • Expand delivery and digital supporting
consumers of occasions (e.g., employees) • Increase
• Differentiate off- your values and free delivery, • Monitor franchisee cash
premise standards, broad set of family customer • Promote social flow to keep
experience promote core offers) behavior connectivity (e.g., stores open (e.g.
(“contactless” hero products throughout the through social defer royalties,
service and vs. LTOs) • Build goodwill crisis media) and support rent
packaging) through innovative broadcast reductions)
• Emphasize family-centric • Use dynamic messages of hope
familiar flavors, offers (e.g., free messaging as and fun • Fully tap available
• Use your brand kids meals) crisis shifts lines of credit
indulgence, and
reputation and
comfort
scale to build • Optimize • Build robust set
confidence media mix (e.g. of scenarios and
increased email, cash
adjusted TV management
media plan) plans
Note - other short term responses on store operations, front line employees and cash management included in appendix section
Reinforce brand trust: Brands have an opportunity to differentiate on safety and
build customer confidence during a time of unease
Guiding principles Examples

• Yum! China pioneered contactless service
• Use your brand reputation and methods and posted videos detailing the
scale as an advantage – reinforce process to their official WeChat
your credentials as a safety leader
• Customers expressed increased confidence in
• Differentiate your offering beyond their ability to order food safely from Pizza Hut
what 3P delivery partners are and KFC (e.g., vs. independents)
offering
• In the US, Chipotle was first to market with
– i.e., not just “contactless” delivery, but tamper-evident packaging and a
contactless production, pick-up, comprehensive safety message (amplified with
payment, drive-thru
“free delivery” promo)
– Consider new channels (e.g., grocery)
to get products into the hands of
customers • McDonalds has released periodic video
updates from the CEO detailing the brand’s
• Show, don’t tell, customers what actions
this looks like in action

Go back to basics: Promote familiar menu items and flavors during a period of
uncertainty and fear
• Remind consumers of your values • Temporarily stopped serving breakfast menu

and standards and re-focused messaging on core items (“One
Taco at a Time”)
• Meet consumers where they are –
in times of high anxiety, familiar • Emphasizing traditional, nostalgic offerings
foods and flavors feel safe (e.g., Friday “Fish Fry” during Lent), with emphasis
on to-go and delivery options
• Press pause on experimental
menu items or meal periods
• Marketing messages emphasizing enjoying
comfort and crave-able foods in a new setting –
• Emphasize messages around
“Even if we’re not together, we’re still family”
tradition, indulgence and comfort
• Heavily promoting pizzas with online-only buy-
one get-one deals week of 3/16 – 3/22

Engage families through value: Develop offerings tailored to groups and families

• Promoting bundle meals for
• Message value during time of groups of various sizes
economic uncertainty; focus on
trip-minimizing BOGOs and • Giving away up to 2 free kids
family value offers meals with every adult meal
• Streamline ordering process for • Flexible bundles for both families

larger groups and offer pre- (“any 4 entrees for $30”) and solo
defined bundles to simplify diners
decision making
• BOGO footlong promotion
• Create new customer habits appeals to customers trying to
around family delivery occasions “stock up”
• Message to the whole family

• Promoting a variety of $20 fill up
(including kids)
buckets

Maintain your share of voice: Continue to market to your customers through high-
impact channels
• Now is not the time to be silent • Messaging emphasizes that off-

– let customers know that you’re premise dining (drive thru and online
open and ready to serve them ordering) is available and accessible
• Amplify marketing messages
around convenience and digital; • “Drive Thru Heroes” messaging
expand online-only offers to emphasizes that employees are
drive digital registration available to serve and thinking of
• Customers are spending more customers in their time of need
time at home; adjust media mix
to new viewing habits and
reduce low ROI media • Messaging emphasizes availability of
investments options that allow customers to feel
safe
• Stay tuned into evolving customer
sentiment; dynamically adjust
messaging and media mix as
crisis unfolds
Be part of the solution: Pivot marketing messaging toward social impact
contributions, promote connectivity, and broadcast messages of support and fun

• Engaging with customers through highly
• Contribute to the cause - people
interactive Instagram Live sessions
will remember selfless acts
with celebrities and live musical acts
during a time of crisis
• Share the pain and show you care • Highly empathetic messaging
in all promotional and marketing
• Expand messaging around hope communications
and fun (as consumers begin to
get afraid, bored and restless at
• Donating meals to hospitals and
home), focus on reducing risk and
medical personnel
anxiety
• Use social media and other • Some locations are offering free meals
customer touchpoints to create to students in need, replacing, in many
moments of social connectivity cases, the free or reduced lunch they
during a time of isolation would have received at school

Manage cash strategically: Examples of actions to support franchisees
• Reduce operating hours; • Reduced royalty fees

streamline menu • Waiving required contributions to advertising for four weeks
starting 3/17
• Waive or defer some cash
• Postponing required capital contributions for remodels and
outlays (royalty fees, marketing
new buildouts
and tech funds, investment
requirements)
• Freezing royalty payments from all franchisees for four
• Reduce or defer rent payments weeks starting 3/17
• Provide additional liquidity to • Announced possibility of rent deferrals during period of dine-
keep stores open in area closure
• Extending payment terms for royalties and advertising fees

• Collaborate with government
for its franchisees in the U.S. and Canada
authorities to negotiate stimulus
measures in support of franchisees • Allowing franchisees to temporarily close some locations
Note: Initiatives listed current as of 3/19
Source: Company websites; National Restaurant News; regulatory filings.

AGENDA

We don’t yet know the extent or length of the impact this crisis will have; restaurants
should be prepared to weather a variety of scenarios
Normal scenario-based • Normal scenario planning starts with a set of likely and stressor scenarios.
stress-testing is not • Scenarios are analyzed for their impact to the business.
applicable in this
situation. • Actions steps are devised to be activated against those scenarios. Business operates based
on the most likely scenario.
• Signs and signposts are identified and monitored to know when there are likely turns in the
road ahead, and when business needs to take steps under a new scenario.
We are too far into the • Highly “bi-modal” outcomes: unknowable probabilities of ending up in either a minimally
event with bi-modal disruptive cluster of scenarios, or a highly disruptive cluster of scenarios.
outcomes and big • Three big factors are all introducing non-linear “jumps” if things get worse.
possible jumps in the
situation. • Normal signs/signposts do not provide enough forward-visibility for pre-emptive actions.
The time-scale of events is days-to-weeks, not months.
Businesses need to • Look at the “full” spectrum of outcomes—no probability-weighting judgments.

identify what their key • Identify the key “jumps” in implications for the business:
jump points and – Aim for 3-5 key jumps (e.g., major cost-cutting, layoffs, invoking capitalization buffers)
identify actions against – Need to identify “What is the breaking point of the business?”
each point. – Action items should then be tied to each of the key jump levels.
Source: Bain Macro Trends Group analysis

Prepare for the full range of possible economic outcomes and identify critical
“triggers” where more aggressive actions will be needed
Consensus expectation I L L U S T R AT I V E
PROJECTED before COVID-19 Increasingly worse outcomes
WORLD GDP
GROWTH 3.3% 0% -X%
“Missing Plan” “Severe Downturn” “Liquidity Crisis”

LEVEL OF • Noticeable changes in customer • Dramatic impact to P&L with • Severe drop in revenue and
I M PA C T F O R behavior likelihood of multi-year affect negative cash risking near term
YOUR liquidity
BUSINESS • Steep short-term revenue decline • Certain BU’s, geos, channels no
with near-term bounce back longer operating with positive • Future viability of parts of
contribution margin business in question
• Short-term disruption in
operations and business • Uncontrollable operational
continuity disruptions
• Curate offering for new • Employ aggressive promo • Consider permanent shut down
Defend against consumption patterns strategies (but avoid slashing of underperforming BUs /
EXAMPLE revenue declines prices indiscriminately) geographies / sales channels
ACTIONS • Shift marketing spend/messaging
to optimize demand
YOU SHOULD
TA K E Stabilize operations • Adjust labor and ordering • Temporarily close locations or • Right size operations to a
to “new normal” forecasts; negotiate rent, OH suspend operations smaller core
Plan urgent cost • Implement spend handbrakes • Implement aggressive “break • Conserve cash levels for
takeout to conserve and no-regrets cost reduction glass” cost reductions controlled default
cash
Source: IMF World Economic Outlook, January 2020; Bain Macro Trends Group analysis, March 9, 2020
We are firmly in phase two of the crisis. Restaurants need to manage through the
disruption, but also look ahead and plan for the recovery
PHASE ONE PHASE TWO PHASE THREE
Emerging Situation Rapid escalation Recovery & Beyond

Virus is present, but has not yet Virus has become prevalent The situation progressively
impacted a large population returns to (a new) normal
Governments take restrictive
Government has not taken actions to contain virus Competitive positions and
action customer relationships may
Retail operations & daily life have been significantly altered
Day-to-day life is still mostly strongly impacted
“normal” – Retail that remains open is
overloaded with stock-outs etc.
Variable public sentiment,
“it’s just the flu” – Retail that is forced to close,
must focus on protecting cash
Most of Europe is in phase 2

China is starting to
emerge into recovery
Most of US in phase 2

We see six urgent imperatives for restaurants during the crisis; in phase two,
focusing on operations and strategic cash management are key
PHASE ONE PHASE TWO PHASE THREE
Emerging Situation Rapid escalation Recovery & Beyond
Rapidly mobilize an
1. Emergency Response Team
2. Protect people as the utmost priority
3. Mobilize on a war footing
4. Make strategic cash moves
Plan to emerge from

5. the crisis stronger
6. Communicate and collaborate internally and externally

1
Restaurants should mobilize an Emergency Response Team dedicated to
managing the crisis
Set up central core team Create local teams where relevant Scan the market and listen
Set up a small but Where relevant, set up “local” Dedicate at least one FTE to
trusted central “core” team attached Emergency Response Teams, e.g., scanning relevant information on
to CEO/CFO/CRO Office  By country spread of virus
 By region
and other retailers’ actions in
Give the team clear access to key affected markets
executives  By format
 By store or distribution Support local teams with timely
Empower the team to make cross- center/warehouse information as virus impacts their
functional recommendations based markets
 By function
on a rapid risk assessment
Outline clear daily responsibilities:
 Executing daily update to top
management
 Holding together multiple ongoing
communication initiatives
 Tracking and reviewing progress on
initiatives, ready to adjust up/down
 Reporting internal KPIs deemed
relevant for major decisions
2
Protect people (your employees and customers) as the utmost priority
Roll-out increased sanitization protocols, focusing on frequent handwashing and cleaning of high-touch areas
Follow official advice on deep-cleaning the most-used areas or facilities, such as elevators, meeting rooms, restrooms,
air purifiers, air conditioners and HVAC ducts
Retrain employees on sanitation protocols and reinforce employee education on virus transmission
Minimize manual handling of products and consider packaging adjustments to enable “contactless” service
Offer customers self-service sanitizing options (e.g., antibacterial wipes, hand sanitizer)
Implement contactless payment options where possible
Consider closing dine-in areas, even where not required
Develop safer to-go options (e.g., curbside pick-up); minimize queuing or waiting inside of store areas
Implement “Red” and “Blue” teams: Split core functions into teams that work every other day or are physically
separated

While near-term emergency response has largely been activated, some restaurants
2
are taking a differentiated approach to protecting their people
Health and safety messages Taking the lead in protecting frontline workers also resonates with
remain important as crisis extends customers
• Provide clarity around sick leave

and reiterate importance of
employees staying home if ill
• Reiterate amplified cleaning

protocols to ensure vigilance,
even while dine-in areas are closed
• Ensure ongoing supply of sanitary

and personal protection
equipment for frontline workers

3
Support franchisees to keep stores open
Identify and develop strategy to Provide liquidity for selected …or reduce cash burdens on
support key franchisees franchisees… franchisees
• Rapidly diagnose franchisee cash • Offer temporary financing at • Waive/reduce/postpone royalty fees
position; disseminate needed tools preferential rates
and templates to create • Step in to temporarily pay rent or
consistency • Serve as guarantor for franchisees’ negotiate with landlords
independent financing
• Identify relevant franchisee • Reduce minimum required
segments investments in marketing, build-
out/upkeep
– High-performing franchisees
– Large-scale franchisees • Postpone franchisee-financed
– At-risk franchisees CAPEX projects (e.g., remodeling)
• Align on strategy for franchisee • Provide paid sick leave for

support (e.g., ‘blanket’ support vs. franchisee employees
high performing franchisees) • Collaborate with government
authorities to negotiate stimulus
measures to support franchisees

4
Make strategic profit enhancing and cash management moves
Adjust menu, staffing Curate offering & Adjust marketing and

and inventory Reduce rent outflows optimize pricing promo spend
• Reduce operating hours • Negotiate with landlords for • Curate existing menu items for • Expand online only offers to
reduced or deferred rent rise in to-go and delivery orders; drive digital registration
• Streamline menu to improve payments focus on:
margins, cut waste, and increase – In some markets (e.g., France), – Popular delivery items • Rebalance spend on TV;
productivity government is stepping in to provide adjust media mix to new
– Less labor-intensive items
rent holidays or deferred rent viewing habits
• Incorporate increased flexibility – Margin-accretive items
into key forecasting tools: • Renegotiate corporate • Stay tuned into evolving
overhead • Develop new to-go or delivery customer sentiment;
– Adjust staffing model to account
for changes in mode of consumption offerings, in line with new dynamically adjust
• Consider temporarily consumer demands messaging and media mix as
– Pause algorithmic ordering /
automated replenishment consolidating the store crisis unfolds
footprint (e.g., reducing store • Reset pricing, including
• Optimize staffing methodologies count within a given catchment delivery/service fees (especially
to operate with less labor area) for popular delivery items) • Expand messaging around
hope and fun (as consumers
– Allocate labor to most critical tasks; • Optimize customer’s begin to get afraid, bored and
re-direct labor to online and to-go
delivery/takeout experience restless at home)
order production and customer
service – Exclusively partner for third-party
delivery or develop in-house solution
• Align purchasing with new • Use social media and other
– Design product and packaging
patterns of consumption optimized for delivery (e.g., customer touchpoints to create
tamper evident packaging) moments of social
– Focus on ensuring continuity of
supply for key items
connectivity

4
At the corporate level, elevate focus on strategic cash management
Ensure Define the scope of savings levers Develop concrete plan for when to
executive mind that are on the table activate “break glass” initiatives
shift to cash
• Model impacts and run “Hand-brake” levers examples “Break glass” levers examples
scenarios, with a focus
on cash (dedicated
To be activated at defined crisis milestones;
Near-term actions to implement to
team) clear owners and implementation plan
mitigate cash crunch
attached
• Ensure C-suite is fully
conscious of new
constraints • Freeze hiring plans as relevant • Implement salary cuts (bearing in mind tradeoffs on
frontline) or benefits freeze
• Cancel all travel and training that is not operationally-
• Ensure Finance critical • Accelerate planned HC reductions
tightens/loosens
• Stop non-critical third-party engagements • Execute permanent store closures or exits from some
where relevant
geographies
• Adjust marketing spend to match shifts in consumption
• Freeze all non-business critical spend (e.g. maintenance)
• Extend payables with suppliers to preserve cash
• Delay non-essential AP
• Postpone major investments
• Negotiate discounts for faster debt payment or early
• Draw down on all existing lines of credit invoice payment

4
Detailed cash management levers (1/4)
NOT EXHAUSTIVE
Accounts Payable:
Cash
management • Avoid early payments and switch from weekly AP payment runs to bi-weekly / monthly
(AP / AR) • Centralize check signing authority above a set threshold
• Pay via checks vs. ACH (utilize float)
• Delay non-essential accounts payable payments (temporary improvement only)
• Don’t pay one-time vendors or vendors you don’t need to re-order from now
• Negotiate deferral / installments
• Use up pre-paids / deposits when possible
• Negotiate away late fees and penalties
Accounts Receivable:
• Introduce discounts for faster payment of debts; seek interim payment of portion of outstanding amounts
• Negotiated agreements for long-overdue amounts; commence legal action
• Leverage customer relationships where possible to facilitate early payment of invoices
• Proactive collect overdue and becoming due debtors (follow-up via key account managers)
• Review credit policies and credit profile for each customer
– Ask for pre-payments and deposits
– Stop extending credit / stop services / shipments to poor credit customers
• Ask customers to pay via wire (minimize processing delay)

4
NOT EXHAUSTIVE
Spend • Create centrally managed spend control tower for all non-contractual and discretionary spend (approval before expense
control tower incurred)
– Review/escalation of all non-business critical expenses – clear all POs and issue new ones only after approval
– Centralized approval for any new contracts
– Centralized approval of all non-business critical spend above a certain amount – i.e. overnight freight / shipping
– Centralized approval of any new capital spend
– Review/ reduce/eliminate ‘discretionary’ spend (i.e.travel, training, events, conferences, subscriptions)
– All spend on consulting (new contracts/existing ones) needs to be approved (independent of amount)
• Institute weekly review and tracking of approvals and spend
External • Freeze all non-contractual discretionary external spend (corporate, BU and plant) at current levels – any additional
Spend expenses to be approved by exception through centrally managed spend control tower
• Accelerate procurement initiatives - vendor negotiation factory, accelerate finalization of current proposals (potential for
leaving money on the table in the long-run)
• Review other ‘discretionary’ spend areas – plants, facilities management, etc.
– Eliminate / reduce expenses for closed facilities
– Freeze non business critical maintenance work (e.g. repainting), approval on an exception basis
• IT
– No hardware shall be replaced due to age until end of 2019 unless it is a business critical device (critical server or network component,
related to all hardware incl. iPhones, tablets, etc.
– Review and immediately turn-off / remove / return unused IT devices: computers / monitors etc. (esp. if leased), mobile phones (switch to
BYO/Allowance), etc.
– cancel all non-business critical software licenses and turn-off any applications not used in the last 6+ months
• Review of ‘discretionary’ marketing and sales spend (incl. capping client entertainment expenses, delay/ freeze any
marketing spend)
4
NOT EXHAUSTIVE
Inventory • Sell excess / obsolete stock
• Reduce / eliminate safety / buffer stock
• Increase consignment stock
• Reduce finished goods (e.g. immediate invoicing)
• Control purchasing through the spend control tower
Capex • Immediate CAPEX freeze, and require all approved CAPEX to be re-submitted
• Escalate CAPEX approval requirements (through the spend control tower), and increase business case requirements
• Review all current CAPEX spend for cost reductions (e.g. change of scope, supplier negotiation, etc.)
Other • Temporarily close stores / plants due to decreased demand

• Accelerate other sources of revenues – settlements / legal recoveries
• Reduce / eliminate dividend
• Delay / minimize integration costs
– Re-phasing of initiatives to delay cost impact
– Reducing the scope or cancel initiatives with significant up-front cash outlays (relative to cost savings/ benefits)
• Delay restructuring expenses

• Review tax strategies for short-term opportunities
4
NOT EXHAUSTIVE
People • Hiring freeze (for non shop-floor / production employees) – exceptions centrally approved, headcount, open positions
incl. contractors / temp labor tracked in a weekly dashboard
• Contractor review – non-renewal of fixed term contracts (on exception basis only), no overtime pay, all approvals flow
through the spend control tower
• Immediate review, standardization and enforcement of HR policies (i.e. overtime, expenses, etc.)
• Ancillary benefits review and revision (i.e. car allowance, parking, mobile phones, expense reimbursement)
• Immediate elimination of underperformers – bottom 5 – 10%
• Review employees eligible for early retirement
• Temporary furlough for non-critical employees or plants/stores with low utilization
• Salary & bonus freeze – relook at bonus accruals
• Selective salary & bonus reduction (i.e. senior management)
• Active PTO and LOA management

5
In the early stages of recovery, restaurants should adjust in-year plans while
gradually returning to pre-crisis posture
Prepare to welcome back Analyze the response and

staff and customers codify key learnings Review buying behavior Refresh & restart 2020 plan
 Don’t expect to  Learn from this shock to  Adjust procurement levels  Reset and restart plan for
immediately return to make your business more as consumers return to 2020 with new objectives,
“business as usual” resilient in future external normal dining behavior budgets and operational
 Develop a plan to gradually shocks (economic  Dine-in traffic may take plans.
wind-down resources and downturns, terror attacks, some time to normalize,
teams dedicated to natural disasters) while demand for delivery
managing the crisis may continue to remain high
 Keep the Emergency
 Maintain basic measures  Gradually re-instate
Response Team active for a
that enhanced safety and automatic or algorithmic
few weeks following the
hygiene in the workplace systems as customer
crisis to conduct a full
 Remain biased toward over- debriefing and codify their behavior re-normalizes
communicating on how the
knowledge for future
company is prioritizing
health issues reference

5
Restaurants should re-vamp strategy and long-term plans to come out of the
crisis stronger than before (“Play offense, not just defense”)
Understand how demand has Adapt your capabilities and Evaluate long-term cost position Prepare bolder moves to
changed and adapt network to meet new demands & build financial resilience strengthen strategic position
 Review customer and market  Review supply chain, IT and  Lay out a clear path to  Understand impact of crisis on
data to highlight areas where logistical setups to increase continuous cost improvement your leadership positions and
market share has been gained or flexibility, resilience and and productivity increases, on competitors’ dynamics
lost during the crisis. Review capabilities in the long run especially if share has been lost  Footprint & capacity evolution
should include: in the crisis  Changes in relative cash & cost
 Review buying strategy and positions
 How the retailer’s highest-value
customers weathered the crisis, to
relocate supply or production as  Make cost base as variable as  Competitor actions that will drive
identify high-priority actions to needed possible consolidation scenarios
nurture those relationships
 Design network redeployment  Ensure the balance sheet is  Adjust CAPEX pipeline and
 Competitive innovations/ new plans as required, such as: development priorities
robust enough to withstand any
business models that helped
consumers during the crisis  Closing the most affected, least hostile approaches  Where to rebuild leadership
productive stores (or online fulfillment positions (most vulnerable areas)
 Develop commercial revitalization points)  Where to build new potential
plans to reactivate demand. leadership positions (weakened
 Opening stores, online points or
competitors)
distribution centers as needed to fill
 Develop investment plans to gaps  Identify and prioritize M&A
address increased off-premise  Swapping assets with competitors in targets to pursue
omnichannel demand and retain weak or strong areas
customers gained in the crisis  Envision potential bold
 Review the role of automation in changes in capital structure
the supply chain and in stores
6
Consistent and relevant internal and external communications are critical as the
situation further develops
Create needed
Establish communication cadence and key messages across audiences bandwidth
Local  Maintain open lines of communication as the situation continues to develop (e.g., understand proposed measures  Resource call
to curb panic-buying and shortages, or potential lockdown areas that could face logistical constraints) centers (for
authorities customers,
 Ensure your employees and customers are aware of (and comply with) the precautions and health suppliers) and
guidelines recommended by authorities equip them with
scripts
Internal  Ensure leadership and staff hears it from you first (rather than hearsay)
(employees +  Allocate
board)  Communicate in specifics rather than generalities, highlighting concrete measures being taken to protect personnel resources to
answering
 In affected areas, call executives to show you care/share the pain
internal
 Keep the Board fully appraised of the situation and your plan communications
(emails, others)
Customers  Proactively and transparently communicate the following:  Activate Social
 What measures you are implementing (store cleaning, hygiene protocols) to make them feel safe Media to outline
 How you are adapting your offer and operations to continue serving them actions taken
 How you share the pain - empathize with the personal cost of the pandemic
Suppliers  Create a drumbeat of communication with suppliers to keep them informed of real-time changes to ordering,
assortment, etc.
 Consider broader communication to shareholders and the investment community

Shareholders
 Earnings guidance, dividend guidance, actions taken, etc.

Benchmarks: QSRs have focused mainly on delivery, take-out options, and
supporting employees financially (1/2)
AS OF MARCH 23 2020
Company Key highlights
• CEO announcement through website sharing initial measures and touchless options for deliveries
Subway
• Communicated pick-up option via e-mail (no mention of COVID-19)
• Inspire Brands (Arby’s, Jimmy John’s, Sonic, and others) announced full-time Coronavirus Preparedness Task Force
• Stores closed – Drive-thru, take out, and curbside pick up remain available
• Sonic communicated expanded sick leave and pay policy for employees impacted by COVID-19 (on owned-stores)
Jersey Mikes • CEO announcement of “continued monitoring of Coronavirus”

• Operating only through online ordering, Rapid Pick-Up, Drive-Thru and Delivery
Panera Bread
• Working on contactless delivery option
• Only coronavirus press release is that they canceled “Free Cone Day”
Dairy Queen
• As of March 16th, information points that stores will remain open
Burger King • Per last press release, stores would continue to be open
Chick-fil-A • Proactively closed dinning options – Only drive-thru, to-go and delivery available
• Launched “virtual lunchtime hangouts” through partnership with Zoom for anyone to join
Chipotle
• Free delivery on orders over $10 throughout March
• Implementing contactless delivery (already done in other countries)

Domino's
• Announced paid leave for full and part time hourly employees for company-owned stores and supply chain centers
Five Guys • Stores would be closed only if there are reasons to believe that employees or customers are at risk

Benchmarks: QSRs have focused mainly on delivery, take-out options, and
supporting employees financially (2/2)
AS OF MARCH 23 2020
Company Key highlights

• Yum (KFC, Pizza Hut, Taco Bell) announced paid leave to employees affected by COVID-19. Also, will pay employees who are required to stay
at home, or work at a restaurant that is closed
• KFC: Free delivery on orders over $12 until April 26th. Via their website, Grubhub, or Seamless
• Pizza Hut: Encouraged contactless option on “special instruction”
• Video updates by CEO (started on March 6th)
• Created (last week) a dedicated team to tackle COVID-19
• Shared 5 principles that will guide company response
• All company-owned-stores closed their sitting areas. Service only available with Drive-Thru, Walk-in take-out, and McDelivery
• Announced that are studying financial support options to improve liquidity of franchisees (e.g. rent deferrals)
• Free delivery through mobile app
• Contactless delivery option implemented for Drive-thru and Pick-up
• For company-owned stores, no dinning option, only takeout, delivery, pickup, and drive-thru
• Encouraged publicly to franchisees to do the same
• Appointed an internal global task force dedicated exclusively to COVID-19
• Closed all sitting facilities, only services available are drive-thru, delivery, and carry-out
• U.S. stores will be open fewer hours.
• Proactively closed sitting options, only to-go, drive-thru, and delivery service
• Last week announced that more than half of its 4,300 locations had shuttered at one point or another
• Company stores only open for delivery or Drive Through

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COVID-19: Impacts and Actions for

Restaurants and Food Service

March 23rd, 2020

Introduction and key context

Current impact on restaurants

Defensive and offensive responses

Appendix: Detailed crisis checklist for restaurants

Common questions Known facts

• Source: Same branch of coronavirus as SARS

Note: [1] Assuming sufficient hospital capacity

HKG Restaurants - COVID-19 Action ... 3

Bird Flu, 2014-17 COVID-19 Swine Flu, 2009-10

COVID-19 SARS Spanish Flu Bird Flu

HKG Restaurants - COVID-19 Action ... 4

HKG Restaurants - COVID-19 Action ... 5

33% daily increase

Spread slowed from initial

Debate over whether the spread

Rapid school closures and quarantining, strong community response

Number of days since 100th case

HKG Restaurants - COVID-19 Action ... 6

Have taken a concrete

HKG Restaurants - COVID-19 Action ... 7

Hit in short-term, Hit in short-term, Spiked in short-term, Spiked in short-term,

Industry • Restaurant & food service • Apparel • Offline grocery • E-commerce

HKG Restaurants - COVID-19 Action ... 9

Significant near-term shock from Early signs of a recovery starting

Increase in daily coal

The national consumer confidence

PMIs also fell significantly from January to

Services fell from 54.1 to 29.6; Increase in average daily

HKG Restaurants - COVID-19 Action ... 10

Introduction and key context

Current impact on restaurants

Defensive and offensive responses

Appendix: Detailed crisis checklist for restaurants

Near-term cash crunch for both brands and franchisees

Turbulence in the internal team: impacts on morale, energy and productivity

Rapid shuttering of dine-in areas Acceleration of demand for off-

HKG Restaurants - COVID-19 Action ... 13

Source: OpenTable, Restaurant Business Online

HKG Restaurants - COVID-19 Action ... 14

Change in same-date dine-in reservations, 2019 to 2020

Includes online, phone, and

Note: As of March 19th, 2020. Not exhaustive.

HKG Restaurants - COVID-19 Action ... 15

QSR and Fast Casual Casual dining brands

• All company-operated locations have closed • Dine-in closed in all restaurants

• Amending hours and temporarily closing

HKG Restaurants - COVID-19 Action ... 16

Source: Lit search, company press releases

HKG Restaurants - COVID-19 Action ... 17

Reduced fees for

Reduced fees for

HKG Restaurants - COVID-19 Action ... 18

• Chinese food delivery service Meituan reported ~4x the number of

Source: Apptopia, SensorTower, Statista