Yum Brands suspends $2 billion buyback program, provides royalty grace period for franchisees

Key Points
  • Yum Brands has suspended its $2 billion share buyback program and tapped into a $525 million revolving credit facility as the COVID-19 pandemic puts pressure on the restaurant business. 
  • "We have over $1 billion of cash now. Certainly we're in a good position," CEO David Gibbs told CNBC.
  • The move allows Yum Brands to provide a grace period for franchisees on royalty payments, Gibbs said. 
Yum Brands CEO on how they're working around the coronavirus and assisting employees

Yum Brands CEO David Gibbs said Wednesday the company's decision to suspend its $2 billion share buyback program allows it to better support employees and franchisees during the COVID-19 pandemic. 

"We can do things like we just did in the United States, which is provide a grace period for our franchisees on their royalties or suspend capital investments for them so they can have the cash to get through this crisis," Gibbs said on "Closing Bell.

Yum Brands has tapped into a $525 million revolving credit facility, according to a regulatory filing Tuesday. The company also borrowed $425 million earlier in March in association with its acquisition of The Habit Restaurants. 

"We have over $1 billion of cash now. Certainly we're in a good position," Gibbs said. "But we want to take an abundance of caution as we manage through the challenges of this situation." 

Yum Brands' portfolio includes KFC, Pizza Hut and Taco Bell. 

Gibbs said Yum Brands' footprint of more than 50,000 restaurants globally has allowed the company to respond to shifting consumer demand during the coronavirus outbreak. Yum Brands has about 7,000 restaurants closed around the world, according to the regulatory filing.  

The company has "a big presence in Asia, where the virus has already impacted the market, and we've had this great ability to leverage the learnings from that market and take those to the other markets as they start experiencing a little bit of this crisis," he said. 

For example, led by CEO Joey Wat, Yum China developed a system for contact-less food delivery that has been adopted by restaurants in other markets, Gibbs said. Yum China was spun off from Yum Brands and began trading as its own entity in November 2016

Gibbs said employees at restaurants operated by Yum Brands will continue to be paid if they are closed due to government mandates. "We know that is the right thing to do. We're working with our franchisees to take a similar approach," he added. 

Shares of Yum Brands finished 4.6% higher Wednesday at $72.87 each. The stock is down 27.66% in 2020.