A&W Revenue Royalties Income Fund - President and CEO, Susan Senecal
President and CEO, Susan Senecal
Source: The Globe and Mail
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  • Fast-food franchiser, A&W Royalties Income Fund (TSX:AW.UN) has seen its restaurant sales decline 4 per cent in 2020’s first quarter, due to COVID-19
  • January and February sales figures were positive, but government lockdowns late in the quarter pulled down its overall performance 
  • Around 200 A&W restaurants have temporarily closed, with some restaurants remaining open as drive-through or delivery services
  • To manage the decline, the company has increased its credit facility by $19 million and is withholding royalty payments until further notice
  • A&W Royalties Income Fund (AW.UN) is up 4.17 per cent, with shares trading for C$28.01 and a market cap of $393.95 million

Fast-food franchiser, A&W Royalties (TSX:AW.UN) has seen its restaurant and royalty business decline amid Canada-wide lockdown measures.

Store sales are down 4 per cent on the previous year’s corresponding period. Sales were on track to be positive based on January and February’s figures. However, during March the impact of COVID-19 government lockdowns hit the company’s operations, pulling down its overall quarterly figures.

Around 200 A&W restaurants have temporarily closed, with some restaurants remaining open as drive-through or delivery services.

Sales from March 13 to 22 were down 42 per cent, a decline which is likely to extend into the present quarter.

However, the opening of 37 new restaurants provided the company’s royalty arm some revenue to offset the sales shortfall.

A&W Food Services’ President and CEO, Susan Senecal, is pleased with the company’s measures to tackle the COVID-19 pandemic.

“Together with our franchisees, we are working diligently to develop and implement plans and programs. I am confident they will not only mitigate the effects of this pandemic, but also ensure the long-term success of A&W Food Services and its franchisees, which drives the success of the Fund,” she said.

To help weather the coming months, A&W shareholders have injected C$10 million in cash assets into the company. Furthermore, the company is increasing its credit facility from $6 million to $25 million.

As previously announced, A&W is continuing to withhold its monthly distributions until a more predictable operating environment emerges.

The company has also withheld a $2.89 million quarterly royalty payment to the fund. A&W stated that the second quarter royalty payment is also likely to be deferred. However, the company assured shareholders that withheld royalties are accruing a 2 per cent per annum interest.

A&W Royalties Income Fund (AW.UN) is up 4.17 per cent, with shares trading for $28.01 at 12:26am EST. 

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