Movenpick chain asks employees to accept stock as overtime pay

The firm behind the troubled Mövenpick restaurant franchises in Canada is asking employees to work longer hours and transfer the extra earnings into a fund to buy company stock for them.

The Toronto Star
November 27, 2001

Movenpick chain asks employees to accept stock as overtime pay
Restaurant company asks workers to forego wages for extra hours one day a week
Tony Van Alphen

The firm behind the troubled Mövenpick restaurant franchises in Canada is asking employees to work longer hours and transfer the extra earnings into a fund to buy company stock for them.

A senior executive for Richtree Inc., which owns 14 Mövenpick outlets in Canada, including nine in the Toronto area, confirmed yesterday the company has made the unusual proposal to have restaurant employees voluntarily work 15 per cent more than their usual work week without pay.

They would add these hours to their Tuesday workload - and accept shares in lieu of cash.

The program, dubbed Richtree Tuesdays, is scheduled to run until May.

Colin West, vice-president of finance and administration for Toronto-based Richtree, said under the plan, net earnings on the extra hours would go into an employee trust. The trust would exchange the money for stock purchases next May.

The company hopes to implement the plan as early as next Tuesday if it gets union support.

The extra free hours would fill a labour vacuum that Richtree company created with a recent hiring freeze and overtime ban, and result in savings for the company.

West said the company is trying to deal with the slump in business and falling revenues since the Sept.11 terrorist attacks in the United States without resorting to layoffs.

"We're trying to be imaginative and creative," said West.

"This is a novel way of getting employees to assist the company and be shareholders."

Richtree, which trades on the Toronto Stock Exchange, said sales have fallen about 10 per cent, leaving the company with a shortfall of $8 million over a year.

On the Tuesdays, staff would be wearing large "Richtree, I love you" buttons to express their support for the company and show customers they will be shareholders, West said.

Under the plan, if an employee, who earns an average of $11 to $12 an hour, served 30 hours in the previous week, the person would work 4.5 extra hours the following week on what the company calls "Richtree Day."

In a speech to employees here last week outlining details, Richtree president Jorg Reichert said hourly paid employees will work their normal hours in a full week but the days won't include Tuesdays.

That's when the company would schedule the extra hours, he also said.

Management also plans to participate by taking salary cuts ranging from 8 per cent for lower level staff to 30 per cent for senior executives. Those earnings will also go into the trust.

"In essence, we are asking everybody in our company, starting with me, my colleagues in management and all our employees to contribute by either working a few additional hours or allowing a portion of their income to be invested in Richtree," he said.

"We think this idea is sensational," Reichert said.

West said unions, which represent workers at the outlets, are co-operating with the plan but it still needs their approval. The move requires amendments to labour contracts.

If the plan proceeds, the trust would buy Richtree shares at 65 cents each next year for employees, according to West.

The company's stock is currently trading at 60 cents per share. It has ranged between 54 cents and a $1 in the last three months.

West noted the company will not force employees to work extra hours under the plan if it proceeds.

A spokesperson for the Hotel Employees Restaurant International Union could not be reached for comment yesterday.

The company also hopes to implement the idea at its only U.S. operation in Boston.

Richtree reported a consolidated loss of $2.3 million on revenues of $80.6 million in the year ending July 29. In fiscal 2000, the company suffered a loss of $14.9 million on revenue of $87.3 million.

In his speech, Reichert, whose family controls Richtree, said in the days after Sept.11, sales plunged 17 per cent, which prompted management to conserve cash and defer payments to directors and cut executive salaries.

"We implemented a hiring freeze," he said. "We stopped all overtime. We reduced our spending on capital investment to only essential things."

Richtree has been feuding with its master franchisor Mövenpick Holding AG in Switzerland for more than a year over allegations of lack of support for U.S. expansion plans.


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