Raphael Stevens

Disney reported stronger-than-expected growth in streaming subscribers across all of its media platforms, but its shares fell after hours.
Disney reported that total Disney+ subscriptions rose to 137.7 million during the fiscal second quarter, higher than the 135 million analysts had forecast, according to StreetAccount.
Disney’s parks, experiences and products segment saw revenues more than double to $6.7 billion during the quarter, compared to the prior-year period.

In this photo illustration a close-up of a hand holding a TV remote control seen displayed in front of the Disney+ logo.
Thiago Prudencio | SOPA Images | LightRocket | Getty Images

Disney reported higher-than-expected streaming subscriber growth on Wednesday, but warned that it is still seeing the impact of Covid on its theme parks in Asia.
Shares of Disney fell more than 2% in after-hours trading. The stock move comes after the company’s shares hit a 52-week low of $104.79 earlier Wednesday.

Disney reported that total Disney+ subscriptions rose to 137.7 million during the fiscal second quarter, higher than the 135 million analysts had forecast, according to StreetAccount.

The company expects Disney+ net adds to be stronger in second half than first half but the rate of change “may not be as large as previously anticipated,” CFO Christine McCarthy said during the company’s earnings call Wednesday.
Additionally, average revenue per user (ARPU) for domestic Disney+ subscribers was up 5% to $6.32.
“Our strong results in the second quarter, including fantastic performance at our domestic parks and continued growth of our streaming services — with 7.9 million Disney+ subscribers added in the quarter and total subscriptions across all our DTC offerings exceeding 205 million — once again proved that we are in a league of our own,” said CEO Bob Chapek in a statement Wednesday.
Here are the results:

Earnings per share: $1.08 adj.
Revenue: $19.25 billion, which includes a $1 billion reduction resulting from the early termination of some licensing agreements
Disney+ total subscriptions: 137.7 million vs. 135 million expected, according to StreetAccount

Investors were keen to see Disney’s subscription numbers after Netflix reported a loss of 200,000 subscribers during its most recent quarter, its first decline in paid users in more than a decade. The company forecast a global paid subscriber loss of 2 million for the second quarter.
Shares of Disney have slumped 30% since January and more than 40% compared with the same time last year, as investors wonder if the company can sustain its streaming growth and question how increased inflation and a possible recession could impact its other business ventures.
The company showed signs of bouncing back from Covid restrictions.
Disney’s parks, experiences and products segment saw revenues more than double to $6.7 billion during the quarter, compared to the prior-year period. The company said growth was fueled by increased attendance, hotel bookings and cruise ship sailings as well as higher ticket prices and higher spend on food, beverage and merchandise.
Disney said its domestic parks are beginning to see the return from international travelers, but not at the levels the company saw before the pandemic. This group of visitors once accounted for 18% to 20% of guests.
Additionally, not all of its international parks have been open full-time during the last quarter. While Paris Disneyland is celebrating its 30th anniversary, Shanghai Disneyland and Hong Kong Disneyland each experienced temporary closures due to local Covid spikes.
While the Hong Kong location reopened April 21, Shanghai remains closed. McCarthy noted that overall parks, experiences and consumer products segment operating income in the current quarter could see a $350 million impact because of these closures in Asia.
Read the earnings release here.

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Lordstown’s deal to sell its plant to Foxconn will bring it $230 million of urgently needed cash.
The parties had set a deadline of May 18 to complete the transaction

Workers install door hinges to the body shell of a prototype Endurance electric pickup truck on June 21, 2021 at Lordstown Motors’ assembly plant in Ohio.
Michael Wayland / CNBC

Embattled electric vehicle start-up Lordstown Motors said Wednesday it has closed a $230 million deal to sell its Ohio factory to Taiwanese contract manufacturer Hon Hai Technology Group, better known as Foxconn.
Lordstown’s shares surged more than 35% in after-hours trading following the news.

The deal to sell the plant, a former General Motors factory, has been seen as a critical lifeline for Lordstown, which has run through nearly all of the cash it raised in a merger with the special-purpose acquisition company (SPAC) that took it public in October 2020.
The parties had set a May 18 deadline to complete the deal. Had it not closed before then, Lordstown would have been out of cash and, likely, out of options to complete development of its Endurance electric pickup.
Foxconn plans to use the factory to build EVs for clients under contract, including the Endurance and a new low-cost model for California start-up Fisker that’s expected in 2024.

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Commercial real estate services giant Cushman & Wakefield appealed a judge’s order that it comply with subpoenas issued by the New York attorney general’s office seeking documents related to its appraisals of properties owned by former President Donald Trump’s company.
Cushman & Wakefield argued that complying with the subpoena for tens of thousands of pages of documents would compromise the confidential information of nearly 1,000 of its clients who have no connection to the Trump Organization.
New York Attorney General Letitia James is investigating how the Trump Organization valued certain real estate assets.

The entrance to Trump Tower on 5th Avenue is pictured in the Manhattan borough of New York City, May 19, 2021.
Shannon Stapleton | Reuters

Commercial real-estate services giant Cushman & Wakefield on Wednesday appealed a judge’s order that it comply with subpoenas issued by the New York attorney general’s office seeking documents related to its appraisals of properties owned by former President Donald Trump’s company.
Cushman & Wakefield argued that complying with the subpoena for tens of thousands of pages of documents would compromise the confidential information of nearly 1,000 of its clients who have no connection to the Trump Organization or the properties being eyed by Attorney General Letitia James in her civil investigation of Trump.

Cushman also submitted in a court filing an affidavit from an independent valuation consultant who wrote that the documents sought by James’ office “will not provide a reliable basis to evaluate or critique appraisals” of Trump properties that are already in the AG’s possession.
“While we are filing this appeal out of an obligation to protect the privacy of our clients and preserve the integrity our client relationships, we wish to continue working with the Office of the Attorney General and hope for a swift and successful conclusion to the investigation,” the company said in a statement.
And the company said, “Cushman’s appraisers did nothing wrong, and Cushman stands behind its appraisers and their appraisals.”
James is investigating the Trump Organization over claims that the company illegally manipulated the stated valuations of real estate assets to obtain more favorable financial terms in loans, insurance policies and taxes related to those properties.
Last month, the AG’s office said Cushman had refused to comply with subpoenas for information related to its appraisals of three Trump-owned properties — the Seven Springs Estate, Trump National Golf Club, Los Angeles, and 40 Wall Street — “and information about Cushman’s larger business relationship with the Trump Organization.”

James’ office said that evidence shows the Trump Organization submitted “fraudulent or misleading information valuations of conservation easements to the Internal Revenue Service” related to the first two of those properties.
And the office said that Cushman had issued three appraisals to Capital One Bank related to 40 Wall Street in Manhattan that valued that property at between $200 million and $220 million from 2010 through 2012, before issuing an appraisal to Ladder Capital Finance LLC in 2015 that valued the same building at $550 million.

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That last appraisal was used by the Trump Organization to secure a loan from Ladder Capital, which employs the son of Allen Weisselberg, the chief financial officer of the Trump company.
On April 25, Manhattan Supreme Court Judge Arthur Engoron ordered Cushman to comply with James’ subpoenas and gave the firm until late May to turn over the documents.
The order came hours after Engoron held Trump personally in contempt of court for failing to comply with another subpoena from James for business documents she believed to be in his possession.
Engoron on Wednesday lifted that contempt finding on the condition that Trump pay James a $110,000 fine and provide additional information about the searches for the documents that Trump claims he does not have.
Cushman earlier Wednesday asked Engoron to reconsider his decision upholding the subpoenas directed at the company. Engoron quickly denied that request, calling it “without merit” and “simply a rehash of issues properly decided by this court in prior opinion.”
Cushman said in court filings related to its appeal Wednesday that last September its lawyers met virtually with officials from James’ office to offer appraisals prepared by the company for the Trump Organization on Seven Springs, Trump National Golf Club-Los Angeles and 40 Wall Street. In January, Cushman agreed “to confer” with James’ office “to address issues raised by [the attorney general’s team] during the September” meeting.
Cushman also said that the attorney general’s office confirmed in writing that Cushman’s presentation of the Trump-related materials “constituted confidential settlement discussions.”
The company said that when James’ office asked Engoron to uphold the subpoenas issued to Cushman for other documents it “breached its promises to Cushman” by including information obtained from Cushman in the January meeting.
“Cushman was promised and expected” that material to be treated confidentially, the company said in a statement.
A spokesperson for James said, in a statement to CNBC: “The court has clearly ruled that Cushman & Wakefield must comply with our subpoenas and turn over information that is relevant to our investigation into Donald Trump and the Trump Organization, and has summarily rejected their attempt today to seek reconsideration of these rulings.”
“While they have a right to appeal, we have a right to continue this investigation and to seek answers,” the spokesperson said.

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McDonald’s is rolling out a new assessment system for its restaurants, and tensions are boiling over for some owners.
Some franchisees are worried the new process will instead harm operations and alienate workers in an already-tight job market. “It just kills morale,” one owner said.
Two separate surveys recently revealed frustrations and disapproval of the new grading system.
“We must remain laser focused on maintaining our world-famous standards of excellence in our restaurants,” McDonald’s said.

McDonald’s franchise owners are expressing concern and frustration over a new grading system the fast food giant is planning to roll out early next year, with some saying it is poor timing due to unprecedented pressures in the workforce.
The company plans to enact the system, called Operations PACE, which stands for Performance and Customer Excellence, in January 2023. McDonald’s notes its “business climate is changing” in a 60-page overview of the PACE system, which was viewed by CNBC, and says it needs a “new approach that supports achieving our growth plan objectives.”

Some franchisees, however, are worried the new process will instead harm operations and alienate workers in a tight labor market. The program calls for between six and 10 visits a year from company and third-party assessors per location, layered on top of other inspections for things such as local food safety regulations. McDonald’s has about 13,000 franchised locations in the United States.
Other owners fear it will result in a less-collaborative approach to operations, with harsher grading, according to three people with knowledge of the matter and two separate surveys of franchisees. These people declined to be named because they are not authorized to speak publicly about PACE.
“It just kills morale, and with the current hiring environment being as tough as it is, I can’t afford to lose any more people,” said one franchisee with decades of experience and about a dozen locations. This person has 500 employees, but is short 100 despite paying $16 an hour.
The owner also said that prior McDonald’s grading systems were more collaborative and featured mutually agreed upon goals. “You cannot improve things by telling my managers that they failed,” the person said.
McDonald’s defended the new assessment plan.

“We must remain laser focused on maintaining our world-famous standards of excellence in our restaurants. This comprehensive performance management system, designed with ongoing input from franchisees, will offer tailored support and coaching to restaurants to help them provide a seamless McDonald’s experience that will keep customers coming back,” the company said in response to a request for comment. “To give time for restaurants to learn the new system, optional learning visits are being offered in 2022 ahead of the official start in January 2023.”
The company added that the assessment framework includes personalized resources that will help franchisees improve everyday performance and drive sales, profitability and guest counts.
Companies continue to face pressures in attracting and retaining workers. Labor costs have also gone up at McDonald’s and other fast-food companies, causing franchisees to increase prices along with pay, and competition for workers is steep. There’s also a growing union push at different restaurant and retail outlets nationwide, with Starbucks workers leading the charge in the food sector, as workers advocate and seek to organize to get better benefits and conditions.

The logo for McDonald’s is seen on a restaurant in Arlington, Virginia, January 27, 2022.
Joshua Roberts | Reuters

Tensions with franchisees are nothing new at the company, where business in the U.S. has been strong, even in the face of ongoing labor woes and record-high costs. In the past, CEO Chris Kempczinski has said the company’s diverse set of owners are reflective of society and different points of view. The owners and McDonald’s last publicly clashed over technology fees McDonald’s said it was owed by owners thanks to uncollected dues, and separately, over pandemic support.
The National Owners Association, an independent franchisee advocacy group for McDonald’s owners, recently shared with its membership an internal survey on PACE, which was seen by CNBC. The poll showed that 71% had been trained in PACE so far, and just 3% of the restaurant operators who responded said the planned grading curriculum is an accurate reflection of operations. More than half felt it was not accurate or somewhat inaccurate. The survey was sent to 900 owners, and they received up to 500 responses.
Nearly a quarter felt it would help or somewhat help operations. In addition, 64% said the staffing environment has gotten worse or somewhat worse, which speaks to the frustrations owners have with this new system being rolled out at this moment in time. More than 80% said it would not be helpful to the company’s “people-first” objectives. A separate letter from the NOA board to its membership said leaders were working with the company on recommendations to reduce the pressure of the program.
“Who in their right mind would add so much pressure to a widely-known distressed industry [and its] employees, facing the worst labor shortage in history, inflation and price increases, the fear of pandemic tremors, and so much more by instituting such a laborious program as PACE?” a source in franchisee leadership with knowledge of the situation said.
A recent survey from sell-side firm Kalinowski Equity Research of more than 20 owners who operate over 200 restaurants also expressed some disapproval with PACE. It includes comments from operators that underscore what some feel is the ill-advised timing of the rollout.
“The PACE audits will hold us back from building sales and will increase our turnover of employees. The worst time in the history of the system to implement such a program,” one respondent said. “Stop PACE programs, which will decimate the staffs we need to operate,” another said. Overall, the proprietary survey ranks franchisee relations with corporate a 1.19 on a scale of 1 to 5, the third-worst score in its history dating back to mid-2003. 
Another franchisee, who has decades of experience and more than a dozen locations, said employees are still recovering from the pandemic and the timing of the system is “tone-deaf.” The owner has more than 500 employees.
PACE will have “strangers with little-to-no restaurant experience coming in and evaluating and interacting with my staff,” this person said. “The issue for me is not the grading, the issue for me is that my workforce is fragile.”

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