As Restaurants Reopen in Canada, Most Operate at a Loss

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The economy may be slowly restarting but most restaurants in Canada say they are still operating at a loss.

A survey by Restaurants Canada found that six out of 10 restaurants are operating at a loss while 22 percent of single-unit operators and 15 percent of multi-unit operators said they are just breaking even.

David Lefebvre, Restaurants Canada Vice President, Federal and Quebec, said that even though establishments are able to reopen, 50 percent of the organization’s members feel there will be a money crunch problem for them.

“And one of the reasons is that a lot of them still had to pay rent during the closure and they had to be even more indebted in order to do that,” said Lefebrve.

“The challenge is basically a lack of cash flow and also it’s going to be difficult to run a business and make a profit when you run at only 50 percent capacity. This is a challenge.”

The Restaurants Canada survey also found:

  • Among restaurants that have reopened their doors for on-premise dining fewer than half (31 percent of single-unit operators and 43 percent of multi-unit operators) said doing so has had a positive impact on their operations;
  • More than a third (47 percent of single-unit operators and 39 percent of multi-unit operators) said the impact on their operations has been negative; and
  • The remainder reported no impact or said it’s still too soon to assess.

“When restaurants thrive, so do the communities they serve,” said Shanna Munro, Restaurants Canada President and CEO. “Our industry wants to contribute to rebuilding the economy and reviving neighbourhoods, but time is running out. Most restaurants have been operating at a loss and accumulating debt for three months already. If they don’t get the help they need to return to positive cash flow, many won’t be able to last much longer.”

Lefebrve said surveys have indicated about 10 percent of restaurants won’t be reopening.

“We’re working to save as many as possible,” he said. “But definitely, especially should there be a second wave (of coronavirus) or something like that, it would be absolutely catastrophic to the foodservice sector.

“I think now at least people have a chance to reopen. They can see better days and they can hope that social distancing measures will be further relaxed so they can make a better opening. I would say that most operators that I speak to, they just want a chance to reopen and see if they can make it a business again.”

Restaurants Canada said that the federal government’s 75 percent wage subsidy is helping some restaurants keep staff working during this period but it said most foodservice businesses are going to need continued assistance until they are generating enough revenue to staff their operations without support.

“We are working with government to ask for an extension and some kind of sliding scale on the wage subsidy. The wage subsidy has been the program that’s been the most helpful I would say for foodservice operators,” said Lefebrve.

Restaurants Canada recommends the following changes to the Canada Emergency Wage Subsidy (CEWS) program:

  • Continue to keep the subsidy available for as long as needed. Instead of the 75 percent wage subsidy suddenly dropping to zero, reduce support smoothly and gradually as a business gets closer to manageable levels of revenue variance; and
  • The 30 percent revenue decline threshold should be scaled to support restaurants in their recovery, instead of serving as a disincentive to improving sales at the risk of losing access to the subsidy while businesses are still operating at a loss.

    Restaurants Canada also said half of restaurant owners across the country are still dealing with landlords who are not willing to participate in the Canada Emergency Commercial Rent Assistance (CECRA) program or any other rent relief arrangement. And more than half of single-unit operators say they have not paid their rent in April, May, and June; one in five of those who have not paid rent for those months did not have permission from their landlord to defer payments for all of those months.

“We’re also asking government to extend and to make more eligible for the rent support program because moving forward it’s also a big piece,” said Lefebrve. “Rent is the number one fixed cost in the foodservice industry. So it would be important if government would be more generous with the program and also make more people eligible for it.”

Restaurants Canada recommends the following:

  • Ensure commercial tenants are protected until solutions are in place. The federal government should work with the provinces to ensure a moratorium on evictions in every jurisdiction to relieve pressure from commercial tenants currently not benefiting from the CECRA program;
  • Tenants should be able to apply for the CECRA program and an application from an eligible tenant should make a landlord’s participation compulsory;
  • Eligibility requirements should be expanded to be more inclusive of all foodservice business models; and
  • Support through the CECRA program should be available on a sliding scale beyond June, recognizing the tenuous financial circumstances that many commercial tenants still face. Relief should continue until business revenues return to a determined percentage of pre-pandemic levels.

Article Author

Mario Toneguzzi
Mario Toneguzzi
Mario Toneguzzi, based in Calgary, has more than 40 years experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, faith, city and breaking news, and business. He is the Senior News Editor with Retail Insider in addition to working as a freelance writer and consultant in communications and media relations/training. Mario was named as a RETHINK Retail Top Retail Expert in 2024.

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