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Broad Economic Impact As Foodservice Businesses Shutter in Canada

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Recently, the Canadian Federation of Independent Business reported that one in seven small businesses in Canada are at risk of going under as a result of the COVID-19 pandemic in addition to the ones that have already closed.

REPORTS FROM CFIB SHOW 1 IN 7 SMALL BUSINESSES AT RISK DUE TO COVID-19

The national organization’s mid-range estimate for small business closures is 158,000.

The restaurant and bar industry, of course, which has already been hit hard, will continue to face steep challenges during this economic crisis that appears to have no end date.

And the ripple effect will have grave consequences for the overall economy.

Larry Isaacs, President of The Firkin Group of Pubs based in Markham, Ontario, with 30 locations including eating establishments, said there could be up to 50 percent of restaurant closures in Canada because of the pandemic.

“You have to remember there is a splinter or fracture that goes out into the marketplace with those restaurants closing down,” said Isaacs. “Aside from the obvious. You’ve got the governments that aren’t going to receive taxes. You’ve got the banks that aren’t going to get their loans paid. Now you’ve got distributors that are waiting for their money. They’re not going to get paid. Therefore, there’s no money coming through the manufacturing sector — impacting the farmers.

“Those are the basic ones. Forget about the plumber, the electrician, the audio visual, the handyman, the music guy. And I could go on and name you a thousand splinters of who are going to get impacted. All of these people and their families. And them paying taxes to the government. So it’s not just a matter of the restaurant shutting down. The economic impact is way more widespread. And you’ve seen it in the retail industry. All these people that are working, they contribute to society by paying taxes. If you take all these taxes off the table where’s the government going to get money to maintain the medical system in Canada. Where are they going to get money to fix the roads and the transport? Where’s the money coming from?”

Isaacs said his establishments closed down the day before St. Patrick’s Day, the biggest revenue generating day of the year for them, and the impact of COVID on the business overall has been “devastating”.

“A restaurant generally works on 30 day payables meaning that September’s revenue will pay August’s bills. We were shut down on the 16th of March and we had to close completely. The Firkin Group is not designed for takeout or delivery. That’s not our operation. Our operation is specifically sit down, watch the sports, have some beers. We were 100 percent closed down except one of our locations tried to do takeout for a little while,” said Isaacs.

“So we had zero income leaving all of our suppliers with no payment. In reopening the business — it’s almost like starting a new business — we’ve got suppliers we have to take care of, we’ve got all this new PPE with masks and hand sanitizers, you have to rebuild your store. And there’s a massive cost to do that. On top of that all we’ve had from (mid) June is patios only (open) and you have to take into account 50 percent distancing. You have to take into account the rain, the wind, the cold nights, the extreme heat. So you have to minus that. And only now in the last couple of weeks have we been able to open the inside at 50 percent.

“At the same time, 50 percent occupancy on the inside of your store. It isn’t really 50 percent because some of the stores are designed that in essence when you lay the tables six feet apart you don’t actually get half of your people. Some of the stores will get only 20 percent, 30 percent, actual occupancy seats where people can sit down. So our biggest concern is we’ve got stuck with no revenue coming in. We had a lot of bills.”

According to Restaurants Canada, restaurants and other foodservice businesses are the fourth-largest source of private sector jobs and number one source of first jobs for Canadians, typically employing 1.2 million people.

RESTAURANTS PLAY A CRITICAL ROLE IN CANADIAN AGRI-FOOD SECTOR

Restaurants support a wide variety of supply chain businesses, indirectly supporting more than 290,000 jobs. Restaurants typically spend more than $30 billion per year on food and beverage purchases, playing a critical role for Canadian farmers and the agri-food sector.

Isaacs said there are three levels of closures facing the restaurant industry. The first has already occurred now since March until today.

“The second piece is going to occur once all the patios close and we move into the fall and into the wintertime. That will be the second closures when people are seeing no patios and you’ve only got half of your restaurant available. They’re not going to be in that revenue,” he said.

“And your third piece is going to come in March and April when you’ve gone through the worst three months of the year — December, January, and February – with no Christmas parties and very little people going out of their homes, you’re going to get the next hit again in March and April.

“So there’s a very good potential that there could be as high as 50 percent (closures) certainly from the independent side. It’s going to be significant unless the government steps in heavily with the rent, payroll relief, tax relief. There has to be a number of helping hands to carry the industry through until May or until the end of the distancing or until there’s a vaccine.”

Article Author

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 National Business Journalist with Retail Insider in addition to working on his own as a freelance writer and consultant in communications and media relations/training.

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