Many restaurants across Canada are on the brink of collapse as they face further restrictions on how they can operate as a second wave of COVID-19 sweeps across the country.
In a recent public letter, Restaurants Canada, with more than 40,000 members, called on all levels of government to stop system-wide restaurant closures as we undergo a second wave.
Restaurants Invest $750 Million to Protect Patrons but Shutdowns are Still Happening Across Canada
“Restaurants have invested over $750 million in training, sanitizer stations, PPE, air purification systems, and other protective equipment, all designed to provide the highest levels of safety for our customers. And national research indicates that 87 percent of Canadians agree that restaurants are doing a good job of keeping consumers safe,” wrote Todd Barclay, President and CEO of the organization.
“Despite these investments, we are still being shut down. Our industry wants to be a part of the solution. We want to welcome customers back to our dining rooms, but without the transmission data and additional government support, half of all local restaurants are at risk of closing within a year. We have already seen 188,000 jobs lost, and recent closures could see that number rise by another 100,000 jobs. We all deserve to know why and what we can do to stop these closures.”
A recent survey by Statistics Canada found that close to three-fifths (57 percent) of businesses in the accommodation and food services sector reported that they were unable to take on more debt and 29.2 percent of businesses in the accommodation and food services sectors reported that they could continue to operate at their current level of revenue and expenditures for less than six months before considering further staffing actions, closure or bankruptcy.
Recently, Canada’s premier, multi-brand hospitality group King Street Company Inc. announced it had gone under the Companies’ Creditors Arrangement Act, in order to restructure its businesses and financial affairs, as a direct result of the COVID-19 crisis.
“Alongside the entire hospitality sector, the COVID-19 pandemic has put us in an extremely difficult situation that was beyond our control,” said Peter Tsebelis, Managing Director & Partner of King Street Company Inc., in a statement. “We are grateful to our loyal clientele, our tireless staff, our supportive financing partners, and all of our stakeholders that have helped us through these very challenging circumstances. This was an emotional decision for us but we are confident that the CCAA process will give us time to stabilize our business and ultimately put us in a stronger position to build on our successful brands as we emerge from the COVID crisis.”
The company was founded in 2006 by Tsebelis and Gus Giazitzidis and its brands include Jacobs & Co. Steakhouse, Buca Osteria & Enoteca, Bar Buca, Buca Osteria & Bar, La Banane, and CXBO Chocolates.
The company said its growth “came to a devastating halt due to the COVID-19 pandemic bringing unexpected and staggering financial difficulties for much of the hospitality industry, including The King Street Food Company.”
Restaurant Industry in Dire Straits Due to Pandemic Restrictions
“We’re seeing it first hand across Alberta and we know it’s happening in other parts of Canada. There are bright spots. I’m hoping to see continued innovation in restaurants like robust curbside, pickup and take out menus. Many operators are catering events as well as those that are creating meal kits for customers to pick up or deliver. Refrigerated, packaged dinner options are popular right now. We’re seeing restaurant operators becoming very creative in the way they serve their customers and that’s a good thing.
“But some independents and the chains have been pushed to the brink during the pandemic and they’ve already filed for bankruptcy protection, others have decided just to shutter their locations. Many were already gasping for air but the COVID crisis likely accelerated their demise.”
For casual dining restaurants, in-house dining service makes up the bulk of their revenue and now they’re incurring additional expenses in health and safety measures. Also, there continues to be no rent relief in place.
“With the capacity limits in place and further lockdowns on the horizon, many restaurants don’t have the full potential for revenue to pay their contracted rent. Landlords need to determine which restaurants are truly in distress and can’t survive without some form of assistance,” said Kehoe. “It’s a negotiation between tenant and landlord.
“Right now we’re moving into the next phase of restaurant survival. One way to protect the financial stability of the restaurant and provide a cushion to recover from the COVID is to structure a percentage only rent arrangement and fix the restaurant’s rental expenses with an acceptable percentage of gross sales. This is an industry with notoriously thin profit margins. They need a lifeline more than ever.”
But unfortunately, Kehoe said, the percentage rent setup won’t be enough to save some restaurants.
“Landlords have to decide. A restaurant that’s empty is not a good situation anytime. It’s even more damaging to landlords today. It’s better to have some dollars flowing in with a restaurant that’s open rather than having an empty restaurant.”