TORONTO – Independent restaurants and their stakeholders are joining forces across the country to signal that their industry is in serious trouble. With the vast majority of restaurants closed completely, more than one million hospitality workers are currently laid off. With no clear path to reopening, many restaurants will be left without the capital needed to resume operations. More urgently, with rent due yesterday, April 1, many restaurants will be found in default, leading to immediate closures across the country and leaving suppliers, landlords, banks and workers seriously affected in the economic wake. Restaurant owners are urgently seeking the support of the government and have proposed industry-specific steps of response.
The potential for restaurants to be shuttered nationwide would have a devastating impact on the Canadian economy. As a $90-billion industry, restaurants are Canada’s fourth-largest employer, representing 1.3 million jobs or seven per cent of Canada’s total workforce. This figure does not include the 280,000 jobs in related industries.
The advocacy group SaveHospitalityCA is made up of more than 1,000 like-minded stakeholders across the industry, representing more than 40,000 laid off workers, and growing by the thousands each day. Together, they’ve created a detailed proposal for government support, and have been lobbying all levels of government. They’ve had discussions with provincial and city leaders, and are awaiting a response from federal ministers.
SaveHospitalityCA’s proposal includes the following recommendations:
- An immediate stay on April rent payments (see Nova Scotia’s CRDSP for an example of such a program)
- Supplemented EI benefits for workers in large cities where the cost of living is higher than other parts of the country
- Providing forgivable loans to restaurants to allow them to pay rent, cover bank interest, guarantee benefits for laid-off employees and ensuring enough capital to restart their businesses
- The structuring of these loans would add security to the banking systems and real-estate markets, while allowing restaurants to bring back their workers and pay suppliers without the crush of unsurvivable debt
“Restaurants are a high-labour, low-profit business,” says John Sinopoli, partner & executive chef of Ascari Hospitality Group and one of SaveHospitalityCA’s co-founders. “To generate $1 million in sales, restaurants require an average of 14.9 workers. This compares to 1.2 workers for gas stations, 4.3 workers for grocery stores and 6.9 workers for clothing retail stores. If restaurateurs don’t get the support they need to reopen once we all get through this crisis, 1.3 million jobs are at risk and the majority will not come back.”
Restaurants represent one of the largest- and highest- paying tenant groups in Canada, spending an estimated $9 billion annually on rent. They have pre-paid March rent, but been unable to operate for most of the month and face steep losses. Now that April’s rent is due, amid a government-mandated shutdown, restaurants with zero cash flow and small cash reserves will be left with no alternative than to close permanently.
“We’re looking at, potentially, the complete collapse of the industry as we know it. Without immediate government intervention, the effects on our economy will be devastating,” says Andrew Oliver, president of Oliver & Bonacini Hospitality, whose company co-founded the campaign. “Investment in the industry now will save the government money in the long run. That’s the message we’re trying to get out. There are big costs coming, but we’ve put together a detailed plan to minimize the costs and get people back to work when it’s safe – allowing our industry to continue to help the economy and generate tens of billions in future tax revenues annually.”
COVID-19 is an unprecedented contagion. Laid off restaurant workers are currently costing EI $660 million per week. Mass restaurant closures will lead to a real-estate collapse, as the $9-billion of restaurant rent represents approximately $150 billion of real-estate value and $80-billion in related loans. These closures will also lead to the forfeiting of $10 billion currently owed to suppliers and vendors, triggering a snowball effect for secondary industries.
While yesterday’s announcement of a 75 per cent wage subsidy is welcomed news for many business owners, it does little to nothing for the restaurant industry that is already completely shut down, as restaurants need to be functioning public spaces in order to generate revenue and justify the cost of labour.
“Many in our industry shut down even before it was mandated, and we know we’ll likely be among the last businesses able to reopen ─ meaning we’ll be incurring costs with zero revenues longer than any other industry,” says Sinopoli. “The majority of owners will not have the funds to make rent and continue to pay benefits to their laid-off employees. If they don’t pay rent, many will be in default of their loans.”
With $750 million in rent due as of yesterday, April 1, governments and the hospitality industry have a very short window to have a positive outcome. Says Oliver, “The alternative will truly be nothing short of economic disaster.”
To view SaveHospitalityCA’s detailed recovery proposal, visit SaveHospitality.ca