Operator Q&A: Andrew Oliver, Oliver & Bonacini Hospitality

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Rosanna Caira: Oliver & Bonacini Hospitality (O&B) has become a large company in recent years. What’s currently under your umbrella?

Andrew Oliver: We’ve been growing and pre-COVID-19, our average annual growth was 25 to 30 per cent from 2014 to 2019. We have 26 chef-driven restaurants, 39 private dining-rooms and 10 large-scale event venues. As far as we know, we’re the largest event producer in North America — last year we did just over 20,000 unique events. And we work with IQ Foods, where not only am I on the board, but we’re an active shareholder in Pizzeria Libretto and helped them grow. When you look at all of that together, we have some 6,570 business units across the country. We’ve got a very large breadth and depth — from QSR all the way to fine-dining.

RC: What has this lockdown been like for your company?

AO: In hindsight, there are so many things I would love to have done to protect ourselves more. Even the last couple weeks of February, and then clearly in March, the writing was on the wall — it was not a matter of if this was going to hit Canada, but when, given the government didn’t close down borders and do a lot of things that, in retrospect, were mistakes. We kept telling people to start buying less with suppliers, because we were starting to see volumes really slow down and effectively, and with millions of dollars in inventory at any given time, an immediate shutdown is a challenge. I still remember having the executive call with our team saying, “guys, what are we doing here? [Are we] going to be closing down in the next two or three weeks?” And that was crazy hard. We closed in Ontario and Montreal first and then Alberta shortly thereafter. We only shut down three or four days before [the government] mandated it, but our hope was, the sooner we shut down, the less this virus spreads, the sooner we’re all going to get back to work, the less people will die, the less it’ll cost the healthcare system — let’s do the right thing and assume the government’s going to be there to do the right thing to help us out. It was a crazy, surreal experience making the decision. We looked at the numbers as to how much, in the millions, we were losing inventory; how much money we’d have going out the door paying everyone’s vacation pay and holiday pay, et cetera. But you never assume you’re going to have 3,000 of your employees take vacation in the same time [while having] zero revenue coming in. So, for a group of our size, that was millions and millions of dollars and that took a long time to figure out how to do while making sure we did our best to reach every employee. There’s a lot of benefits to being [a bigger company], but the bigger you are, there’s a lot of things that are then compounded — it’s much harder to reach everyone so they don’t hear via a press release that we closing down and that they’re not going to be working. We did our absolute best to do that — we were most certainly not perfect, but that was the reality in those early days and look where we are. We’re in a halo effect right now. August [was] as good as it’s going get for the industry, in my opinion, for the next 12 months. You [had] patios open, governments allowed us to increase the size of our patio in some cases for those lucky enough to have them, with indoor dining, as well as the wage subsidy, August [was] so as good as it gets. Look, if [you weren’t] making it work in August, don’t put more of your own personal capital at risk. Winter is coming, it’s going to be brutal, and if people think the worst for our industry has happened, that’s unequivocally wrong. Come November, December and January, you’re going to see half the industry fail based on the government support we have now.

RC: When you made that tough decision at the beginning to close most of your units, were you able to pivot right away?

AO: When we decided we wanted to close, we took a week off and opened three [locations] for takeout only. Where we had a hard time was [whether it was] morally right to ask employees to go back without really knowing what was going on. There wasn’t a lot of guidance [from government] as to what we should or shouldn’t do to operate a kitchen safely so we did our best to try and figure that out. We asked our employees and said, “Look, if we can’t get people who want to do this, then we won’t do this. But if there are people who want to try this, let’s try this.” [During] those first two, four or five weeks, everyone was scared — and I was terrified of what happens if someone gets [COVID-19] and I put them in harm’s way? Don’t get me wrong, I’m fearful of the economic collapse of our industry, but I also don’t want to have people getting sick and potentially have life-changing consequences. So, we did pivot early on to takeout with a handful of our restaurants when people got a little bit more comfortable with spacing and masks and sanitation. We also asked employees how we can help and we started doing meals for frontline workers — I think we’ve done tens of thousands of meals — and eventually started grocery lines when going to grocery stores became a problem for people. Grocery stores in Canada stepped up huge and I’ve got nothing but admiration for those [companies] and we felt if we could stop one person from getting [COVID-19], then spreading, it by delivering groceries, let’s do that. And if the if the upside was we could bring back five per cent of our workforce, as long as we weren’t losing money because we most certainly were not making money doing it. We felt a moral obligation to be part of a solution to try and bring the economy back, while helping people not contract COVID-19.

In [August], we started doing weddings again and even though we started with ceremonies of 10 people, now we’re up to 50 people — adhering to all the rules. Our events business is down 98 per cent, the restaurant businesses is down to 60-65 per cent.

RC: Are you still offering grocery delivery?

AO: We are and it’s evolved. In the first eight weeks of doing it, yeast and flour — which were impossible to find in any grocery store — were available because we would buy 10 or 50 kilo bags of flour, package them up and sell them. They were unequivocally the number-1 sellers by number of units sold for the first eight weeks and in the last eight weeks, we haven’t sold one bit of flour or yeast. Where we’ve pivoted now, and it’s done very well for us and we’re super proud of it, is the at home meal kits, where you can get restaurant-quality food as meal kits that are chef inspired and range from super easy to a little bit more complicated.

RC: Your company is known for all the events that you produce, and you’ve grown in that area. Now that you’re hosting events again, how are those working?

AO: We started by doing virtual events — such as cooking demos — where you didn’t have to be in the same space or rooms with people. We’re still down 90 per cent compared to what we would typically do, but there are those out there saying “look, we need to get on with our lives; we need to move on we’re comfortable with the risks.” And again, being a larger company that takes health and safety as seriously as we do, there’s often times we’re now we’re telling clients we can’t do this, what you’re asking us to do is not within the guidelines we’ve been doing. And even if it’s at your residence or somewhere else private, our staff don’t want to do events that might put them at risk. I mean, they’re just like everyone else. And so, there are there are people willing to do events — two months ago, the amount of calls for events was down 90 per cent and now we’re down about 70 per cent — but the vast majority of them are for less than 50 people. And again, that’s a huge problem for the industry since you just can’t make math work when your numbers are constricted as much as they are right now.

RC: How busy are your restaurants with the current restrictions in place?

AO: With 50-per-cent capacity, it sounds like you’re getting at least half your business, but the fact of the matter is, that’s 100 per cent not true. For July and August, let’s forget that for a bit because the patios have expanded but that’s not real long term. But at places like Canoe, we can only fit in 35 per cent of the regular number of guests in tables [with proper distancing] and so despite the fact occupancy can be 50 per cent, you only get 35 per cent. So, our dinner sales are down 60 or 70 per cent, let’s say, but the business has gone down more than 50 per cent given we’ve lost lunch service. It’s better than nothing and it works because of the financial aid we have but I’m very concerned come October, November, December, as [CEWS] program winds down, that the math just doesn’t work. And so what keeps me up at night is not only is the government support ending, but when patio season ends, it’s ending relatively abruptly. [Government] support should be tied to the restrictions the government is imposing on us as opposed to just saying, “this is how long it should be.”

RC: The rent component is a huge factor for you. I know you’re in a lot of the downtown cores where rent is really high. The rent-subsidy program has certain good features, but a lot of flaws as well. How would you rate that program and would you like for it to continue for the longer term?

AO: I’ve been advocating since week two with governments — from municipal government all the way up to the Premier and then all the way up to the Prime Minister’s office. I don’t think anyone would argue that the CECRA program has been nothing short of a disaster or on a slew of disastrous programs and again, the proof is in the pudding. In the first two, three months of [the lockdown], only five or six per cent of landlords applied. My family invested in some buildings that we had restaurants in and the restaurants failed, but the real estate survived. And we’ve applied and gone through all the paperwork and the nonsense — if you didn’t know any better, you’d think the government created a program and made it so difficult so it wouldn’t get uptick. And I truly believe a lot of people, including institutional landlords, believe that to be the case. It’s not a small-business rent-relief program, because small business has no voice in the program. This was a real-estate program the government assumed people would use. The rules are so convoluted and backwards — they just don’t make sense — which is why there have been so many complaints. So, ultimately, they should be changing this program — it’s completely backwards the way it is.

[There needs to be] a program that works directly with hospitality workers and owners, because we’re on the frontlines of this. Rogers Communications qualified for [government relief] programs, despite the fact it made $275-million in profit last quarter — something’s wrong with these programs. And so, we have had to mostly rely on our landlords and their belief that this is a short-term or medium-term impact and they’d rather have us here than not. And whatever we can do to help them would be great because landlords have done nothing wrong.

RC: You were actively involved with the group, Save Hospitality, and some of these issues you’re talking about have been raised with that group. Are you still involved with group and if so, what is your role?

AO: I was one of the founders with the guys at the Ascari Group. And, oddly enough, we’ve never met face to face. Some people in my family have been in government relations over the years and they said, ‘hey, this is how you can make a change. Try and write the legislation you want to have happen. And what we’re doing is saying ‘we’re leaders here and hopefully [the government] will listen. We’re [probably] representing more than 100,000 people who have lost their jobs or had lost their jobs at one point during this pandemic and are continuing to do our best to advocate. But it does come at a cost to your business when you’re trying to advocate and it’s, by far, one of the most-frustrating experiences of my life to continuously show people this is what’s happening. For example, with the rent-relief measures, we said if you make it at the will of the landlords, this will not work. But the government did it anyway.

But there were folks in government that have been amazing and saying, ‘I’m so sorry this is happening to you. We can’t get them to do the right thing.’ But at the end of the day, the government’s doing what the government’s doing and all we can do is continue to push and advocate and say to government ‘look, if you feel you’ve done enough for our industry, why have 30 per cent of restaurants closed our doors?’ So obviously, nobody is listening and the question is, there are associations in the industry that lobby behalf of restaurateurs — whether they’re provincial or national or local — are they doing a good enough job? What needs to happen to either change the messaging or to get people to listen to a group that has a lot of clout in the economy, but obviously, it’s not being heard? There are some associations doing a great job, but we’re fragmented. We started Save Hospitality because we weren’t happy with the advocacy that was already there. As an industry, the margins are so low, the thought of paying $2,000 a year to an association or government lobby group to try and corral such a fragmented group of people has been nearly impossible.

RC: How do you feel about the surveys that say post-COVID-19, one in two restaurants will be gone?

AO: One in two is the new base-case scenario. We need a plan for industries and businesses that have been forced to have reduced occupancy. The U.S. now estimates 90 per cent [of restaurants] will fail over the next 12 months, and they’ve received hundreds of billions of dollars in aid directly to that industry. Without the government having an industry-specific plan, 50 per cent is by far the best-case scenario because, again, the math doesn’t work. If you have 100 per cent of your cost base, and then come winter, we’re going to have 35 per cent of the regular capacity and seats, I don’t get how anyone thinks that works. And, remember, this problem is going to decimate urban cores more than anywhere else. We’ve done huge things to try and revitalize urban downtown cores to make them vibrant but to do that while still charging property taxes and full rates makes no sense to me. That’s been a bone of contention with our landlords, who are saying, look, we’ll waive rent but can you at least pay your property taxes. It’s going to be crippling when the CERCA program ends and that’s the same time we’re going start seeing a slowdown in patio season. You’re literally going to see August is the best month we have as an industry right now, and you better be able to get a little bit ahead because come October, November, December, it’s going get really rough. [Operators] are going to try and hold on as long as they can, hoping for a good holiday season; hoping people might still go out and things will change. But with all those bills coming due in January, without government help and support, can they survive?

RC: What has the biggest challenge been for you as a leader during this turbulent time?

AO: The decisions that we made as leaders at the beginning have been endemic — literally life and death — which wasn’t what we signed up for and the weight of that was very hard. My obligation is to my vendors, my landlords, to everyone in our economic ecosystem, to go and say, I’m going to do everything I can to make your life better as best I can. When we can. And it went from, we need to survive this, to how do I save as many jobs as I possibly can because we as a large company that has been around for 30-plus years in various forms, have people who are unbelievably dedicated. And believe me, we owe it to them to do everything we can to ensure it’s going to be okay. Yes, there’s going be sacrifices for everyone along the way, but it’s a matter of how you try and lead by example by trying to do the right thing and surviving, as best you can.

RC: Do you agree that structural changes need to be made to the business model moving forward?

AO: I don’t know how you go about making huge change because we’re so fragmented. A lot of [operators] are saying they have to raise prices. Well, that’s great in principle to say, let’s raise our prices for what it actually costs, but people will always try and price compete, because that’s how you get bums in seats. People are now talking about getting rid of tipping again, which comes up every couple of years. It’s really important for the average person to know, the systems in U.S. and Canada are very different. I don’t know how you legislate something like that at the end of the day, and I don’t think the government would get involved in doing it. We need to look at structural changes. I don’t see how the government is going to agree to this, with deficits probably approaching half a trillion dollars, but our industry is so aggressively overtaxed because we don’t have a proper lobby group. At one of our venues in Toronto, our property taxes — just the property taxes — are more than 50 per cent, or $50,000, a month. That is a real problem. And when you look at that, coupled with the fact Ontario has the highest liquor tax of any jurisdiction in North America, one of the highest in Canada, if the government was serious about wanting to change our industry, it has to come at the cost of the government.

RC: What are some of the biggest lessons you’ve learned through this pandemic as it relates to your own business?

AO: The number-1 lesson is that there’s the pros and the cons. I’ll start with a negative. As an entrepreneur in Canada, you’re on your own — the government is not here to help you, they’re here to, more than likely, make your life more difficult, even when they try and help you. One of the hardest things in the restaurant industry in the early days was getting people to come back to work because of CERB. On the other side of things, what I’ve learned is there are amazing humans out there. We have amazing employees who have given their blood, sweat and tears — countless folks who put in countless hours despite being laid off or on reduced hours — they did what they had to do because they believed in our industry; they believed in what we’re trying to accomplish as a company; and they believed in us. To our guests who were the first people who came and did grocery with us, to doing takeout and delivery, to the first folks who went to indoor dining — those are heroes to me.

Don’t get me wrong, there’s a lot of folks out there who are not happy with our situation as a company and as an industry and I get it. But if you build the right corporate culture, if you pick the right kind of people to surround yourself with and get on that bus, you won’t feel so lonely when things get that bad. We’ve taken the attitude of saying, ‘never surrender and never give up,’ despite the fact every work day feels like a punch in the face — I get knocked down and I got to get up again, over and over and over again. There’s always going to be hope, no matter how dark, dismal and terrible it seems. You just have to continue to get up and keep fighting. I don’t begrudge anyone who’s had to give up and throw in the towel, because I know how hard it is every day to get punched in the face and have to get up again and again and again to do it. But as an entrepreneur, you didn’t do this because it was easy. You did this because you love it and you’re passionate about it. The last couple of Sundays I’ve been substantially less depressed than the other ones because I’m excited about some of the plans on the horizon. It’ll be the worst thing it’ can be and then it’ll get better ,and for those who have been able to take on the unrelenting abuse, the reward will be that there will be more opportunity for you than in any other time in our industry. And hopefully, you’ll be ready to take advantage of that.

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