Restaurant Companies Express Frustration With Landlords, Government and Third-Party-Delivery Companies


AS COVID-19 continues to wreak havoc around the world, businesses are being forced to deal with repercussions of a lockdown that has no end in sight. For the restaurant industry, that reality has translated into huge declines in revenues and a continuing fear of what the future looks like.

Large restaurant companies and small operators alike are dealing with the stark reality that this problem is not ending any time soon.

For Janet Zuccarini, founder and visionary of Gusto 54, the effects of this pandemic are not just about a few months, but rather years. Speaking on KML’s Table Talk podcast recently, she said from day-1, she realized she needed to have a two-year plan in place.

“We’re going to need a vaccine or we live with a virus. So, we’re going to find a way to live with the virus and we’re going to operate in a safe way when we’re allowed to open our restaurants to be sit-down restaurants. Yes, everyone will be wearing masks and gloves and [using] sanitizing stations and taking temperatures and everything that we’re going to do. But everyone’s going to need to be vaccinated. So, it’s going to take 18 months for a vaccine and then how long is it going to take to vaccinate a couple of billion people,” she asked rhetorically.

Her challenge specifically, she explained, is that “My restaurants are mostly volume restaurants where people are elbow to elbow. When are people going to feel comfortable like that?”

Almost immediately, her group pivoted to takeout and delivery where it could, but she acknowledged the limitation of doing that. “Italian food is terrible for takeout, it doesn’t hold well.” In an effort to fight that, she introduced pasta kits where in three minutes you have a Felix- [her critically acclaimed L.A. restaurant] like quality meal in your home.” With barbecue season fast approaching, she’s also looking to introduce barbecue kits.

She’s quick to point out that “If I’m going to be making 50 per cent of my revenue, my landlord cannot be collecting 100-per-cent of rent. It’s just not going to be. You have to renegotiate all your leases,” said the restaurateur. I’m on calls around the clock. I’m renegotiating…if I have landlords that will not play ball, then I’m walking; I’m handing them the keys and I’m walking.”

The issue of rent has certainly been the albatross around restaurateurs’ neck from day-1. As an example, Grant van Gameren, chef and owner of 10 different concepts, including famed Bar Raval and Bar Isabel, had his bar, Pretty Ugly, padlocked by his landlord. The experience has left him disheartened and disillusioned.

“I own none of my buildings and they’re all across the map here. So, you have some that are [fully] waiving rent during the closure, even backtracking to March 15, even though discussion started in April; and then you have other landlords looking to defer rent for one month. At that point, I might as well just give you three months now,” said the award-winning chef.

Van Gameren asked all of his landlords to “adopt the mentality of short-term loss and long-term gain” and while some were receptive, others, such as the owners of Pretty Ugly on Queen St. West, chose to padlock the unit.

“It just blows my mind that all of this pressure is put on to the restaurant or small-business owner. And we’re essentially the heart of the body, right? Without us, no one else exists or gets paid.”

The anger and disillusionment cuts across all sectors. Charles Khabouth, whose concepts range from the Bisha hotel in downtown Toronto, several restaurants and three more under construction, to three music festivals in Montreal, Ottawa and Toronto and a restaurant in Miami, can’t understand the lack of support. “We’re probably the biggest industry in Canada and maybe globally,” he pointed out, and the trickle-down effect to other industries is significant — farmers, fisherman and myriad others. We need to be taken care of.”

Though he thinks the politicians have done a good job, he says some of the legislation they’ve passed doesn’t work for the operators. “Our rents are high; our payroll is higher; so, we’re left in the cold. I feel bad for all the staff that’s laid off and not sure who’s going to come back to work,” said Khabouth.

Nick Di Donato of Toronto-based Liberty Entertainment Group, which operates the Cibo brand in Toronto and Florida, fine-dining restaurant Don Alfonso 1890, the Liberty Grand event space and tourist attraction Casa Loma, is equally frustrated by the lack of government support. In fact, he thinks the U.S. government has done more south of the border to help the restaurant community. “In the U.S. I don’t have any concerns whatsoever about surviving and being able to stay afloat and keeping my restaurants and venues going for the next year,” said Di Donato, explaining the federal government there has “given us loans that we desperately needed, not to run our business today, but to be able to run it for the next year. Without those loans, without liquidity, I would not be able to keep those restaurants open for over a year without making the revenue stream that we’re accustomed to making. So, having a federally backed loan, within 48 hours of the application from the banks, that’s phenomenal. That’s what we need here,” he said, adding the $40,000 loans in Canada, with $10,000 forgivable, just “doesn’t get you very far.”

Though he was quickly able to pivot many of his units to takeout and delivery and sell essential retail items as part of his market concepts, he’s particularly frustrated by what he calls exorbitant commission rates being charged by some third-party aggregators during this huge crisis. “It’s very challenging to make money on the delivery, which is our only source of revenue right now, when some third-party companies, such as Uber Eats, are charging 30 per cent.”

He’s currently on a mission to see what other options operators can come up with to ensure they don’t continue to lose a large part of their revenue to third-party aggregators; or at minimum have governments set up some caps for delivery companies, similar to what exists in jurisdictions such as San Francisco, which has a cap of 15 per cent. “We need to figure out how to make money on those deliveries. That’s going to be crucial for the survival of many restaurants,” said Di Donato.

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