Many restaurants may not be able to afford to reopen their doors once the Province has permitted them to do so.
According to a study from Restaurants Canada, most restaurants won’t have enough cash flow to be able to reopen their doors to diners once they are allowed to do so.
According to the findings, seven out of 10 restaurateurs are worried their business won’t have enough liquidity to pay vendors, rent and other expenses over the next three months.
Additionally, while the Canada Emergency Commercial Rent Assistance (CECRA) program might provide some restaurants with relief, rent obligations continue to be a challenge for many:
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- At least one out of five independent restaurateurs is dealing with a landlord who is not willing to provide rent relief, either through the CECRA program or some other arrangement.
- 14 per cent of independent restaurants haven’t been able to pay rent for April and nearly 20 per cent aren’t able to pay rent for May, despite not having an agreement from their landlord to postpone those payments.
“The resiliency of our industry won’t be enough to ensure Ontario’s 38,000 restaurants remain viable in the face of insufficient cash flow and insurmountable debt,” James Rilett, vice-president of Central Canada for Restaurants Canada, said in a news release.
“The province needs to come to the table with a package of solutions to help these mostly small and medium-sized businesses stay afloat as they ramp up their operations,” he continued.
Restaurants Canada is urging the government to take action to ensure businesses in the foodservice industry can continue to operate as more businesses begin to reopen, including:
- Commercial tenant protections and rent relief. While the Ontario-Canada Emergency Commercial Rent Assistance (OCECRA) program responds to one of the greatest challenges for restaurants, many will be unable to secure any protection or relief through this mechanism, through no fault of their own. A broader rent relief program is needed to capture businesses that have experienced a significant decline in sales but do not meet the current qualifying threshold. Commercial tenant protections also continue to be needed for those not benefiting from this program to relieve pressure while all stakeholders come to the table to develop immediate and long-term solutions. Some provinces, like New Brunswick and Nova Scotia, have already taken action on this front. Ontario should follow their lead and place a temporary moratorium on evictions and distress actions to protect commercial tenants until solutions are reached.
- Help with cash flow and rising debt levels. Most restaurants are small and medium-sized businesses that were already operating with razor thin profit margins before COVID-19. With little-to-no sales revenue coming in for most foodservice businesses, many have already depleted their reserve funds, or soon will. Existing measures may need to be expanded and new solutions continue to be welcomed to ensure restaurants will have enough working capital to reopen their doors. Due to the perishable nature of their inventories, many suffered unrecoverable losses when physical distancing measures began and will also need support to restock as they reopen.
- Assistance with labour costs. While the federal government’s 75 per cent wage subsidy is helping some restaurants keep staff on payroll, those that are now preparing to reopen are concerned about being able to access this support in the months ahead. Further assistance in this area from the Ontario government would be welcome, along with an extension of the Canada Emergency Wage Subsidy (CEWS) program by a few months.