Ontario’s restaurants need more working capital to successfully reopen: survey
A new survey from Restaurants Canada has revealed that most foodservice businesses in Ontario might not have enough cash flow to successfully reopen their doors to diners. As the province moves forward with lifting emergency measures, restaurants will need more support remaining viable until they are on a path to full recovery.
According to the survey, about seven out of 10 respondents said they are either very or extremely worried that their business won’t have enough liquidity to pay vendors, rent and other expenses over the next three months.
While the Canada Emergency Commercial Rent Assistance (CECRA) program might provide some restaurants with relief, rent obligations continue to be a challenge for many.
The survey reveals that at least one out of five independent restaurant operators are dealing with a landlord who is not willing to provide rent relief, either through the CECRA program or some other arrangement. Fourteen 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,” said James Rilett, Restaurants Canada Vice President, Central Canada. “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.”
Restaurants Canada states that Ontario’s $37 billion foodservice industry represented 4 per cent of the province’s GDP and was the province’s fourth-largest private sector employer before the start of the COVID-19 pandemic.
If conditions do not improve, the province’s foodservice sales could be down by as much as $7 billion for the second quarter of 2020 and the industry might not be able to recover the more than 300,000 jobs it’s lost due to COVID-19.
Restaurants Canada is urging further action in the following areas where foodservice businesses continue to need support to have a fighting chance at survival:
- 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.
- 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.