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Chef Mark McEwan in the Diwan restaurant at the Aga Khan Museum in 2015.

Fred Lum/The Globe and Mail

Celebrity chef Mark McEwan’s restaurant, gourmet grocery and events business has obtained protection from creditors, warning that unless it is permitted to streamline its operations, it could run out of cash within weeks.

Toronto-based McEwan Enterprises Inc. was struggling even before the COVID-19 pandemic resulted in temporary closings and reduced traffic at its locations. The company has not been profitable since 2017, according to court documents. Like many in the hospitality industry, Mr. McEwan’s catering business and high-end restaurants – including Bymark, Fabbrica, One Restaurant and Diwan – have been hit hard by pandemic restrictions. In addition to its six restaurants, McEwan Enterprises also runs two food halls and a gourmet grocery shop, partners with meal-kit service Goodfood Market Corp., and generates revenue from Mr. McEwan’s television and media projects, such as the Food Network show Top Chef Canada.

The company is seeking court approval to transfer the business to a new company held by the same owners, excluding its leases for the Fabbrica Don Mills restaurant and the McEwan Yonge & Bloor food hall, which means these two locations would close. A subsidiary of Fairfax Financial Holdings Ltd. owns 55 per cent of the company, with the remainder owned by Mr. McEwan’s holding company McEwan Holdco Inc.

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McEwan Enterprises had $10.25-million in liabilities as of Aug. 31, including $2.3-million owed to its suppliers, another $2.3-million loan from Fairfax, $2.2-million owed to Royal Bank of Canada, $539,000 in overdue or deferred rent to landlords, and $488,000 in outstanding customer gift cards.

As a result of pandemic-related public-health orders, the McEwan restaurants – all but one of which are in Toronto – have been closed for a total of 10 out of the past 18 months, and traffic has been significantly reduced at its food halls and grocery location, court documents say. (Restaurants in Toronto have been permitted to open for outdoor dining since June 11, and indoor dining resumed with limited capacity on July 16.)

But the most significant strain on the company’s finances has been the food hall at Yonge and Bloor streets in downtown Toronto, which opened in 2019. “With the benefit of hindsight, the company would not have entered into operations at this location based on the existing lease terms,” Mr. McEwan said in an affidavit filed on Sept. 27. The Fabbrica restaurant location and McEwan grocery at Don Mills were also underperforming before the pandemic, the affidavit stated.

McEwan Enterprises lost $1.3-million in 2019 and $2.8-million in 2020. In the first six months of this year, it lost another $2.2-million.

The company has attempted to renegotiate some of its leases and to leave some locations, but it has been unable to reach agreements with landlords, Mr. McEwan’s affidavit stated. McEwan Enterprises now faces a “liquidity crisis,” the affidavit said. The company employs 213 full-time and 55 part-time staff, all of whom it plans to keep on after the transaction.

To cut costs during lockdowns, the company temporarily laid off 200 employees at its locations, 173 of whom have so far been rehired. Its management also negotiated rent deferrals and abatements, deferred equipment lease obligations, and received government support, including about $300,000 under the Canada Emergency Rent Subsidy, $3.3-million under the Canada Emergency Wage Subsidy, a $60,000 loan under the Canada Emergency Business Account, and a $250,000 loan under Business Development Canada’s program for sectors affected by the pandemic.

In a court filing, the monitor overseeing the creditor-protection process said if the company’s situation does not change, it expects to run out of cash by the last week of October.

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McEwan Enterprises was granted protection under the Companies’ Creditors Arrangement Act on Sept. 28 while it seeks approval for its proposal.

The company has not explored a sale of the business to a third-party, the court documents say. In his affidavit, Mr. McEwan stated his continuing involvement as chef and operator is integral to the survival of the business, and that he would likely not remain involved under another owner.

“Many of the McEwan locations have been historically successful and profitable; however … certain locations have been underperforming for a number of years, causing an overall significant strain on the company’s profitability and liquidity,” Mr. McEwan’s affidavit stated.

In an e-mail, Mr. McEwan said it would be improper to comment further at this time. A representative for Fairfax did not respond to a request for comment.

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