How Chef Mark McEwan navigated the ‘public undressing’ of restructuring his business

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After years of running restaurants and building businesses, including events and gourmet grocery stores, Mark McEwan was feeling confident.

It was 2019, and while Toronto-based McEwan Enterprises Inc. had been losing money in recent years as its operations expanded, Mr. McEwan believed things were headed in the right direction. His business had grown to include six restaurants as well as catering services, and drew revenue from media projects such as his role as head judge on the Food Network show Top Chef Canada. The company also ran two gourmet grocery locations – and Mr. McEwan had big plans for a third, opening at one of Toronto’s busiest intersections.

“I was a bit too confident,” Mr. McEwan said in an interview, reflecting on arguably the most difficult period of his career.

The McEwan Fine Foods market, in the subterranean level of a condominium at Yonge and Bloor streets, never turned a profit. (That project “was the biggest mistake I ever made,” Mr. McEwan said.) His restaurant Fabbrica, in the Don Mills shopping complex northeast of downtown, had been underperforming. And then the COVID-19 pandemic hit, decimating the industry and placing further strain on the company’s finances – particularly as mandatory lockdowns dragged on in Toronto. Last September, McEwan Enterprises sought creditor protection, citing $10.25-million in liabilities.

The company – which is owned by Mr. McEwan and a subsidiary of Fairfax Financial Holdings Ltd. – has now completed its restructuring, having reached a settlement with the Yonge and Bloor landlord that pushed back against its initial plan. That location is now closed, as is the Don Mills restaurant. In a separate move, last week, Mr. McEwan announced that he would be leaving ONE Restaurant after 15 years. He has sold his 50-per-cent stake to the new owners of the Hazelton Hotel, where the restaurant is located, in Toronto’s high-end Yorkville neighbourhood.

“2022 will be a year of sensible consolidation, and really mapping out where we want to go for the future,” Mr. McEwan said.

The entire sector is facing a challenging future. Industry group Restaurants Canada estimates that nearly 13,000 restaurants have already permanently shut down since the pandemic began.

For those that are still in business, the pressure is rising. Food-cost inflation means that restaurants are paying more for ingredients such as meat and cooking oil, and have also seen higher labour costs as workers push back against low wages.

The pressures affect businesses big and small, from high-end restaurants to fast-food chains. Earlier this month, Starbucks Corp. lowered its profit estimates for this year and said that it would hike menu prices to cope with rising costs.

Restaurants Canada expects commercial food-service sales to reach $73.2-billion this year, a 12.4-per-cent increase compared to last year, but still 5 per cent below prepandemic sales levels. That forecast was recently downgraded to account for the impact of the Omicron wave, and the renewed restrictions on dining that resulted in some parts of Canada.

Mr. McEwan has vented his frustrations about the impact of public-health policies on his industry, taking to social media throughout the pandemic to criticize government mandates such as limits on indoor dining.

Many restaurant owners were forced to cope by offering online ordering for takeout or delivery; others used their spaces to establish ersatz grocery markets and bottle shops. McEwan Enterprises had already launched grocery retail operations, which were a bulwark during the crisis – even though the e-commerce side of the business was “in its infancy” before COVID-19 hit, Mr. McEwan said.

At the height of the pandemic, McEwan Fine Foods was filling 50 to 60 grocery orders in Toronto each day. That has levelled off to closer to 40, but Mr. McEwan said he is hoping to continue building that business and has been making improvements to the ordering system. He also wants to expand online delivery services from the Fabbrica restaurant in Toronto’s financial district. And he is hopeful that demand for corporate catering will rebound as many remote workers return to their offices.

“We’ve moved people around [the company] and tried to keep the foundation of the employee base together,” he said. During the lockdowns, the company benefited from government support to keep paying workers, receiving $3.3-million under the Canada Emergency Wage Subsidy as of last September, according to court documents. “Your employees are your company; you can’t just shut down, lay everybody off and then think everyone is going to come back when you reopen the doors.”

McEwan Enterprises had 213 full-time and 55 part-time employees when it entered creditor protection. Mr. McEwan estimates the company has retained roughly 80 per cent of its staff since the restructuring began.

The competition for talent has intensified in the restaurant sector as workers in many industries have re-evaluated the work they want to do – and in some cases demanded better compensation. Average weekly earnings in the accommodation and food-services sector rose by 5.1 per cent in November, the most recent month for which data is available, according to Statistics Canada. In Ontario, where Mr. McEwan’s businesses operate, the provincial government recently raised the minimum wage.

“I thought the timing of that was incredibly bad,” Mr. McEwan said, referring to the continuing pressures of the pandemic, worsened by renewed restrictions during the Omicron wave.

“Nobody makes [minimum] wage in my company unless you’re a server or bartender, and then you’re probably making $350 in tips a day. ... [But] as soon as a server and a bartender makes $3 more an hour, everybody in the company wants to make $3 more,” he said.

A labour shortage has given workers leverage to demand not just better wages, but different working conditions – a concern among some in the restaurant sector who have become more vocal on the subject.

Mr. McEwan said the rise of food television, in which he has taken part, has made the industry appear glamorous, attracting workers who may not have considered the career in the past. He believes not everyone is prepared for the high-pressure nature of service in a busy restaurant that can seat 450 people in a night – something he compares to a military operation. But societal concerns over workplace treatment go beyond stress or brusque tones in a busy kitchen, as complaints have arisen about abusive behaviour in some restaurants.

“I’ve always had a zero-tolerance policy there,” Mr. McEwan said. “I’ve had very, very few conversations like that over the years. They usually lead to an immediate firing if somebody is out of line, or makes foolish comments, or just forgets why they’re there.”

As restaurants begin to pick up the pieces of the past two years, Mr. McEwan believes there are structural issues that have not yet been addressed.

“I think there’s going to be a reckoning in the restaurant business,” he said. “I think too many restaurants were built. There was this frenzy of activity. … Too much capacity. And I do believe that there’s going to be some change [this year] to that.”

Restaurants that have managed to ride out two years of the pandemic are still feeling the pain: In an October survey of restaurant owners, 45 per cent reported they were losing money, while 22 per cent were breaking even and just 33 per cent were turning a profit, according to Restaurants Canada. By January, with dining restrictions reinstated in some parts of the country, the percentage that said they were losing money grew to 68 per cent.

Food prices rose by 5.2 per cent in December according to Statistics Canada. Conditions are expected to worsen: Food prices could rise by as much as 7 per cent this year, according to Canada’s Food Price Report, which was released last month by researchers from Dalhousie University, the University of Guelph, the University of Saskatchewan and the University of British Columbia.

For his part, Mr. McEwan said the restructuring process has put his business on more solid footing.

“It was a difficult decision, because you sort of publicly undress yourself a little bit,” he said of filing for creditor protection. “In the middle of it, I questioned it a couple of times, thinking, ‘Why did I subject myself to this?’ But it was the correct thing to do.”

As to whether he would attempt to open new restaurants or grocery locations in the future, Mr. McEwan said that for the time being he is letting the dust settle, and keeping an eye on the health of the Canadian economy.

“Definitely, we have designs to grow. There’s no question about it. But we want to be very careful about that, and I won’t be quite as ambitious, maybe, as I have been,” he said. “I’m going to be smarter about it. That’s for sure.”

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