Mohamad Fakih lived through civil war in Lebanon, and came to Canada with $1,200 in his pocket. But the worst experience of his life, he says, was the first few days after restaurants were forced to close to limit the spread of COVID-19.
The founder and CEO of Paramount Fine Foods spent that time calling “around 65 landlords," pleading with them to cut his franchisees some slack. Amid the financial stress, there was the existential angst he shared with everyone else in the restaurant sector: Had their life’s work abruptly been extinguished?
Mr. Fakih is breathing a little easier now. With rent deferrals, some ramp-up of takeout and delivery service and government assistance being rolled out, his Middle Eastern food empire is still standing.
But even as Canada starts to enter a reopening phase, Mr. Fakih is warning that the threat of catastrophic failure across his industry is only going to mount, during a “dangerous transition period” in which restaurants will likely face restrictions such as reduced capacity limits, and nervous customers probably won’t flock back.
To avoid mass closings, he says, governments will need to continue financial assistance, more tailored to different segments of the restaurant world. And restaurant owners will need to seize the opportunity to correct aspects of their business model – out-of-control overhead costs, outsourcing of delivery services – that may have been unsustainable even before the pandemic hit.
Mr. Fakih is uniquely positioned to speak to the industry’s state. Paramount, which he built from a single Mississauga shop into a brand with 74 restaurants, is one of its big recent success stories. He prides himself on being unusually hands-on with the franchises that make up the bulk of those locations. And he has increasingly emerged as a civic leader, with philanthropic efforts ranging from helping cover funeral costs for victims of the Iran plane crash to spearheading a major food-bank drive during COVID-19, moving in high-level (especially Liberal) political circles.
His characteristic positivity has not abandoned him, even with some of his restaurants completely shuttered and others doing only about 10 per cent of normal sales. He thinks that by leveraging relationships and taking unusual measures such as waiving royalties, he might be able to see all of Paramount’s locations through. And he praises the federal government for doing an “amazing” job of quickly responding to the industry’s needs with the aid it has offered.
But he repeatedly returns to darker themes – crushing debt burdens, unmanageable anxiety levels. He’s been in touch with owners of smaller establishments whom he mentors. “Psychologically, they’re not doing good at all. Some of them are crying on calls … There are dreams that will be shattered.”
He also seems worried that government aid to date will be mistaken as sufficient. Government-backed loans to small businesses of up to $40,000 were mostly used to pay bills that accumulated over the winter as business slowed before the lockdown. Meanwhile, Ottawa’s commitment to pair with landlords to cover 75 per cent of some struggling small businesses’ rent still leaves restaurants with 25 per cent that he thinks many can’t afford, while drowning in other fixed costs.
What many restaurateurs don’t know, Mr. Fakih suggests, is how much more to invest in getting through the next couple of months, amid so much uncertainty about thereafter. His best guess is that for about six months after lockdowns end, many restaurants will only see a marginal increase in revenues over today.
To avoid owners pre-emptively shutting for good now rather than risking doing so with more debt later, Mr. Fakih says, the government should already be signalling that it will be there to help through the next phase as well. With each new short-term program announcement, he says, the message should be: “This is a temporary measure, but we’ll get your three months after that … please understand we’re dealing with it as it comes.”
As for what shape future help should take, he suggests further rent relief, a waiving of the $40,000 loans – and funding that breaks the industry up into four categories, based on their ability to get by mostly on takeout and delivery.
At one end, needing relatively little assistance, would be “quick serve restaurants” (fast food). Next would be “fast casual,” which Paramount fits into, and “full serve,” including fine-dining. Needing the most help would be bars and nightclubs, possibly not able to do any business while some physical distancing rules remain.
For those receiving the most aid, the idea wouldn’t necessarily be to prop them up until things returned to normal, but give them a chance to adapt. That could mean a bar shifting more focus to food service. And it could mean sector-wide corrections, too.
Like many other restaurateurs, Mr. Fakih points to delivery models as one necessary adjustment. When it was only a marginal component of their business, many restaurants outsourced it to third-party services, such as Uber Eats. If it’s a main revenue source, the commissions those companies charge – up to 30 per cent of each order – can be crippling.
Mr. Fakih would like to see governments cap commissions and has been trying to rally others in the industry to make that push. Otherwise, he sees the need for restaurants to start doing more delivery themselves. He is starting to talk with digital specialists, he says, to “brainstorm” a new delivery app. Among the challenges is that consumers have been conditioned to consider third-party apps their one-stop shop. So he has some thought of teaming up with other restaurateurs, to give any new platform the critical mass to compete.
Another way business models may have to change, he says, is downsizing physical space. In a city like Toronto, high rents were already contributing to a growing failure rate before the pandemic. So Mr. Fakih also thinks some restaurants would be wise to accompany the shift to more takeout and delivery with moves to smaller storefronts.
Such a shift could be facilitated, he says, by tenant-friendly government measures such as sheltering from penalties for ending leases. But he clearly thinks that for many restaurants to survive, it will require converting those existential questions they’re facing into willingness to operate differently from how they did before.
Amid the current darkness, he says, he draws inspiration from recalling what happened after the civil war in Lebanon, when his father emerged from a bunker and immediately joined others in physically rebuilding the country.
If his current world may never be the same after this pandemic as it was before, he’s trying to be positive in imagining what it could look like instead. “I’m always hopeful,” Mr. Fakih says.
The Globe and Mail
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