A day before his restaurant’s April rent was due, the chef Tom Thai scrubbed down the abandoned kitchen at Foxley, the bistro he owns on Toronto’s Ossington Avenue, and started cooking as though his life depended on it.
Like other restaurateurs across Canada, Mr. Thai was forced to lay off his entire staff two weeks earlier and close his doors. Yet while the business stopped, his bills did not. He had utilities to cover and suppliers to settle with. He’d asked his landlord for help with the rent but hadn’t heard back. Global pandemic notwithstanding, it was due on April 1. Failure to pay would put him into default.
And so after posting the news on Instagram, he was alone in the kitchen, cooking takeout – still allowed as an essential service – while his wife, Chiho Kawami, packed the food and dealt with customers. They offered wine from their list at half off, anything to get the cash flow pumping. “For me it’s better to make something than nothing,” he said. The little bistro got a total of four customers on that first night back in business. “Hopefully it will be busy enough that I can get some of the staff back too,” Mr. Thai said.
All across Canada, chefs and restaurateurs who are terrified of losing their livelihoods are taking similar measures, selling off assets, “pivoting” to takeout and going to work in spite of the risks.
At stake as the shutdown continues is not merely individual restaurants and hospitality companies, but the future of an industry that accounts for 1.2 million jobs and four per cent of Canada’s economic output. That’s before you begin counting up the other businesses that depend on it.
“What’s the contagion effect for society as a whole?” said Andrew Oliver, the president and CEO of Oliver & Bonacini Hospitality, which runs 30 restaurants across Canada. “What happens to our real estate market if 50 to 75 per cent of restaurants fail? What happens to our suppliers who are owed billions of dollars that they’re never going to get back? What happens to our commercial loan market when our banks are forced to eat the losses of all those small business loans?
“Who do they think is going to step up and say, ‘I’ll buy all these places up,’ when the best case we’re hoping for the economy right now is a recession?”
No matter what happens in the coming months, the country’s restaurant landscape, and the way we go out to eat and drink, could be almost unrecognizable when business finally resumes. Restaurants Canada, the national industry lobby group, said that one in 10 Canadian restaurants it surveyed has already decided to close for good. With another few months of COVID-19 shutdowns, that figure, say many in the industry, will grow to 50 or even 75 per cent.
And even a reopened, post-pandemic restaurant scene will almost certainly be severely hobbled, many fear. “Are the restaurants going to fill up again?” asked Terry Tsianos, a hospitality investor and landlord with stakes in more than 50 Canadian properties. “Or are people now going to have in their minds, ‘I don’t want to sit beside you because I don’t know if you have something?'” As for crowded bars and dining rooms and communal tables, you can probably open-mouth kiss those goodbye.
Other restaurateurs, with suddenly little to do, are already imagining completely reconfigured staffing and operations. Grant van Gameren, the Toronto chef whose company Overbudget Inc. ran 10 busy restaurants and bars until last month, said that in his best-case scenario, he expects to hire back 70 per cent of his staff when the pandemic ends. He’s already got a list of all the outside services, from grease trap cleaning and garbage collection to playlist curation, that he plans to cancel when operations resume. Instead of using a labour-supply firm for his restaurant’s dishwashing crew, he’ll likely have trained chefs and servers rotate through instead – ”if they want to work,” he said. “Maybe our staff rent a U-Haul and go around to all the restaurants and take the garbage to the dump,” he added. “Right now it’s about protecting your staff’s jobs as much as possible.”
On the plus side, Mr. van Gameren added, “There’s something comforting knowing the whole world is experiencing the same thing at the same time.”
But right now, the special of the day is desperate measures. In Vancouver, the city’s pioneering high-end sushi king, Hidekazu Tojo, drove delivery orders around the city, and in Toronto the former NHL star Tomas Kaberle took up work as a delivery guy to help keep his wife’s restaurant, an Italian fine dining spot called Quanto Basta, afloat.
Specialty wine and beer bars that have spent years collecting world-class cellars sold off their inventories at steeply discounted prices. “We’re doing it as a means of survival,” said Tomas Morana, whose Birreria Volo, on Toronto’s College Street, had managed a day earlier to unload a series of rare Belgian cult beers that almost never come up for retail sale.
Restaurant suppliers, meantime, lay awake at night doing mental math and catastrophizing, not without good reason. In Kelowna, B.C., Gord Weighill, whose specialty ingredient company Mikuni Wild Harvest supplies top chefs across the continent, laid off 50 staff last month and gave away tens of thousands of dollars in perishables that would otherwise rot. He had $1.6-million in accounts receivable, he said. “Are we going to get 50 per cent of that? Are we going to get 20 per cent?” Mr. Weighill asked.
Everywhere, people in the hospitality industry have also been engaged in frantic negotiations with their landlords and their banks. Janet Zuccarini, whose Gusto 54 Restaurant Group runs seven restaurants in Toronto and Los Angeles, laid off 700 workers on March 19. One of her places, Gusto 501, an enormous new casual Italian spot in Toronto’s Corktown neighbourhood, opened just this spring at a cost of $9-million. When her business came to a halt overnight last month, she had four additional projects under construction, two in California and two in Toronto. “This pandemic caught me in the biggest growth phase of my life,” she said.
Ms. Zuccarini’s bank understood her predicament and offered two months’ pause in payments, she said. Some of her landlords, however, have been less willing to play ball. Within the industry, this has been a common refrain. The best offer most restaurateurs have received so far is rent deferments – what you can’t pay now you’ll have to pay later. “Deferment is not a solution for us,” said James Iranzad, a partner behind Vancouver’s Wildebeest, Lucky Taco, Bells and Whistles and Bufala restaurants. “I can’t just defer it and pay later because we’re not going to have the money.” Mr Van Gameren, who deals with 10 different landlords, said one of them completely waived his rent retroactive to March 15. “I almost cried when he told me.”
Mr. Thai, of Foxley bistro, finally heard from his landlord on Thursday this week. She offered a rent reduction, temporarily, on condition the chef makes up the shortfall when business returns.
Mr. Tsianos, the investor, had a different reaction from one of his landlords. “We’re not working with you, we just don’t care, we’ve got bills to pay – tough,” he said he was told. (For his own tenants, Mr. Tsianos said, he’s offered up to two years to pay their rent. “Whatever they need to catch up.”) Ms. Zuccarini said her approach has been to open her books, and to pledge to be a model, long-term tenant on the pandemic’s other side. Her fallback? “Take my keys,” she said. “Good luck finding another restaurateur to fill that space. Who’s coming in? Who’s your tenant going to be? We are all on our knees,” she said.
Mr. Oliver, of Oliver & Bonacini, has shifted his job title in the last two weeks from head of a 1,900-worker restaurant company (they’ve all been laid off) to government lobbyist. As a founder of SaveHospitalityCA, an advocacy group he and others in the industry quickly set up when their restaurants were shuttered, he’s been spending most of his time pressing federal and provincial leaders for help. So far, many in the industry say, such requests for aid have not gone well.
Restaurants don’t run like other small businesses. Thanks to the nature of what they do, they typically have far higher real-estate and labour costs than other businesses, and their margins average just north of four per cent. (The higher real estate costs are a result of many restaurants’ need for prime locations to draw foot traffic. And it typically takes 15 restaurant workers to generate $1 million in revenue, while it takes far fewer in most other retail sectors.) And downturns hit them almost instantly. “This is a 100 per cent cash-flow business,” said James Iranzad. “It depends on the revenue of people constantly coming through the doors.”
The relief programs coming out of Ottawa so far don’t account for those realities, many of the industry leaders said. The federal government’s $40,000 small-business loan program, said Mr. Oliver, assumes that restaurants will be able to carry that extra debt if and when business returns to normal. And the federal government’s 75 per cent emergency wage subsidy, others said, doesn’t help when revenues are effectively zero and employees have been laid off for weeks.
In the short term, Mr. Oliver’s group, as well as Restaurants Canada and others, are pushing for Ottawa and the provinces to rush out a solution to the rent crunch. Their proposals range from short-term bans on commercial evictions to full rent forgiveness, with corresponding programs to help landlords and lenders weather the loss.
Absent that sort of help, the prognosis looks grim, they said. “This isn’t an industry that can just be allowed to collapse,” said Mr. Iranzad. “There’s too many people involved.”
However – and whenever – restaurant dining comes back, it won’t come back the same. “I don’t know how diners are going to want to eat when we’re allowed out again,” said the chef Connie DeSousa, a co-owner in four Calgary restaurants, including the celebrated Charcut Roast House. “Every single one of our places has an open kitchen and we love that theatrical environment. But depending on how long we’re kept isolated for, people’s mindsets are going to change about wanting to be around people and the way their food is handled,” she said.
In Montreal’s Mile End neighbourhood, Vanya Filipovic, who co-owns the wine bar Vin Mon Lapin, said she plans to end the room’s no-reservations policy so customers don’t jam into the place while they wait for tables. She plans to take out some of the tables, too – ”just to give people that extra security.” Reducing capacity, of course, comes at a cost.
Mr. Van Gameren, in Toronto, worried that less controllable factors might limit restaurants’ capacity by default. One of his restaurants, with 175 seats, is “in a district fuelled by tourism, travel, sports, theatre, ballet and entertainment, which are all pretty much squashed for the remainder of the year,” he said.
Those diminished prospects will absolutely come up in discussions with his landlords, Mr. van Gameren added, wondering why he should “take on yesterday’s rent in tomorrow’s market, which is probably 50 per cent less.”
Other restaurateurs said deeper, more structural changes will be necessary. Ms. Zuccarini said the pandemic has exposed the fragility of how the entire business – a business that lives and dies, after all, on personal contact – works.
If rents collapse and storefronts sit empty, it could bring new opportunities for young, innovative restaurateurs and bar owners with access to cash. It could also mean that mega-chain restaurants with pension fund and stock market financing could push out many independents for good.
Others in the industry hoped the return to some sort of normal after COVID-19 would bring positives, too. Shelley McArthur Everett, who runs the Vancouver hospitality PR firm SMC Communications, said it will bring a change in attitude. “I think people will appreciate restaurants a lot more,” she said.
Your time is valuable. Have the Top Business Headlines newsletter conveniently delivered to your inbox in the morning or evening. Sign up today.