Newfoundland and Labrador’s restaurants need more working capital to successfully reopen

ST. JOHN’S, May 07, 2020 (GLOBE NEWSWIRE) -- A new survey from Restaurants Canada has revealed that most foodservice businesses in Newfoundland and Labrador 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.

Survey reveals most restaurants will struggle to resume dine-in operations

About seven out of 10 survey 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:

• 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.
• 14 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.

Restaurants Canada is calling for solutions to support reopening

“The resiliency of our industry won’t be enough to ensure Newfoundland and Labrador’s 1,100 restaurants remain viable in the face of insufficient cash flow and insurmountable debt,” said Luc Erjavec, Restaurants Canada Vice President, Atlantic 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.”

Before the start of the COVID-19 pandemic, Newfoundland and Labrador’s $1.1 billion foodservice industry represented 3.3 per cent of the province’s GDP and was the province’s third-largest private sector employer. If conditions do not improve, the province’s foodservice sales could be down by as much as $195 million for the second quarter of 2020 and the industry might not be able to recover the more than 10,000 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 CECRA 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. Some provinces, like New Brunswick and Nova Scotia, have already taken action on this front. Newfoundland and Labrador should follow their lead and place a temporary moratorium on evictions and distress actions to protect commercial tenants until solutions are reached.
• 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 Government of Newfoundland and Labrador would be welcome, along with an extension of the Canada Emergency Wage Subsidy (CEWS) program by a few months.

About the Restaurants Canada survey

Conclusions cited above are based on responses to a Restaurants Canada survey conducted between May 1 and May 5, 2020. Restaurants Canada received a total of 890 completed surveys from foodservice operators across Canada, representing 11,965 locations (as many respondents belong to multi-unit businesses). Canada’s commercial foodservice industry is made up of 97,500 establishments, including full-service restaurants, quick-service restaurants, caterers and drinking places.

About Restaurants Canada

Restaurants Canada is a national, not-for-profit association advancing the potential of Canada’s diverse and dynamic foodservice industry through member programs, research, advocacy, resources and events. Before the start of the COVID-19 pandemic, Newfoundland and Labrador’s foodservice sector was a $1.1 billion industry, directly employing nearly 17,000 people, providing the province’s number one source of first jobs and serving tens of thousands of customers every day. Newfoundland and Labrador’s foodservice industry has since lost more than 10,000 jobs and is on track to lose as much as $195 million in sales over the second quarter of 2020 due to the impacts of COVID-19.

Luc Erjavec
Restaurants Canada
902-209-0804
[email protected]

Marlee Wasser
Restaurants Canada
416-649-4254
[email protected]