Making the case for a restaurant-industry bailout
For 15 years, the Metropolitain Brasserie, an upscale French bistro with the vibe of a lively Irish pub, has been a mainstay of Ottawa’s ByWard Market. Located steps away from the Fairmont Château Laurier, where Rideau and Sussex Street meet, it has hosted every prime minister since it opened its doors in 2005—from Paul Martin, to Stephen Harper, to Justin Trudeau.
“Basically any politico has been here,” said Sarah Chown, its managing partner. When actors and performers come through town, including Sandra Oh and Jim Cuddy, they’ve also been known to come and raise a pint.
But this year, it was forced to close for three months because of the pandemic; when it was able to open in June, business was down 50 per cent compared to 2019, Chown told BNN Bloomberg. She says even with a newly-expanded patio which can accommodate up to 100 people, her events and cocktail party business is non-existent and without international tourists, she sees no way to make that up.
Her restaurant has been lucky so far with warm and inviting summer weather, but already she can see trouble on the horizon for her industry. “It’s going to be very bleak for sure. I will do whatever I can, whether that means I need to reinvest, because I’m going to be thinking with my heart. But you’ll see a lot of things close once that cold weather hits,” Chown said.
According to a recent report from Statistics Canada, more than 60 per cent of Canada’s restaurants may close their doors forever within the next three months because of the economic fallout from COVID-19. Before the pandemic, the food services sector was responsible for 1.7 million jobs, or one out of every 15 jobs in the country—and generated $30 billion a year in gross domestic product.
A campaign called “Our Restaurants” kicked off this week, representing more than 60 brands and spearheaded by the Canadian Chamber of Commerce. Members, which include Boston Pizza, Paramount Fine Foods, Firkin Pubs, and Molson Coors, are calling for a restaurant industry lifeline in the form of additional help from all levels of government.
“We have come together to raise our voice concerning the looming threat of widespread restaurant closures. This would not only have disastrous impacts on employment, but on all sectors supporting restaurant operations, including food and beverage distributors and other businesses within the supply chain, right through to Canadian farmers,” said David Lefebvre, vice-president of Restaurants Canada, in a statement.
The group’s requests include extending or improving existing programs including the Canada Emergency Wage Subsidy, Canada Emergency Commercial Rent Assistance and the Canada Emergency Business Account loans, which are winding down this year.
Chown, who is not part of the campaign but supports its goals, says the wage subsidy has been a lifeline for her business but it’s set to expire in December, at the worst possible time. “In the winter months, most of us suffer pretty substantially. People are less apt to go out and they have less disposable income after the holidays so it’s a really bad crunch period,” she said.
And although loans from the federal government are helpful, Chown and others are asking for loan relief as an alternative to piling on debt at a time when so much remains up in the air.
Paul Goddard, the CEO of Pizza Pizza, told BNN Bloomberg that this is “a wake-up call” for people who may have been lulled into thinking that everything is fine because patios seem full for the time being. Although he’s seen an increase in his delivery business, everything else is down, from walk-ins to locations in sports arenas that remain shuttered.
Goddard says he understands that the public’s appetite to open government coffers even further may not be strong, given concerns about ballooning debt and deficits, but he sees this as an investment.
“The restaurant industry puts $30 billion a year into the economy, that has a pretty good payout ratio. If it ends up exceeding that by two or three times let’s say, even then, within two, three, four years it would be [an] attractive return there.”
Glen Hodgson is an economist and senior fellow with the C.D. Howe Institute who advised the federal Finance Department decades ago. In a phone interview he said he’s sympathetic to the plight of the people in the industry because “there’s going to be a lot of pain and turmoil” but he views the case for another wave of major financial relief as a tough sell. Ottawa has said no to bailout requests from the airline industry and the Canadian Football League, which are also suffering. According to Hodgson, saying yes to food services would bring on a slew of calls from other industries with equally compelling stories.
He points to June gross domestic product data, where the strongest rebound was in the accommodation and food services sector, which are “springing back to life.” But in his view, a one-size-fits-all financial intervention doesn’t make sense given the different needs of businesses, depending on their geographic location and type of establishment.
“I don’t think there’s a compelling case for a government bailout,” Hodgson said. He would prefer a case-by-case approach through discussion with each establishment’s creditors.
Conference Board of Canada Chief Economist Pedro Antunes sees a “very difficult and drawn-out recovery” for the food services industry. In an email to BNN Bloomberg, he suggests more emphasis on the federal wage subsidy to help businesses through a “tough environment”, although he isn’t convinced that alone will be enough support when combined with a seasonal fall and winter slowdown.
Additionally, “Our Restaurants” members are asking for less red tape and breaks on fees and taxes on food and beverages. They say positive messages from politicians encouraging people to dine out, and highlighting that it is safe because of restrictions in place, would also be a welcome change.
Corinne Pohlmann, the senior vice-president of national affairs with the Canadian Federation of Independent Business, says she’s most worried about the fate of small business in the coming year. In a phone interview with BNN Bloomberg, she said that when they go under, they change the character of neighbourhoods.
“The bigger chains likely have more support behind them; even if they’re a franchisee, they still have the corporate support that can help them get through this. But the little independents, the ones that bring the interesting and unusual choices, those are the ones most at risk. Trying to find ways to adapt to this new environment has not been easy,” Pohlmann said.
She suggests that they are also most vulnerable in the event of a second wave. “Doing curbside pickup or delivery isn’t feasible for every business. It’s costly to figure out—some of those delivery services take 30 to 40 per cent of the bill,” said Pohlmann.
During the lockdown, Metropolitain Brasserie crunched the numbers for doing takeout and delivery but it didn’t work out and its ownership opted to shut down from March until June. Shutting down again would be very difficult.
Chown says she’s grateful for regulars who make a point to come by more than once a week. She says that it’s an extremely stressful time for restauranteurs, who like her, have poured themselves into their business.
“This restaurant is my life—I’m here six or seven days a week,” she said. “This is my passion because of the staff and the clientele, whom I consider family.”