'Post-pandemic hangover' forcing many restaurants to file for bankruptcy, association says
Restaurants facing 'triple whammy' of inflation, labour shortages, COVID-related debt: Restaurants Canada
Restaurants across Canada are "in crisis" and still fighting for survival, says the not-for-profit association that represents 30,000 of the businesses countrywide.
Restaurants Canada says its members are facing a "triple whammy" of challenges: inflationary costs, labour shortages and COVID-19 loan repayments.
"We're in this post-pandemic hangover phase," said Mark von Schellwitz, vice-president of the group's Western Canada division. "It's been really difficult to get back to normal."
Bankruptcy filings in food services have spiked 116 per cent since 2022, according to Restaurants Canada. It says about half of restaurants are unprofitable right now, compared to only 12 per cent before the pandemic.
The organization says 25 per cent of members worry they won't be able to survive another year. It's lobbying the federal government to extend the repayment deadline for the Canada Emergency Business Account (CEBA) to give struggling businesses some reprieve.
In B.C., the struggling restaurant sector has spent the last few weeks pressuring the provincial government for support. The group has been quietly meeting with the labour and jobs ministers, resulting in a list of 10 recommendations to the province.
CBC News has learned the government is currently working on additional supports — not only for the restaurant sector, but for small businesses as well.
"We do know that a number of small businesses are feeling the impact," said B.C. Jobs Minister Brenda Bailey, referring to the inflation and labour shortages, along with COVID-related debt.
Bailey said the government will announce shortly measures to assist restaurants and small businesses.
Changing business model to survive
Before the pandemic, The Birds & The Beets cafe in downtown Vancouver was a lunch hot-spot relying on daytime office workers.
Co-owner Matthew Senecal-Junkeer says the business was able to pay all of its bills and fixed costs with the busy lunchtime business.
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But that's no longer the case. Many workers haven't returned to the office, which has forced the cafe to also turn into a wine bar five nights a week.
"That's really been essential for our survival," Senecal-Junkeer said. "Restrictions are lifted, life is back to normal, but people's patterns are just different post-pandemic."
High food costs
According to Restaurants Canada, restaurants have also had to increase menu prices to keep up with inflationary costs, but not hike them too much to avoid pushing away customers who are also feeling the pinch.
Canada's inflation rate reversed its cooling trend last month and moved higher, to a 4.4 per cent annual rate.
While overall costs have come down from recent record highs, food prices are still staying at eye-watering levels. Grocery prices have increased by 9.1 per cent in April.
"The impact of higher interest rates and slower consumer spending is impacting restaurants the most and that's why our members are predicting that next year is going to be an even worse profitability year than this year," von Schellwitz said.
Calls to extend CEBA repayment deadline
Restaurants Canada is calling on the federal government to extend the CEBA repayment deadline. The program offered interest-free loans of up to $60,000 to small businesses and not-for-profits. The deadline to pay back loans is Dec. 31, 2023.
Repaying the loan before deadline will result in loan forgiveness of up to 33 per cent (up to $20,000).
Businesses that do not repay the loan by Dec. 31 will have to start paying interest and will lose the forgivable portion.
"I think that's when we'll see a lot of spaces turning over, a lot of bankruptcies and all the pain and suffering that come with that," said Senecal-Junkeer, who owes $40,000 in loans.
Restaurants Canada estimates 20 per cent of its members won't be able to pay back the loans by deadline.
It's proposing a 36-month repayment schedule, where every six months, businesses lose five per cent of the forgivable portion.
The organization is asking the government to respond by the end of this month. The House of Commons rises for the summer on June 23.
In an emailed response to CBC News, Adrienne Vaupshas, press secretary to the Minister of Finance, noted the repayment deadline was already extended once.
"To further support small businesses, in Budget 2023 we announced that we have secured commitments from Visa and Mastercard to lower credit card transaction fees for small businesses, while also protecting reward points for Canadian consumers," Vaupshas wrote in a statement.