Nova Scotia’s restaurants need more working capital to successfully reopen

HALIFAX, May 07, 2020 (GLOBE NEWSWIRE) -- A new survey from Restaurants Canada has revealed that most foodservice businesses in Nova Scotia 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 Nova Scotia’s 2,200 restaurants remain viable in the face of insufficient cash flow and insurmountable debt,” said Luc Erjavec, Restaurants Canada Vice President, Atlantic Canada. “The Government of Nova Scotia has made commendable efforts to help restaurants survive to this point with the Small Business Impact Grant and other emergency measures. But as these mostly small and medium-sized businesses begin to gradually reopen their dining rooms, there will be a need for continued support.”

Before the start of the COVID-19 pandemic, Nova Scotia’s $2.1 billion foodservice industry represented 4.6 per cent of the province’s GDP and was the province’s second-largest private sector employer. If conditions do not improve, the province’s foodservice sales could be down by as much as $395 million for the second quarter of 2020 and the industry might not be able to recover the roughly 24,500 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. Ongoing protections will also continue to be needed for commercial tenants not benefiting from this program to relieve pressure while all stakeholders come to the table to develop immediate and long-term solutions.
• 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 Nova Scotia government 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, Nova Scotia’s foodservice sector was a $2.1 billion industry, directly employing nearly 39,000 people, providing the province’s number one source of first jobs and serving tens of thousands of customers every day. Nova Scotia’s foodservice industry has since lost about 24,500 jobs and is on track to lose as much as $395 million in sales over the second quarter of 2020 due to the impacts of COVID-19.

Luc Erjavec
Restaurants Canada
902-209-0804
lerjavec@restaurantscanada.org

Marlee Wasser
Restaurants Canada
416-649-4254
media@restaurantscanada.org