Many small independent operators are at the breaking point, says Restaurants Canada
A national restaurant industry trade association is calling on the federal government to modify its Canada Emergency Business Account (CEBA) repayment plan in view of the desperate situation restaurant operators across Canada are now facing.
With only a few weeks until the House of Commons rises for the summer on Jun. 23, and the repayment deadline set for Dec. 31, Restaurants Canada says time is of the essence to address the acute CEBA loan repayment challenges facing restaurants and other small businesses.
Fourth largest employer
Canada’s foodservice sector is a $100 billion industry that serves 22 million customers across the country every day.
As the fourth-largest private-sector employer, Canadian foodservice directly employs 1.2 million people and indirectly supports more than 290,000 jobs in related industries, with $32 billion in food and beverage products purchased every year.
However, according to Restaurants Canada, bankruptcy filings in the foodservice sector have increased 116 per cent since 2022. RC is expecting more restaurants to close their doors if the federal government fails to take action.
RC’s CEBA recommendations ask parliament to provide struggling small businesses with a 36-month payback extension on CEBA loans, with a scaled-down model on the forgivable portion. The effective plan will ensure that taxpayer funds are paid back to the government, while saving thousands of restaurants and other small businesses from being forced to declare bankruptcy in the near future.
“Thousands of small independent operators in our industry are at breaking point as a result of their CEBA debts,” said Olivier Bourbeau, vice president at Restaurants Canada for federal and Quebec Affairs. “That’s why we are calling on the deputy prime minister, Chrystia Freeland, to take meaningful action by adopting our CEBA repayment proposal to help ensure their survival.”
High season looms
“We are nearing our sector’s summer high season,” he added. “However, with half of all foodservice companies currently operating at a loss or just breaking even, and 80 per cent making less profit today compared to pre-pandemic (2019), many of our members are weighing their options to either remain open and continue incurring further debt, or close their businesses and file for bankruptcy. A decision on CEBA before the summer season is integral to providing small-businesses with predictability.”
For the majority in Canada’s foodservice sector, according to Restaurants Canada, the pandemic created seismic financial challenges which they are still struggling to recover from. In response, the federal government launched the CEBA program, which gave small businesses, including 83 per cent of table service and 56 per cent of quick-service restaurants, and not-for-profits interest-free loans of up to $60,000.
Not positioned to repay
But as the repayment deadline approaches, a Restaurants Canada survey has revealed that nearly 20 per cent of the restaurants that have yet to reimburse CEBA will not be able to repay it in part or at all given the current state of Canadian foodservices. Restaurants Canada says the finds are unsurprising given that:
- Canada’s foodservice industry has hit the $100 billion, yet when adjusted for inflation, in comparison to all other Canadian business sectors, restaurants have experienced a 12 per cent drop in economic activity (GDP) from 2019 to 2022; second last to the arts, entertainment and recreation industry which is down by 19 per cent.
- As well, nearly every operational cost is on the rise due to inflation; utilities have increased by 6 per cent, proteins (beef) have increased by 9 per cent, 11 per cent (seafood), 13 per cent (chicken), and cooking oil (up 40 per cent). There are also rising labour costs, and restaurateurs have been forced to absorb as much as they can to avoid impacting consumer traffic.
Impossible deadline “For many restaurateurs, the December 31 repayment deadline is simply impossible to meet – which reflects the state of our industry as a whole,” said Bourbeau. “Post-pandemic operational challenges like inflation, labour shortages and supply chain hurdles are further diminishing the profitability of these businesses and lengthening the sector’s recovery process entirely.”