Up to 2,000 restaurants across the province are at risk of closing next spring unless a “miracle” comes their way, according to the BC Restaurant and Foodservices Association.
As 2023 comes to a close, CEO Ian Tostenson said the sector has reached “the lowest point” he’s ever seen, weighed down by debt accrued before and after the pandemic, in addition to higher costs of food, rent, labour, and more.
“We’ve got CEBA loans — the federal loans — coming due in about a month’s time. Most restaurants haven’t been able to accumulate the $40,000 you need to pay it,” he told Global News.
“Especially you look at the Okanagan Valley, all those restaurants in August didn’t make any money because the forest fires and so on and so forth.”
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In October, Restaurants Canada released a report revealing half of food service companies are operating at a loss or just breaking even. While sales improved in the wake of the pandemic, profits declined “due to soaring operating costs” and low foot traffic that never recovered from pre-pandemic levels, it found.
As it stands, only 12 per cent of restaurant operators have double-digit profit margins. As of March, 34 per cent of restaurant companies were operating at a loss with 17 per cent breaking even, Restaurants Canada found.
“I think a lot of people are saying enough is enough. Most of these the small businesses, they’re working six-and-a-half days a week just to keep their places open,” Tostenson said.
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“We’re just carrying over so much of the baggage from the pandemic where the industry had to borrow money to stay alive … then it borrowed more money, and then we came out of it quite well, but then it was inflation that got everybody.”
At the end of the day, he said it means many restaurants are selling a $20 hamburger plate it costs them $30 to make, taking the loss just to keep customers in the dining room.
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Tammy Siu, owner of North Vancouver’s Catch 122 bistro, knows that struggle well. The restaurant moved from Gastown to North Vancouver earlier this year, noting that “COVID hasn’t been kind to that neighbourhood.”
Her costs went up in 2023 and that’s meant more “personal sacrifice” for her team.
“In Vancouver there’s so many restaurants, so people kind of expect the price to be comparable to each other,” she explained.
“To increase price — you can do a little bit but you can’t do much without losing your clients. You have to be creative. We don’t want to sacrifice the quality of our product. You have to do different things to lower your cost.”
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Not too far from Catch 122, North Vancouver’s De Dutch is closing after more than three decades in the business. Its last day of operation will be Dec. 24.
According to Restaurants Canada, bankruptcy filings in the food service industry have increased 116 per cent since 2022.
Ottawa’s deadline for repaying the CEBA loan — Canada Emergency Business Account — interest-free with a portion of loan forgiveness is coming up on Jan. 18. In B.C., nearly 123,000 businesses accessed those loans worth over $6.6 billion.
“By the time that people realize they can’t pay their CEBA loans and they can’t get financing from the banks because they’ve probably already maxed out all their credit lines, I think you’ll see most of the damage happening in early 2024,” said Tostenson.
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The Canadian Federation of Independent Business has called on the federal government to provide struggling small businesses with a three-year extension on CEBA repayments with a “scale-down model” on the forgivable portion.
Ottawa has extended the repayment deadline twice — first from Dec. 31, 2022, to Dec. 31, 2023, and then from the end of this year to Jan. 18, 2024.
According to the federal government, $20,000 will be forgiven and no interest will be charged on a loan of $60,000 as long as $40,000 is repaid by Jan. 18. Similarly, $10,000 will be forgiven on a $40,000-loan if $30,000 is repaid by the deadline. Other forgiveness scenarios are outlined on its website.
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