One out of every two independent restaurants across Canada does not expect to survive if the situation doesn’t improve over the next few months.
It means our dining options could look very different once COVID-19 restrictions loosen.
The problem facing the industry is both fees from food ordering apps like Skip the Dishes and Uber Eats that are eating away at whatever crumbs local restaurants are able to survive on right now. And then there’s the more pressing issue for most independent restaurateurs…insurmountable debt from rent.
Ontario Premier Doug Ford was asked whether restaurants should get a bail out to help them survive? Ford called the rent abatement program “a bailout in itself.” However the premier did say he’ll raise the idea with Prime Minister Trudeau. But he also added that the province has “fiscal restraints.”
The province announced retail stores would be allowed to reopen on Monday. Premier Ford was asked when restaurants will get the green-light? “We’re going to be there to support you, I know a lot of restaurants are hanging on by their fingernails.” Ford hinted that an announcement for more help is coming soon.
The Minister of Economic Development says restaurants should start preparing for re-opening. Vic Fedeli says restaurants should do this by understanding what the businesses needs to do to protect staff and customers.
“Rent relief depends on landlords choosing to participate“
While those forthcoming changes for restaurants and that meeting between Ford and Prime Minister has yet to happen, help can’t come soon enough for Canadian restaurants. Three out of four restaurants say they are very concerned about their level of debt, and rent is a main source of that. That data comes from the latest Restaurants Canada survey.
James Rilett is the Vice-President of Restaurants Canada (formerly CRFA), an advocacy group who describe themselves as ‘the voice of foodservice’ in Canada.
Rilett says unfortunately the rent assistance program that the federal and provincial governments have brought to the table depends on landlords choosing to participate. “We are currently working with municipal, provincial and federal governments on rent relief gaps and access to working capital and labour,” added Rilett.
Rent relief is provided to eligible landlords who choose to apply for the Canada Emergency Commercial Rent Assistance (CECRA) program. The CECRA requires landlords to reduce rent by at least 75 per cent, forego rent profit for April, May and June and place a moratorium on evictions for three months.
The tenant would then pay 25 per cent of their rent and the federal government *in conjunction with the provincial government* covers the other 50 per cent.
“App fees are threatening the viability of providing delivery services”
While rent may be the final straw, the other problem threatening the viability of neighbourhood restaurants is fees from apps.
Randy Feltis is the Chef and owner of the Farmhouse in Barrie. Feltis says the 30 per cent fee Uber charges is a “big problem” for him.
He says the Farmhouse has tried to create new ways of drawing customers in, including Barrie’s first ever social distancing drive-in BBQ. “We helped out a local pig farmer who couldn’t get rid of his livestock, so we bought an entire 300 lbs pig,” said Feltis. Instead of using apps to get food delivered, Feltis would rather customers pick their order up in-person, “safely.” You can call in or email in orders.
Restaurants Canada also view these third party delivery companies as “a serious problem.” Vice-president James Rilett says they acknowledge Skip the Dishes and Uber are helping to drive takeout and delivery sales during the pandemic – mainly because of the scale of their advertising capabilities. But he says those promotional discounts also drive down prices and restaurant operators are often left bearing those costs.
“Steep fees from third-party delivery services were previously a source of frustration for restaurants when they were charged on incremental sales, but now that takeout and delivery are the only options, these fees are threatening the viability of providing delivery services. Many operators are making very-little-to-no revenue on transactions due to the size of these fees,” said Rilett.
Canadian restaurants may need a 15% cap, like in San Francisco
Rilett says Restaurants Canada continue to encourage these third-party delivery companies to work with their members on “win-win solutions,” otherwise he says their members will want to see caps on these fees imposed, similar to the 15% cap imposed in San Francisco. An emergency order from Mayor London Breed capped commissions for food delivery apps at 15 per cent across the board.
Skip the Dishes reduced commissions by 15 per cent at the start of the pandemic, later extended that to a 25 per cent for restaurants. Skip also offered a 10.5 per cent commision rate cut to any restaurant on Skip to utilize staff to facilitate their own delivery.
Officials with Skip the Dishes tell us they’ve created a network to support new provincial legislation which allows restaurants to sell alcohol with food orders for delivery.
Steps taken by apps like Skip the Dishes during the pandemic
Uber Eats waived delivery fees for customers on orders placed through the app that are picked up in person.
DoorDash has reduced commissions for some restaurants by 50% until the end of May. The company says their commission relief program will benefit more than 150,000 local restaurants in the United States, Canada, and Australia. DoorDash previously announced $0 delivery fees every Saturday until the end of May. DoorDash also waived commission fees for orders placed through the app that are picked up in person.
Restaurants are being forced to adapt
Cassie MacKell of Low Down bar in Collingwood says times have changed and it has forced them to get creative. “We have fewer staff, a reduced menu and reduced hours,” said MacKell. “We’ve been very busy with both delivery and curbside pick-up.” Both Skip the Dishes and Uber are not available in Collingwood, but Dash Delivers is. MacKell says their fees are cheaper but most people just call-in orders or take advantage of their free local delivery.
“As a cocktail bar we had to adapt that side of things too,” said MacKell. “Now that the AGCO (Alcohol and Gaming Commission of Ontario) has allowed us to sell alcohol to-go (under strict guidelines) we have begun selling Cocktail Kit’s To-Go and they’ve been hugely successful for us.”
Is there a long term solution?
Restaurants Canada say an immediate moratorium on evictions and lockouts for commercial tenants is a start. They are also pushing for rent assistance at a percentage in line with decreased revenue to avoid insurmountable debt levels. And Restaurants Canada recommends continuing rent relief measures until businesses have returned to a fixed percentage of pre-COVID-19 revenues.