Mar 22, 2020

Last supper for restaurants

written by Lisa Eason

The industries I know and love — hospitality and entertainment — are collapsing. Virtually all restaurants, bars, clubs, theatres, cinemas, hotels, visitor attractions and cafes are shut and taking no income at all. None of us know when these tens of thousands of special places might reopen.

This has been a week of fear and despair for my business colleagues. One partner has spent two decades of hard work building a thriving regional brasserie operation, offering excellent food and service, staffed with outstanding teams. His company has paid millions in tax of one sort or another. Now all six of his restaurants are closed, and the vast majority of his employees laid off. He is worried that his home will be repossessed. He feels anger, shame, despair.

I suspect millions of regulars who patronise pubs and restaurants everywhere are similarly heartbroken at the complete closure of the entire trade. These establishments are the heart of how we socialise as humans — where we celebrate, meet friends and family, fall in love. Now they are all padlocked and desolate: no laughter and fun, just silence and emptiness.

And, for the 3.2 million who work in the business, perhaps a third have lost their jobs, and the rest may soon lose their livelihoods as society practises “social distancing” — all victims of the coronavirus in various ways.

Such operations are labour intensive and have high fixed costs. Once they close, the owners have an awful choice: keep staff on and bleed rapidly to death — or lay them off and hope to re-open and hire them back soon. Meanwhile, every restaurateur and publican has been in frantic negotiations all week with their landlords, suppliers and the taxman about deferring bills, so as to live and fight another day. Some are desperate for salvation from the government, others begging for support from their banks.

Certain property owners are taking a pragmatic view and showing forbearance over the March quarter rent due in a few days’ time. Others are being more ruthless — and may well drive their tenants into bankruptcy. The most brutal landlords will then be left with void premises, which are likely to prove unlettable in the current market, since the demand for restaurant space will be negligible for the foreseeable future.

Unfortunately, the insurance industry is deserting the battlefield at the first whiff of cordite. They are almost all unilaterally denying any liability under business interruption policies, using small print to sidestep claims. Their actions hardly represent the “utmost good faith” that is supposed to underpin every insurance policy; their reprehensible behaviour confirms all the worst stereotypes of their profession.

It is true that the hospitality sector has enjoyed a boom for many years, creating ever more capacity, especially in big cities. An expanding foodie culture and friendly funding conditions enabled this seemingly endless cycle of growth. This month has been a dramatic and terrible reckoning, with plenty of fine entrepreneurs facing commercial oblivion. Those with high debts or grappling with turnarounds will be the first to go to the wall — probably in the next few weeks. Some premises will be recycled, but others will become derelict. The business rates holiday will help, but it is insufficient to salvage lots of wonderful offerings that were not built for these arctic conditions.

A few restaurateurs are trying to pivot their business towards home delivery — but this is a tough game, and not that many dishes actually taste good after 30 minutes on the back of a moped. We may be able to rent a hotel to the NHS for use by medical staff unable to go home — at bargain-basement room rates, I hasten to add. Our Gail’s bakeries hope to stay open throughout, feeding neighbourhoods around London.

But for the majority of outlets providing a sit-down experience, such options do not exist.

If there’s a recession across the economy as a whole, then the hospitality business is in a full-blown depression. Thousands of operations are in hibernation, proprietors firefighting to save their companies, reputations and jobs, and stave off forfeiture and insolvency. The industry overall might well shrink by a third or more unless it is able to revive in May or, at the latest, June. If the country remains in some ghastly lockdown through the summer, then many of the brightest and the best from the wider catering community will give up entirely, I fear, their optimism destroyed, their spirits broken. I pray that does not happen.