Indie restaurants struggle to survive

By William Johnson

The response was fast and curious. On March 22, when Ubuntu Canteen shared on Instagram that its final day of service would be April 16, the comments section said it all. People were sad (“Truly heartbreaking”). They were appreciative (“Thank you for everything you’ve done”). And a few had questions (“The people, the food, the bread will all be missed. I would love to know why”). It mirrored the collective sentiment from a week earlier, when news broke that Chinatown’s Kent’s Kitchen would shutter after 40 years.

Ubuntu and Kent’s are just two of a long list of restaurants to recently announce closures for varying reasons. Others include Chewies Oyster Bar in Coal Habour, Weirdo Cafe, Benkei Ramen, and Kind Cafe & Eatery.

While the birth and death of restaurants are part of every city’s hospitality ecosystem, some business owners told the Straight last week they are worried that this recent slate of closures could reflect a broader trend. And they are trying to raise awareness around the challenges that Vancouver’s independent establishments face as they grapple with the lingering effects of the pandemic and other issues.

The national numbers on independent restaurants (typically, non-chain establishments with one or two locations) tell a clear story. According to data from Restaurants Canada and NPD Group, 13,800 fewer independent restaurants were operating across Canada in 2021 than in 2000.

The situation is likely to get worse, according to Matt Senecal-Junkeer, co-owner of Gastown’s The Birds & the Beets and Strathcona’s Hunnybee Bruncheonette. Senecal-Junkeer believes oncoming headwinds could sound the death knell for businesses contemplating a smorgasbord of economic issues like rising labour and food costs, paired with a labour shortage and a decline in sales.

“It’s sort of the perfect storm,” he says. The tipping point for many food and drink establishments may come later this year when the federal Canada Emergency Business Account (CEBA) loan program shifts, adds Senecal-Junkeer.

CEBA offered interest-free loans of up to $60,000. According to government data, 122,890 BC businesses were approved for loans from the program worth $6.6 billion. Many were hospitality businesses.

The loans are interest-free until December 31, after which the remaining loan amount will automatically convert to a two-year term loan with interest of five per cent per year. Businesses that pay back an initial $40,000 by December 31 will get the remaining $20,000 forgiven.

But for the majority of independent restaurants (76 per cent, per Restaurants Canada/NPD Group) that are pulling in under $500,000 in top-line revenue, $40,000 is two years of profit, explains Senecal-Junkeer. For many of them, paying back the loans is completely unrealistic, he argues. In fact, only 13 per cent of small businesses have been able to fully repay their CEBA loan to date, according to the CFIB.

“It’s hard to imagine a scenario where if you weren’t able to pay the [$40,000] on December 31, you’re gonna be able to pay the $60,000,” he says. “Those are probably restaurants that will have to look at what does that bankruptcy look like? How aggressively is the CRA going to come after those? You know some of them are personal guarantees if you have a sole proprietorship, and some of them aren’t. But that’s probably, in my view, the extinction event for a lot of independents that are just clinging on.”

Adrienne Vaupshas, a spokesperson for Finance Minister Chrystia Freeland, said the current repayment deadline and loan forgiveness structure was “intended to support hard-working business owners as they continued to recover from the pandemic.”

Senecal-Junkeer believes the government saw CEBA loans as investments into pivoting or adding retail and other revenue lines.

“But I think in reality, at least in our case,” he says, “and from a lot of operators I’ve talked to, those went to operational expenses: the staff, rent, things that you’re not seeing any benefit from today. Wages were number one, rent was number two. Because it was survival mode for everybody.”

With pandemic health restrictions over and the CEBA loan deadline nine months away, the challenges independent eateries must navigate remain immense—one of which is that there simply may be too many places to dine out.

Doug Stephen, who operates Downlow Chicken Shack and a growing collection of businesses, believes the notion is worth considering.

“There are probably more restaurants open than the market actually has the ability to sustain at any given time,” he says, adding that it leads to a hypercompetitive marketplace. “As a new restaurant opens, the amount of dining dollars remains the same—or in this kind of economic state, it might even be decreasing… And so the inevitability of closures exists.”

Those holding on must grapple with a record property tax hike in Vancouver, ongoing safety issues across the region, and what appears to be a permanent change in day- and night-time dining habits.

“BIAs [Business Improvement Areas] are begging everyone to come back to the office, but there’s just a permanent shift in our culture,” notes Senecal-Junkeer. GS