A sector analysis series #1
Creative Commons Licence CC BY-SA (i.e. use in any way you want with attribution of source: “Inga Petri, Strategic Moves, May 17, 2020”)
Public health officials in Canada ordered dine-in restaurants closed everywhere during March 2020. Now in mid-May, they are musing about reopening restaurants with new obligations, centred on 2 metre distancing, disinfecting surfaces and perhaps more.
That potential “permission” to “open” cannot result in thinking restaurants and their owners wouldn’t require continued financial support.
The reality check
2018 financial data from Statistics Canada available at http://www.ic.gc.ca/eic/site/pp-pp.nsf/eng/home shows that for the 35,514 full-service restaurants with sales between $30,000 to $5 million (data for those earning above $5 million is suppressed):
- 35% did not generate any profit at all, i.e. they were operating at a loss.
- The other 65% turned a profit of 7.6% on average, representing $24,400 for the year.
That means a profitable restaurant in Canada makes money only 4 weeks out of 52 on average. It also means a restaurant owner’s average annual profit is less than minimum wage. And no, many sole proprietors do not pay themselves a regular wage; instead keeping everything working in their business. Anyone can see the high risk restaurateurs take and how tenuous their existence is.
In the Yukon, where I live, the numbers are a little better: only 22% do not report any profit and of the 78% that do, the average profit is 9.3% representing $66,000 on average in 2018. Nonetheless these figures show how little slack there is and how all the money for the years comes from the now cancelled summer tourist season.
This data makes clear: the average restaurant, closed down already for two months due to the public health orders, is already bankrupt. Re-opening obligations are shaping up to be costly and won’t result in lower staffing complements despite serving far fewer customers due to new labour intensive cleaning regimes. There is simply no economic case to reopen for the great majority of dine-in restaurants.
Significant direct contributions to Canadians
Through the risk borne by them, restaurateurs have been contributing far-reaching benefits to Canada’s economy: according to Government of Canada data, the average dine-in restaurant had $765,600 in sales. Of that $250,300 went to labour costs and wages. Purchases and materials that are part of the cost of goods sold totalled $273,900. Rent accounted for $65,300 and so on.
And there are many more indirect, restaurant owners have been building communities, contributed to quality of life, played a large part in attracting and retaining a skilled workforce, growing tourism through the culinary arts and memorable dining experiences, supporting charities, paying staff, helping put young people through school, feeding people, all while breaking their backs and bank accounts.
In short, the direct and related economic activity generated by the restaurant sector is worth billions to Canadians and the Canadian economy.
A broken model – Restaurateurs need help
COVID-19 is showing for the world to see what has been true for some time: The business model independent full-service restaurants have been forced into, largely by price competition from other food sector players, is broken and the owners are broke.
The numbers also make clear why restaurants can fall into GST and Payroll remittance tax debt, when basic break-even is so difficult to achieve. Non-remittance incurs extraordinary penalties and interest charges that can take up any monthly surplus and more. And then they are exposed to the CRA’s relentless collections and being treated as less than valuable community builders and hard-working, creative, innovative business leaders.
They need a chance at a life beyond COVID-19 and beyond a broken business model.
How can Canada help restaurants and their owners now?
A few ideas that could pull restaurants and restaurateurs back from the brink:
- Consumers have to learn to pay much more for the pleasures of eating out, especially when they don’t wish to tip 20% for servers and rather see living wages for restaurant workers, rather than below minimum wage as is the case in some jurisdictions. In the Yukon where I live it appears as though most, if not all, workers in the restaurant industry earn well above minimum wage plus tips.
- Landlords should permanently slash rents to restaurant tenants to enable restaurant owners earning a living wage and being able to invest in innovations in their business or business model.
- In addition to short-term COVID-19 Transition Grants to pay for additional public health mandated expenses and staff training, Government has to consider providing meaningful tax debt relief to allow a fresh start or at least some peace for owners.
- Sole proprietors must be considered as a special group requiring assistance. If sole proprietors are considered as “making a profit” when they barely break even before paying themselves anything, their work translates into not being able to cover their personal expenses and falling into debt.
- Local governments should revisit their zoning requirements to enable new, innovative ways of providing food services to the public. They can range from quickly enabling sidewalk patios and taking over unused parking spaces (no tourists means ample parking spaces are unused); a new breed of home-based businesses offering nano-scale/single-table/prepared-food eating experiences without the massively expensive requirements for home-based commercial kitchens; significantly reducing restaurant and liquor licensing costs.
- Canada’s provincial and territorial government-owned and run Liquor Control Boards should look at offering higher discounts or find a way to return most of their profits to their customers, i.e. bars and restaurants that must purchase alcohol at government controlled prices; allowing off-sales within every restaurant liquor license during the COVID shutdown period and 3 months beyond.
COVID-19 relief has been fast and effective at saving the financial lives of millions of Canadians. It is time to save the lives of those Canadians who have been living under the unyielding pressures of low price competition while the market demands quality food and high quality, unique dining experiences.
In my current version of life as a speaker and consultant I am thrilled to get invited to work across Canada. Then last year, I decided to actually live in two places about 5,000 km apart (Whitehorse, Yukon and Ottawa, Ontario). Already in my sixth year as a frequent traveler, I have had to find ways to not feel disconnected or plain lonely. It feels like I have finally found some groove in the last couple of years that keeps me socially connected and engaged with wherever I am.
Today a touring musician friend posted this update on Facebook:
Things that make me really happy:
New movies on Air Canada.
Great conversations with taxi drivers.
Swedish meatballs as snacks.
That post reminded me about the spaces in between the places I go. As my travel schedule has grown I’ve come to focus a lot more on all the life that can happen in those spaces: like that hilarious late night conversation on the plane to Whitehorse the other day with one of the House of Commons staffers travelling with the Parliamentary Committee on Electoral Reform. Or that messenger chat with a distressed friend while waiting at the gate. Or talking to the mom with the kid that is having a terrible flight and not making her feel bad about her child being a child. Or drifting off on that after lunch nap on an Air North flight to YXY – while in my regular seat (yes, I always get the same seat when I check in on AN) – and listening to my favourite artist on my iPod. Or binge watching new movies on Air Canada flights. Some of my friends may be surprised that I rarely work while in transit … to me offices and conferences are for working. I’ve come to prefer to be in transit and see what life there holds in store.
Of course, my friend managed expressed all that in the songpoet’s way in 4 half-lines!
“The specific characteristics of the performing arts eco-system matter to whether they can fuel vibrant rural communities.” With this hypothesis in mind, I have been investigating whether there are common criteria or success indicators for building a sustainable, rural arts community. This exploratory research draws on existing literature about arts in rural communities as well as my work with organizations in rural communities from coast to coast to coast. In this initial phase of the study I focus on three communities: Haliburton County, Ontario; Temiskaming Shores, Ontario; and Wells, BC.
I will present findings from this new study for the first time at the SPARC Symposium taking place in Haliburton from October 27 to 30, 2016.
My work with SPARC goes back to 2014: I presented a keynote at the first SPARC Symposium in April 2014 on “Co-creating a Culture of Place in Rural Communities.” Then SPARC invited me to co-facilitate the SPARC Network Summit in November 2014. In my ongoing consulting practice I also work with small, rural and remote communities to help strengthen local capacities and capabilities.
A key goal of the SPARC 2016 Symposium (a project of the SPARC Network) is to create an environment where people can network: exchange ideas, find opportunities for collaboration, discuss solutions to tricky problems and identify big ideas. Attendees will have an opportunity to meet people engaged in the performing arts from rural communities throughout the province and across the country.
Whether your goals are professional development, learning strategies to attract new audiences, innovative approaches to sustainability, opportunities for information exchange, or developing creative methods for marketing campaigns or mentoring programs, it is SPARC’s belief that this year’s program will facilitate them: http://www.sparcperformingarts.com/sparc-symposium-2016/
See you in Haliburton next month!
The Capital Regional District (CRD) Arts Service is poised to begin a broad-based community engagement and consultation process to identify key implementation strategies designed to achieve the goals of the CRD 2015-18 Strategic Arts Plan.
I am thrilled that the CRD Arts Service has hired Strategic Moves and my project team to undertake this work. I am excited to get to know the communities and people of southern Vancouver Island better.
With the contract signed last week, we are putting everything in place for a round of pre-consultation sessions. On June 23 and 24, we will undertake a series of four sessions with as wide a range of people active in the local arts community and those interested in developing the arts in the CRD as are available. I know it is going to be short notice for some, but it is better than a July or August date when vacation season creates only more challenges. We will use this pre-consultation to introduce the project, our team and to gather initial feedback and input on the community engagement and consultation process itself. In my view, our job is to listen closely to the community as we build together a strong, meaningful and relevant implementation plan.
These pre-consultation sessions represent the beginning of a 6 months long process where those interested in the arts in the CRD will have several opportunities to make their voices heard and their ideas count about their priorities for key implementation activities the CRD should consider adopting over the next 3 years. We’ll reach out and invite the full diversity of artists and arts organization and communities throughout this process.
These last few days my working hours have been consumed with briefings, document reviews, planning more briefings with the Arts Committee of the Arts Service and the newly formed project Steering Committee, and planning these pre-consultation sessions.
As with all large projects with many different stakeholders, I expect deep conversations, vigorous discussions and healthy debate. It is the best way we have to ensure that the results of this process are solid and meaningful to the local arts community and the CRD communities at large.
In a word, as art is fuel, I am stoked.
I enjoyed working with her and we had some great conversations about authentic presenting. Her performance coaching practice applies to anyone who gets to work with a microphone, not only musicians.
At the CAPACOA conference in Halifax this past January, attendee feedback suggested that I made a compelling case for Breaking the Fifth Wall: Digitizing the Performing Arts. Indeed, attendees were buzzing with the challenges and opportunities presented. Others who have watched the presentation online have asked me how they can get involved. You can watch my talk here on video. In it, I weave together a case for sector-leadership and sector-ownership in developing a future digital platform. I am most excited about digitization beyond the 2-D screens we have today. In particular, I believe a future-oriented perspective requires us to contemplate live-streaming/streaming 3-D renderings; holographic and or virtual reality convergence in technologies. Things most of us have never seen but enabling technology solutions are advancing rapidly.
In this talk I offered a brief context of digital transformation in the last 20 years, an overview of experiments in digital performing arts presentation from around the world, a perspective on what it take to transform the challenging economic model that persists in live performing arts for the presenting field in particular, and a call to action.
At the upcoming CAPACOA national conference in Ottawa from November 25 to 28 I hope to turn that buzz into tangible action: Together with CAPACOA, we invite you talk about the next steps we as a sector want to take to drive this discussion forward and explore opportunities of digital distribution at scale in Canada and beyond. Can we establish a working group to spearhead conversations and build sector leadership on this central issue? Who wants to be and needs to get involved?
I am looking forward to facilitating this conversation on November 26 at 8 am.