AN OPEN LETTER

The hospitality industry is in a state of crisis and is in need of immediate and concrete support from all levels of government. It is unquestionable that the hospitality sector has been among the hardest hit by COVID-19, with our businesses being required to shut down in the fight against the spread of the virus. The option of working from home does not extend to hospitality workers. Our livelihoods and those of our employees have been decimated in the blink of an eye. The hospitality industry is a significant economic sector; it represents far more employees than the entire airline industry, and yet there are no reports of bailouts or additional support for our workers, who are most certainly among the most vulnerable. Let us be clear: most of us do not have shareholders. We feed our families and pay our mortgages with the income from our businesses. The financial pain about to be felt by hospitality employees, owners and operators is beyond comprehension.

With over 1 million hospitality jobs lost across the country last week alone, there can be no doubt that the rebound and survival of our industry in Canada will be crucial to our country’s overall economic recovery. That includes reciprocal support to the tourism, conference & event, arts & entertainment and retail sectors. The hospitality sector’s recovery will also be essential to the survival of our food supply system including farmers, purveyors, and food manufacturers. In the spirit of community outreach that our industry is so well known for, we would like to start an immediate dialogue with governments to utilize our latent facilities and workforce in the aid of first responders and front line health care workers.

In an unprecedented move, hospitality company owners and stakeholders have come together quickly to outline our needs to our government and all others who can help. The list of restaurants and hospitality-related companies signed on below was compiled in only a few days. Our requirements are both immediate and long-term. Without proper aid, this industry will likely collapse and take down many other supporting industries in the process.Investing in the hospitality industry NOW will pay off when we begin our collective recovery. Foodservice is a $90B industry in Canada, accounting for 4% of the country’s GDP. Restaurants are the 4th largest employer in Canada with 1.3M jobs, accounting for 7% of the country’s workforce – they are the largest segment on EI right now and not able to work until the restrictions are lifted. We need an industry-specific response from all levels of government at the same scale or higher as that afforded to so many other industries in their times of crises.

To every lawmaker and government official currently considering how to help those most affected by COVID-19, we the hospitality and hospitality-related business owners ask for your support during these unprecedented times. The following are our short-term and long-term recommendations.

 

 

Before the end of March 2020:

  • Ensure immediate Employment Insurance benefits for all of our laid off staff. Our team members have been attempting to apply for EI for days, still with no confirmation of benefits from Service Canada. People are extremely anxious that their benefits will take weeks to arrive, as the current demand on the system is overwhelming. Any delay will leave them in an incredibly precarious financial situation. The federal government must immediately add capacity to these processing systems. We recommend Service Canada waive the waiting period for everyone laid off, not just those who are sick or caring for the sick.
     

  • Ensure that normal EI benefits are supplemented to reflect the higher cost of living in our urban centres. We recommend hospitality staff be paid 100% of their average hourly earnings as our employees rely on income generated from gratuities.
     

  • Cease the collection of commercial property taxes immediately for restaurants, bars, retail and hospitality related businesses and their suppliers. We asked that commercial property taxes related to all hospitality venues be waived for 18 months from March 1, 2020. A 60-day grace period has been provided for personal and business property taxes, along with water/sewer service and solid waste management, however, there has not yet been support offered with respect to electricity and natural gas utilities for businesses.
     

  •  Issue a government directive for rent and additional rent amounts to be paused temporarily from April 1st, until the government aid package outlined below can be finalized and implemented.
     

  • Require insurance companies to cover business interruption during this time of mandated hospitality business closures. Currently, they are denying coverage for such claims.
     

  • Require the abatement of all hospitality-related business loan payments from financial institutions. Most banks, including the BDC, are deferring the principal only and not the interest. All payments need to be deferred until the below recommended aid package can be implemented.
     

  • Suspend all taxes owed to the federal and provincial governments including HST, EHT, source deduction obligations and corporate taxes, as well as remove any penalties and/or interest for current late payments. As long as returns for HST, EHT, and corporate taxes are filed on time, (but without payment) businesses should not be penalized or charged interest.
     

  • Waive WSIB payments for February and March, 2020 (due March 31st and April 31st, 2020, respectively), without penalty and interest for 90 days.
     

  • Require credit card companies to lower all interest charges on cards held by hospitality and hospitality-related businesses, including merchant services providers (e.g. fees and equipment leases/rentals).

 

In the Weeks and Months Ahead:

  • Create a significant cash stimulus package to support hospitality business operators through the governments required closures and for the reopening of their businesses (e.g. monies needed for re-purchasing lost inventory, pre-opening labour, etc.). We recommend that this cash stimulus be distributed in the form of a forgivable loan provided by the banks but funded and guaranteed by the federal government. The loans would be based on a formula of 10% of prior year annual sales. The loan amount would be increased if the shut down lasts longer than eight weeks by adding roughly 1.25% of annual sales for every additional month of forced closure.

    These forgivable loans would provide much needed liquidity for hospitality companies to pay ongoing costs while the mandatory shutdown is required, and help cover the costs to re-open. The funds would be used to pay rent, utilities, vendors, and some employees during the shutdown period and re-opening phase. The payment of rent and bank interest would be a requirement for the loan. This requirement would achieve two very beneficial outcomes: First, it would add security to the banking system and real estate markets. Second, it would provide a much-needed sense of security and optimism to all of the restaurant operators, and allow them to begin the planning of their re-opening instead of fretting about whether they will have the funds to re-open. The loans would be forgiven over time by calculating a portion of HST generated on new sales over a set term. Alternatively, payroll taxes on employees re-employed could also be included in this calculation – incentivizing bringing back employees as early as is possible (we realize this may require a significant amount of coordination with payroll companies). Starting up sales as quickly as possible would be incentivized therefore giving the economy a much-needed boost.

    The loans would be administered by the banks and adhere to certain conditions to ensure funds are used appropriately – allowing for both the timely distribution of the funds as well as our financial systems to work and create liquidity to all tangential industries. This plan, although grand, provides multiple solutions to multiple stakeholders. In short:

     

  • Hospitality companies would be provided liquidity during periods of no revenue

  • Companies would be enabled to re-employ a number of their workforce earlier to prepare for re-opening

  • Landlords would receive rent

  • Lenders would receive payments on existing loans

  • Vendors would receive payments

  • The burden on the government would be reduced, as more employees would be hired back and come off EI more quickly

  • The economy would be stimulated by providing cash flow to related industries

  • The long term return for governments would be multiplied as more restaurants re-open instead of shuttering for good, which would lead to less tax revenue and an unimaginable burden on social service

     

In the months ahead
 

  • Extend the temporary layoff period status until further notice to ensure that hospitality employees are not automatically terminated at the end of the layoff period, triggering an obligation of termination pay for all. Such a financial burden will bankrupt the vast majority of independent operators.
     

  • Provide relief to hospitality industry suppliers and service providers for non-payment since the beginning of the crisis.
     

  • Implement changes to the Provincial Liquor Board rules across Canada to enable more efficient utilization of alcohol inventories (e.g. the ability to transferring inventories between locations).
     

  • Reduce taxes on spirits for purchases by retail licensees by 50%.

 

Our general message to lawmakers and government officials is this: we are an industry that employs an enormous number of people who are disproportionately vulnerable to cash flow stoppages. Hospitality businesses across the board are extremely sensitive to decreases in cash flow as margins are notably razor thin. This is not a cash flow shortage, but a complete termination of cash flow. Our businesses are like freight trains: they take a lot of energy to start up and a lot of energy to slow down; and now we have suddenly experienced a violent derailment. For the sake of all of our employees and their families, we implore your immediate support and attention in helping us get back on track.

In Solidarity,

This letter was drafted with help of multiple people, special thanks to.

 John Sinopoli | Partner & Executive Chef - Ascari Enoteca, Hi-Lo Bar, Gare de l'Est
Ivy Knight - Food and Wine Navigator

Daniel McCormack - Pluggd
Meagan Bowden - Phancy Food and Catering
Dyson Forbes - Forbes Wild Foods 

As well as countless other business owners and industry members who have contributed to drafting this.

Please download the entire letter here 


 

 

 



 

 
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