Food News

What will it take to save the hospitality industry?

In this current crisis, there’s a lot to be said about profit. There’s even more to be said about the people.
Mary's Underground

Inside Mary's Underground.

Photo: Jason Loucas

One week. That’s all it takes for a restaurant to be staring down the barrel of oblivion. Australia’s hospitality industry is facing its biggest challenge yet as the latest nationwide shutdown of “non-essential” services, in an effort to contain the spread of COVID-19, puts the future of our dining scene in turmoil.

Top-end restaurants, usually booked out months in advance, have had to rapidly pivot to offering takeaway and home-delivery options. Staff have been laid off as owners make tough decisions to save their businesses. This, in an industry already notorious for its wafer-thin profit margins.

The food and beverage sector employs some 802,500 people and is a cornerstone of contemporary Australian life, where families and friends gather to eat, drink and meet. Social distancing may be the answer to containing the virus, but it’s bringing an industry to its knees.

What’s the state of play for businesses trying their hardest to survive? What can be done? And most confronting of all: will any of it work?

The dining room at Nomad Up the Road.

(Photo: Petrina Tinslay)

Jacqui Challinor has experienced the worst week of her career. The head chef at Sydney’s Nomad has just been forced to stand down two-thirds of her staff at her Mediterranean restaurant in Surry Hills. “We’ve gone from 50 to 16 employees in the space of five days,” she says. “I’ve never felt anything like it before, and I hope to god I never have to feel like that again. Because telling people they don’t have a job… I don’t even know what to say to describe it.”

The impact of COVID-19 has hit with unpredictable ferocity. The Federal Government’s first attempt to control social activity was on 13 March – Black Friday – when a ban on outdoor gatherings of more than 500 people was imposed. But this wasn’t enough to deter diners, and the restaurant’s weekend trade was strong. “Then come Monday, we had six people walk in for lunch, 20 for dinner, and it’s continued like that throughout the week,” says Challinor.

Just five days later on March 18, Prime Minister Scott Morrison announced a ban on non-essential indoor gatherings of 100 people or more; on 20 March, the four-square-metres per-person rule for indoor gatherings of 100 people or fewer. At maximum capacity, the Nomad seats 140 so this regulation only allowed about 40 diners at any one time. “It’s completely crippling,” says Challinor. “With the start of the year the hospitality industry has had, no-one has had anything to fall back on. Fire, flood, drought – everyone’s on the backfoot. Not a lot of restaurants have the reserve to get through this.”

Today, Nomad has put down its shield. The restaurant has made the heartbreaking decision to close their venue for now, with all staff, including Challinor, stood down.

What’s most frustrating for the industry is the mixed messaging to the public. Practise social distancing; self-quarantine if you’re unwell. But also this: mass gatherings of 100 people are permitted at supermarkets and shopping centres; but as of noon Monday pubs and clubs have been forced to shut, though bizarrely hairdressers and beauty parlours are still open. Restaurants and cafés can offer takeaway and home-delivery, but with ever-tightening restrictions and dwindling patronage, what’s the point?

Rent and staff are the two biggest overheads in hospitality. The former is payable whether or not a venue is thriving; the latter is the first casualty, the virgin sacrifice proffered, to stem the hemorrhage of cash when a business starts to go under.

“They’re tying two hands behind our back but saying we have to fight,” says Jake Smyth of Mary’s Group. To date, he’s laid off 215 workers – mostly casual – from a total workforce of 240 across the Mary’s burger venues, The Unicorn, Mary’s Underground and The Lansdowne Hotel in Sydney, plus Mary’s Melbourne. (The latter three have since closed temporarily.)

The Restaurant & Catering Industry Association is lobbying for landlords, where possible, to offer rent abatements for three to six months. “One clear problem being faced by business owners across the country is rent bills that are sitting on their desk and need to be paid despite trade in some places dropping by as much as 80 to 90 per cent,” said CEO Wes Lambert in a statement. The association has even created a letter template, available online, for business owners to request a pause or reduction in rent payments.

Smyth says he’s “blessed” most of the Mary’s group venues have been granted relief from landlords. But he says broader support for landlords is needed. “Banks need to put business mortgages on hold, for as long as this downturn is in play,” he says.

Others are not so lucky. Sáng by Mabasa is a pocket-sized Korean restaurant in Sydney’s Surry Hills. Restaurant manager Kenny Yong Soo Son has been desperately trying to contact the landlord to negotiate their rent. “We’re hearing nothing, and that’s incredibly frustrating and upsetting,” he says. Rent comprises about 70 per cent of outgoings at the family-run restaurant. “The biggest thing we need is breathing space, and rate abatement will definitely help.”

Sáng by Masaba

(From left) Sáng by Mabasa co-owners Jin Sun Son, Kenny Yong Soo Son, Youmee Jeon and Seung Kee Son in 2018.

(Photo: Will Horner)

In the current crisis, there’s much to be said about profit. Across the board, profit loss is as mild as 10 per cent, to as devastating as a 100 per cent for caterers who’ve faced sudden and swift job cancellations as a result of the ban on mass gatherings, according to the Restaurant & Catering Industry Association.

But there’s more to be said about the people. In conversations with owners about the future of their staff, the word “family” crops up repeatedly. Jake Smyth’s voice cracks with emotion when he talks about current and recently retrenched workers. “We have resilient and magnificent staff,” he says. “And I’ll continue to refer to them as our family, because they are.”

And many businesses are trying their hardest to keep the family together. In the last week, countless restaurants such as Melbourne’s Attica have pivoted towards offering their dishes as take-away; Queensland’s Restaurant Labart has delegated front-of-house staff as delivery drivers; while Sydney’s Sixpenny and Pipit in northern New South Wales are selling grocery boxes. Others have simply shut their doors: Adelaide’s Orana has placed its staff on paid annual leave for as long as possible, while Melbourne’s Maha East has been put in an induced coma, and is hoping to reopen in late April.

Junda Khoo, however, has been playing a slower game. Instead of rushing towards reinventing his business, the chef-owner of Malaysian restaurant Ho Jiak in Sydney’s Chinatown has been planning his own survival strategy: a detailed seven-point plan that starts with blunt acceptance that sales will not improve in the foreseeable future; dives deep into balancing declining profits with staff and food costs; and ends with Khoo stockpiling a financial “war chest” to see out the next six months. “The play for me now is […] how much and how long can you bleed to get to the other side of this,” his Instagram post reads.

It’s a strategy he hopes will allow workers to be employed for as long as possible. “It’s not right to cut them off right now,” says Khoo. “They’ve done so much for me since I started as a tiny 12-seater restaurant in Strathfield. That’s why I’m looking out for them.”

There’s some relief. On Sunday 22 March the Federal Government unveiled a $66.1 billion rescue package to help businesses stay afloat and continue to employ workers, and to bring financial relief to those who have lost work as a result of the pandemic. It comes on top of a $17.6 billion stimulus package for small- and medium-sized businesses announced on 12 March.

State and territory governments have followed suit, with their packages waiving, deferring or refunding payroll taxes. (As of 17 March, South Australia and the Northern Territory’s packages did not address these taxes).

But will it go far enough? Khoo has done the maths. In the first stimulus package, the Federal Government promised to cover half the cost of PAYG withheld payments. For the period covering January to March at his Haymarket restaurant, he says he’s due to receive $15,000. “That’s enough for one week’s rent,” he says.

As for the second package, he’s struggling to understand what’s on offer, and how to access it. “They say businesses are entitled to $20,000 to $100,000 but what’s the criteria for determining who gets what?” The Federal Government says payments will be available from April 28, five weeks from now. “It’s okay for people who want to fight. Or they can fall.”

“There is a major disconnect between the relief measures being offered, and their application to small to medium businesses working in the hospitality sector,” says Michael Rodrigues, chair of the Night Time Industries Association. The organisation projects 85 per cent of employees in Sydney’s hospitality and entertainment sector will lose their jobs. “Money is needed now and it must go directly to the affected employees and the many self-employed owners who run these venues.”

Then there’s the big L-word: lockdown. Rumours of a nationwide forced closure of businesses have flown thick and fast in the industry. One prominent chef has spoken to the media about his purported insider knowledge about the forced closure of all restaurants and clubs on Sunday 22 March. (He was right, almost: pubs and clubs have closed; restaurants and cafes are permitted to trade in takeaway and home-delivery only.)

A total lockdown – home confinement, the forced closure of all businesses – will bring bittersweet relief. A lockdown will signal a clear government directive to suspend trade. “Shut us down and support us. That’s what I want to happen,” says Smyth.

The Night Time Industries Association’s petition calls for assistance for casual workers, landlords, and the hospitality, culture and recreational sectors; plus a fund to support businesses that are forced to close. It’s also advocating for subsidies similar to the kind offered by the UK government. (On the weekend, Britain shut down its pubs and restaurants, and offered to cover up to 80 per cent of workers’ wages for at least three months.)

“Venues desperately need the kind of wage guarantee announced by the UK government, which would give them breathing space over the next critical period,” said the association in a statement.

However, Smyth says the Federal Government is halfway there towards securing the future of the hospitality industry. The latest stimulus package effectively doubles the JobSeeker (formerly NewStart) payment, with eligible recipients set to receive an additional fortnightly “coronavirus supplement” of $550 on top of the base welfare payment. “What they’ve announced for the next six months is excellent,” says Smyth. His only criticism is that “it’s not fast enough”, with the past few days seeing massive queues outside Centrelink offices, and the overload of the MyGov website causing it to crash.

“The missing part of the puzzle is the banks, mortgages, landlords and rent. Those four are the key to the ongoing survival of every venue, and the long-term survival of the hospitality sector,” says Smyth. “We just need to maintain the rage, and push these things through.”

The next National Cabinet is meeting tonight. Rental assistance is on the agenda, though no-one knows what sort of form it will take.

Every action has a reaction. There’s much despair in the industry, but there is also grit, determination and an outpouring of support from customers, friends and family, colleagues past and present. “The fact that I’m getting messages of support from staff I’ve had to lay off, it’s so humbling,” says Smyth.

Khoo has introduced Ho Jiak’s “survival menu”; a selection of takeaway dishes priced at $10. Survival here is a two-way street. “It’s about providing food that ensures I can pay my wages, and people who have lost their jobs can still afford to feed themselves. It’s not just survival for ourselves. It’s for everyone else.”

A number of Mary’s venues remain open for takeaway, part of Smyth’s mission to retain some semblance of pre-shutdown days. “The reality is life is about to get fucking weird,” he says. But if we can sit on the couch and eat a burger, and listen to some rock ‘n’ roll, it’s one step towards keeping life as normal as possible.

During Australia’s recent disastrous bushfire season, the hospitality industry mobilised en masse to help those in need. Restaurants, pubs and cafes across the country held fundraisers for firefighters, those who’d lost their homes, and wildlife charities. Hospitality is about food and comfort, yes; but it’s also a powerful driver of community and belonging. It shows what’s at stake if venues are forced to turn out their lights for good.

“Restaurants, cafés, bars – they’re the fabric that hold us together that make life enjoyable. People are going to want that when we get back to normal,” says Challinor. “It’s a pretty dim outlook if none of this is around.”

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