‘Everyone is broke,’ Vancouver diner latest to close as industry worries about the future

They were hoping someone would step in and keep their business going, but it never happened and now the owners of Wallflower Diner in Vancouver are closing their doors for good.

On their social media platforms they say, in part, “We really hoped someone would be able to pick up the pieces and keep the legacy going, but everyone is broke.”

 

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Mark von Schellwitz with Restaurants Canada says amid inflation, a staffing crunch, and increasing debt, this will likely be a make it or break it summer for many eateries and he expects more to close by summer’s end.

“We’re down in sales here in B.C. over the last two years, 13 per cent combined down before 2019 and there’s no question, we’ve had about 80 per cent of our members that have taken on additional debt as a result of the pandemic. We understand about three-quarters of those will take a year or a year-and-a-half to return to profitability and we still have 38 per cent of our members with that debt that are saying unless conditions improve, their survival is still very much in doubt. Not surprising that we still have some people that are struggling to survive, and we still have some casualties. Over the last two years, we estimate we’ve had about 13,000 restaurants close across the country, so it’s been a pretty significant hit.”

He says restaurant sales in B.C. in 2019 were $16.2 billion, in 2020, it was $12 billion and last year it was $14.2 billion.

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To help bring that number back up, von Schellwitz says owners are going to have to figure something out to retain and expand their customer reach.

“Obviously, there’s been a big change in the last two years as well. We’ve had, for full-service restaurants, on-premise dining drop from 76 per cent down to 44 per cent of sales, so take-out and delivery is now going to be a much more important part of the sales mix of any restaurant.”

He adds with concerns like the cost of living going up and a possible recession on the horizon, there are worries, the industry will be dealt another blow which it may not be able to handle.

“We know from our latest surveys that we’ve still got a lot of restaurants that are hanging on by their fingernails and if they can’t find staff, and if they can’t open their doors and have to shut down hours of operations because they can’t staff them up completely, that’s going to hinder their ability to generate those sales that they need to recover. If those sales aren’t there, then we’ve got a lot of members who are in serious trouble, especially when you consider how much debt they’ve had to take on and, at some point, we have to repay that debt.”

The debt he’s referring to, he explains, are the costs associated with trying to stay afloat during the pandemic, which includes things like leases, taxes, and utilities, as well as operating costs, inventory, and labour.

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“With respect to the 80 per cent of restaurants that took on additional debt during the pandemic, restaurants took on additional debt from their financial institutions and/or borrowed via the pandemic Canada Emergency

Business Account (CEBA). On CEBA we successfully advocated for repayment extensions as restaurants are not generating enough revenue to repay debt yet.”

Overall, he feels the industry won’t rebound until 2023 or possibly 2024.

However, it’s not all grim.

Zabi Sarwari is the part owner and general manager of Afghan Kitchen, which has locations in Surrey and Vancouver. He admits they are struggling financially and have been for a while but they’re doing what they can to stay open.

“We’re working hard and making sure our guests are… satisfied. We’re just trying to stay afloat just to cover most of our costs and expenses. Our message is the same to all of our fellow restaurant owners to just do your best and survive this next little while with these uncertainties and we’ll all get through this together. What we do is we do our best to serve the public as much as we can.”

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He says in addition to being understaffed, inflation and dealing with the pandemic, high gas prices are also hurting them.

“We used to have people who used to come quite frequently but we’re seeing less of them nowadays because gas prices are quite high so not everyone is wanting to come from the Guildford area all the way to South Surrey. It affects the business quite a bit too because now you’re losing customers who were coming to your restaurant, us being one of their favourite restaurants and now you don’t see them often.”

Sarwari says their Surrey location is struggling more than the Vancouver location, despite having been opened almost five years longer and being well-established, but he reiterates this is part of being in the industry.

“All businesses come with one challenge of just surviving right now.”