'Smoke and mirrors': For restaurants and their suppliers, booming patios mask industry's fragile state
Eugene Honcharuk saw news of patios reopening in Toronto last week and started making a list. He filled six pages with every available piece of patio equipment in his inventory and waited for the restaurants and bars to start calling.
“I thought, ‘OK all these people are going to call’,” said Honcharuk, who owns Contract Supply Corp. Ltd., a commercial furniture manufacturer that supplies the hospitality industry in Canada and the United States. But the wave of orders didn’t happen.
His company sent out about 20 quotes on furniture in the past week or so, but hasn’t received an order. He estimated that his business has made at least $500,000 worth of restaurant furniture over the past few months that is piling up in his Mississauga, Ont., facility, for which he has yet to be paid. Another half-a-million in orders are now uncertain. One client has gone silent on a $300,000 job. He said he had to take out a second mortgage on his home to keep the business afloat, and still has only been able to bring 12 out of 45 employees back to work.
“I wouldn’t be talking to you today if I didn’t go put a HELOC on my house,” he said. “We just need the industry to turn on, that’s the problem.”
While reopened patios could look, from the outside, like the industry turning back on, some restaurant owners and suppliers are cautioning that it is mostly an illusion.
For Honcharuk, a real return to normal could be longer than a year away, particularly if restaurants continue to close en masse, flooding the market with a glut of second-hand furniture. Patios are a stop-gap for now so it doesn’t make much sense for restaurants to invest in more furniture, particularly when social distancing rules mean most patios will have less tables than usual.
“You just went through living hell for three months. Why would you spend extra money?” Honcharuk said. “If you know you’re just going to do this for a while and you’re not allowed to have people come indoors, why wouldn’t you put your (indoor) chairs outside?”
As Andrew Oliver, president of the Oliver and Bonacini Hospitality, put it this week: “If you only have 50 per cent of your patio available … your issue is not furniture.”
Restaurants Canada, a major industry association, estimates that a typical restaurant will spend roughly $46,000 to reopen, which is enough to make many hesitate, given their inability to function at full capacity.
“When you figure in the front- and back-of-house staff as well as the additional staff required for higher sanitization standards, the ability to open 10-25 per cent of your business doesn’t necessarily add up,” Restaurants Canada spokesman James Rilett said in an email.
Firkin Pubs, an Ontario chain with 23 locations, said reopening means turning on equipment after three or four months, which often leads to repair costs; then there are added costs for personal protective gear and marketing to bring customers back. And that’s all to reopen at a small fraction of their regular revenue.
“It is a smoke and mirrors of success,” Firkin Pubs president Larry Isaacs said of the excitement around patio reopenings. “The reality is you cannot afford to pay 100 per cent of your bills when you don’t have 100 per cent of your business.”
Patios are also at the mercy of weather. If it rains, you’re closed. If it’s too hot, no one wants to sit in the sun. During a string of hot days in Toronto last week, for instance, some newly opened patios were on the hunt for extra umbrellas.
“That has also been a big scramble because of the heat,” Isaacs said. “A lot of people don’t want to sit outside because there’s not enough shade, interestingly enough.”
But Firkin Pubs has managed to make due without buying new equipment. They bring the indoor furniture outside, if necessary, and have managed to source umbrellas — though they are looking for more bases.
At the Churchmouse and Firkin, a Firkin location in Toronto, general manager James Eric Nicholson said the patio’s eight tables were empty on Monday around happy hour, until the sun sank behind the buildings on Church Street.
“We didn’t have anyone come in between four and five-thirty-ish. It’s too hot to sit on a patio,” said Nicholson, who has only been able to bring back four of his 16 front-of-house staff back to work.
Earlier this week, he was looking for more umbrella bases so he could add extra shade to the patio, but noted that the umbrellas “aren’t going to make or break my business.”
Two major beer brewers, which are some of the main suppliers of patio umbrellas to Canadian bars and restaurants, confirmed that demand for their branded umbrellas has gone up this year.
“We have provided more umbrellas than we have before (as many restaurants are opening patios for the first time),” Molson Coors said in an emailed statement. “We’ve been taking it establishment by establishment to provide tools they need where we can and where it makes most sense for our brands.”
Sleeman Breweries also said it was seeing a slight increase in requests for umbrellas, but it “hasn’t impacted our inventory levels at this point.”
Because the big brewers hand out promotional umbrellas for free, Honcharuk, at Contract Supply, doesn’t make them. Patio furniture — like patios in most restaurants — represent a small chunk of his sales. Until the rest is back online, his 35-year-old family business is in limbo.
“I am now in a position that I’m financing all this manufacturing,” he said. “Technically, I think I’ve had one cancellation for like $5,000. That’s it. Everybody claims that the orders are still good. But everybody also claims they don’t want to take them right now, or they don’t want to pay for them if they’re done, or they don’t want to receive them even if they’re paid for.”
Financial Post