Eating into the profits: Ottawa restaurants offer rare glimpse into their financials as pandemic persists
Ottawa restaurant owners give reporter Peter Hum a rare look into their financials, to show just how forcefully one year of pandemic conditions has hurt their businesses.
Peter Hum, Ottawa Citizen
Publishing date: Apr 01, 2021 • 1 hour ago • 13 minute read
In mid-February, although the stay-at-home order that had gripped Ottawa since Boxing Day finally lifted, Scott May scarcely felt like celebrating.
While applying for an emergency rent subsidy, the owner of Bar Robo and Q Bar in the Queen St. Fare food hall ran some numbers. Comparing his early 2021 sales to those a year earlier, before the pandemic struck, May found his monthly revenues were down 97 per cent, having plummeted from somewhere in the low six figures to a modest four-figure amount.
“What’s killing me right now is we’re just coming out of a 58-day lockdown,” May said then. “We’ve been surviving the last 58 days selling three-dollar coffees.
“Our entire business model was predicated on office workers, both before work and after work,” May said. But downtown is practically deserted, due to the work-at-home regimen ushered in to combat the spread of COVID-19, he continued.
A month went by. Asked in mid-March if business had improved, May said it had not grown in a meaningful way. These days, a good day of sales might yield about $500 for May, generated from the sales of coffee, pastries and T-shirts. Before the novel coronavirus turned life upside-down, a good day meant between $8,000 and $10,000 in sales, he said.
“I’m kind of resigned to it at this point,” said May.
May’s candour about his predicament is uncommon. Restaurants, which enjoy slim profit margins at the best of times, usually keep their financial details close to their chests, not wanting to alert their competitors to their relative strengths or weaknesses. But these are unprecedented times, and May and some of Ottawa’s restaurant owners were willing to divulge in concrete financial terms how forcefully one year of pandemic conditions has hurt their businesses so the public can understand their dire need for existing and additional government support, as well as whatever patronage the pandemic allows.
Their disclosures to this newspaper show that one year in, the pandemic has hammered some restaurants nearly to the point of forcing them to close, but for the support of government grants, loans and subsidies. For the restaurants struggling most severely, factors such as location, dining-room size and their ability to pivot to a takeout-centred business model have been critical. When these pieces of the puzzle have not fit together, the result has been drastic drops in revenue that have reoccurred week after week.
Other restaurants that have not been hit quite as hard by the pandemic nonetheless say they’re surviving and feeling hopeful given an increased turnout by dine-in customers since the weather has warmed and vaccinations have begun. But these restaurants count paying bills and staff as major victories — forget about making their usual profit margin of eight to 10 per cent.
Remarkably, a small number of restaurants are doing more business now than they did before the pandemic, after their best efforts to adapt were surprisingly successful.
A Statistics Canada survey released in March found that in Canada just 6.7 per cent of restaurants and bars saw their revenues increase in 2020 compared to 2019, while more than 86 per cent experienced a drop in revenue. Almost 43 per cent of the businesses had a 40 per cent decline in revenue.
In Ottawa, one restaurant that has grown its business during the pandemic doesn’t know how long the mysterious boom will last.
“We still feel very vulnerable,” says Andrew Lay, co-owner of the Main Street restaurant Sula Wok.
When all 9,000 square feet or so of Queen St. Fare opened in the Sun Life Financial Centre in early December 2018, the massive food-hall-and-live-music venue had dreams of helping to spark an after-hours revival of downtown.
For a time, Queen St. Fare thrived. Downtown workers grabbed coffee at Bar Robo before work, bought lunch there or at one of five other vendors, or sipped cocktails after work at Q Bar, sometimes while a band played.
But no one could have dreamed that by the spring of 2020, a global health emergency would cause the opposite of a revitalization to happen.
May says Bar Robo and Q Bar could not jump into the takeout market as other businesses could.
“It’s hard for us frankly to pivot,” he says. “We have done some takeout and we have sold some booze, but we don’t have a kitchen, so we can’t offer deep-fried anything. We’re selling some baked goods and some coffee but that’s about it.”
May received federal wage and rent subsidies, and he thanks his landlord for not aggressively seeking the balance owed. “It’s allowing us to focus here on just keeping the doors open,” he says.
In mid-March, May also received a $20,000 provincial small business grant. But it will only go so far and last so long, he says.
“When I have $3,000 a month in sales, I have $10,000 in fixed costs,” he says. Furthermore, when he renewed his business insurance last fall, it more than doubled to $38,000 annually, although his sales have cratered.
May figures he has gone into debt $100,000 because of the pandemic. “We are not going to give up. I’m going to keep it going regardless,” he says.
But he also says: “There’s nothing about the economics of a bar or a restaurant that makes sense today. You can’t make it work.”
Ramya Dandamudi, the chef-owner of Cumin Indian Grill in Centretown, knows that feeling.
Not quite a kilometre south of Queen St. Fare, Dandamudi’s tiny, narrow restaurant, which only seated 22 people before COVID-19, has also suffered because of the exodus of workers from downtown.
Dandamudi opened her restaurant in April 2019 and says that just before the pandemic struck in March 2020, she was getting close to breaking even each month. But since the start of the pandemic, the restaurant’s revenues have fallen steadily, Dandamudi says.
“Everything went down the drain. I’m hardly doing any business. I’m just opening the door and sitting there,” she says. “If I’m lucky, I’ll get $150 a day. There are days where there are no orders.”
She looks back at January this year, when her dining room was not allowed to open. Her revenue for the month was under $2,500, and she had to give almost 35 per cent of that to third-party delivery services.
Dandamudi has cut back her menu, food costs and staff costs. Federal wage and rent subsidies and a $10,000 provincial grant are the only reasons for her staying in business. “I would have closed the doors three months into the pandemic if it weren’t for the subsidies.”
As far as Dandamudi is concerned, she is just hanging in there. “I have no idea what I’m doing, how I’m doing. I’m taking it one day at a time. I feel like my life is so unpredictable. My dream of this restaurant had died even before it started and that’s really heartbreaking.”
Jon Svazas can tell you succinctly why one of his restaurants had to close earlier this year while the other stays open.
“It’s kind of a no-brainer, the reason why Fauna works and (Bar) Laurel did not,” Svazas says. “It’s bigger, really, is the only answer.”
In January, Svazas wound down Bar Laurel, his acclaimed Spanish-themed eatery in Hintonburg, deciding not to renew its lease after an unflinching look at its numbers.
Svazas says the costs for operating Bar Laurel and Fauna, his fine-dining restaurant in Centretown, were the same. But during the pandemic, Fauna can hold about 45 people, down from its usual 90, while the capacity of the much smaller Bar Laurel shrunk from 45 to 16 due to physical distancing guidelines.
That reduction was one nail in the coffin for what Svazas called “a tiny tapas bar whose purpose was to be rammed with people all the time.”
What’s more, before the pandemic, Svazas needed to fill Laurel three times on Fridays and Saturday, with early diners, then with people arriving around 8 or 9 p.m., and lastly with snacking and drinking latecomers. So, the pandemic’s 9 p.m. last call “destroyed any hope of a third seating,” says Svazas.
Svazas received the federal wage subsidy for Laurel and ran it with two or three people. But his revenues were “way less than a third” of what he usually made, while many of his expenses were fixed.
The bar, which had made most of its profit on drinks, tried to pivot. It sold take-home dinners for two — “but there just wasn’t enough uptake on it to come close to paying the bills,” Svazas says.
“To make any money, you’d have to sell $80,000 a month, and that’s to keep a 10 per cent margin. That’s rare. That really happens on really great months. It’s more like six, most of the time,” he says.
But when Ottawa was in a full lockdown, Laurel was lucky to make $3,000 in a week, Svazas says. Most months during the pandemic, Laurel only brought in about $12,000, he says.
Despite the government support it received, Laurel “lost quite a lot of money,” Svazas says. “If I decided to stay, I would have to lose four to six thousand a month, just to be there.”
The decision to close Laurel was “heartbreaking,” Svazas says. He still hopes to revive its concept at another address if circumstances allow. Another food business has already staked a claim on Laurel’s former space.
It took three years for Shanghai One Fine Dining, a massive 250-seat restaurant in Ottawa’s southwest suburbs that opened in September 2016, to become profitable, says co-owner Wenying Yu. December 2019 was its best month, with revenues of $130,000 and a profit of about $25,000, she says.
But the effects of the global pandemic struck the Merivale Road restaurant early. Many of its customers were Chinese expats and they began avoiding the restaurant in late January 2020, anxious that travellers visiting China had brought the virus back to Ottawa. “February 2020 was down tremendously,” Yu says, citing “panic” in Ottawa’s Chinese community.
After it recovered from the shock of the pandemic, Shanghai One, which was previously a popular venue for weddings, parties and Chinese community gatherings, tried to pivot to become a takeout restaurant. Last year, it simplified its extensive dine-in menu to make it more broadly appealing for takeout. It sent flyers to thousands of nearby residents to announce its presence, and put up bigger posters on its windows.
But the publicity blitz about Shanghai One’s pivot could only do so much. Yu offers a stunning comparison that distills the pandemic’s crushing effect on her business — while Shanghai One’s total revenue for 2019 was $1.1 million, in 2020 it took in just $90,000.
“We lost a million dollars due to the pandemic,” Yu says.
In January of this year, when Ottawa was locked down, the restaurant made just $10,000 — all from takeout and far short of its $20,000 rent, Yu says. And that’s before the restaurant paid 25 to 30 per cent of its meagre sales to its delivery services. It hired its own minimum-wage delivery person because it was a cheaper option.
Yu says her restaurant received $22,000 in government support to help with its fixed costs. But even with that support, it lost $12,000 in January, she says.
“I’m not optimistic, when the pandemic is still there, people are scared to go (out to eat),” Yu says. “Even for myself, I don’t want to take a risk to go eat. I only go to my restaurant. Other restaurants I still go take out.”
“To be pretty honest, I’m pretty happy,” says Ryan Edwards, chef-owner of Le St Laurent, the fine-dining restaurant in the penthouse of the luxurious 480 St. Laurent condominium building.
That’s not to say the pandemic has been easy for Edwards and his business. But his perspective is that the restaurant avoided a mortal blow since it re-opened last fall, is receiving government support that helps it basically break even, and dine-in customers are returning on weekends.
“The fact that we’re allowed to be open and able to get any business at all is good at this point,” says Edwards.
Indeed, Le St Laurent was closed last year from the start of the pandemic until September. That’s when Edwards, who had been its chef, bought the business from its owner, the Gatineau-based developer Brigil, which has built 480 St. Laurent.
Edwards thinks Brigil gave him a good deal on rent because it didn’t want the hassle of operating Le St Laurent, especially during the pandemic.
“Most chefs, that’s the dream, take over your own restaurant,” says Edwards. “Without the pandemic, I wouldn’t have been able to own and operate the restaurant. Brigil was so good to me. I didn’t have to jump into this with a ton of crippling debt.”
Pre-pandemic, Le St Laurent was making money, Edwards says. But by late 2020, in the thick of the pandemic, its revenue was down 60 per cent, he says.
The early 2021 lockdown was challenging for Le St Laurent because its isolated location didn’t make it a natural for takeout customers. “We’re 130 feet up in a condo building,” says Edwards. “It was me and my sous chef trying to keep the lights on.”
But condominium residents and others nearby gave the restaurant enough business to pay basic bills, and since dining rooms were allowed to re-open in mid-February, business has been consistent, Edwards says.
Now, with the help of government support, Le St Laurent is breaking even. “Everybody’s getting a paycheque. That’s what the purpose of this was,” Edwards says. “For us, it’s been about getting everybody back to work and into the kitchen and doing what they love to do. I’m happy with that.
“People miss eating and drinking,” continues Edwards. “I think people are realizing it’s one of their more favourite things to do. Everyone coming in has been extremely kind. It’s nice to see smiles and hear clinking glasses in dining rooms again.”
It helps that Le St Laurent’s dining room, in addition to having a killer view, is spacious and well-ventilated, seating 35 in a space that used to hold 80.
“Size matters,” says Edwards. “We can spread out. There’s a lot of room between tables. That’s why after this reopening, we seem to be rather steady.”
At Pita Bell Kabab, a Turkish and Middle Eastern restaurant on Carling Avenue that before the pandemic was perennially busy, manager Mustafa Omar has seen a rebound similar to Le St Laurent’s.
Before the pandemic, Omar’s monthly revenues were between $90,000 and $140,000, he says. But for April 2020, the first full of month of the pandemic, Pita Bell’s revenue dropped to $25,000 and it lost about $8,000.
Omar has been able to keep his business going with the help of a $40,000 federal government loan, and in January 2021, during the full lockdown, he had takeout sales of $55,000, he says.
Takeout sales, for which Pita Bell does its own deliveries, continue to make up more than half of Pita Bell’s revenue, says Omar. But its dining room, which now maxes out at 50 instead of 140, appeals to customers too, and on weekends the wait for a table can be as long as 45 minutes, Omar says.
“Of course we worry about what happens next,” he says. “But right now, what I see, it looks better than before. The business is starting to get better than before.”
Sula Wok, the tiny pan-Asian restaurant on Main Street, has not received any government support during the pandemic — not that it’s complaining.
“We weren’t eligible,” says owner Andrew Lay. “Your sales had to drop. Ours did the opposite.”
Before the pandemic, Sula Wok was struggling, he admits. “A lot of days were $800, $900. That just doesn’t cut it in the restaurant business … That’s not a break-even point.”
However, sales have ramped up since the pandemic started. “Now, $1,500 is not unreasonable at all, and now there are days that are better than that as well … Fridays and Saturday nights, it certainly can be significantly more,” Lay says.
He’s not quite sure why Sula Wok’s success has grown with the rise of COVID-19, but hard work at the pandemic’s outset might have something to do with it.
“From the beginning of the pandemic, we worked 169 days straight … we were literally near collapse,” says Lay, who operates the eatery with his wife in a building that they own (and incidentally live in). The parents of three sons also enlisted their oldest boy to help by answering the phone.
Of Sula Wok’s pandemic pivot, Lay says: “We did it fast, overnight. We did not shut down, ever.”
Already known for its takeout fare, the eatery did everything to project to prospective customers it was not only open but taking COVID-19 seriously, Lay says. TV-screen menus that were above the counter were moved so that customers outside could read them. Until October, customers never entered the premises, and all of the dispensing of orders went through the building’s garage-door window or front door.
Lay thinks his business’s transparency won over customers. “We had a good advantage because we have an open kitchen,” he says. “People can see what was going on. They’re recognizing how seriously we took this.”
Sula Wok never re-instituted indoor seating when it was allowed because takeout orders were so strong, Lay says. “No one even requested outdoor seating … No one really cared,” he says.
The tiny dining room was repurposed as a prep area and it may just stay that way, Lay adds. “We may see that (indoor dining) as more of a hassle. That’s not our business model anymore.”
Still, Lay worries Sula Wok’s success will be temporary. “All those people that are eating takeout, a lot will resume with their old patterns,” he says. ” I don’t know if that pattern will include us or not.”
phum@postmedia.com
https://ottawacitizen.com/news/restaurants-pivot
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