Overall, the UK government deserves praise for providing swift financial support to small businesses. Here at Bia Rebel we have availed ourselves of that support and in an attempt to keep our staff and customers safe we stayed closed.
However, now that restrictions are being eased somewhat and everyone is eagerly awaiting the next phase, we are seeing a lot of assumptions that small food businesses and restaurants such as ours can re-open under social distancing rules. Unfortunately, this just isn’t a realistic solution.
Social distancing and its impact on the restaurant, pubs and hospitality sector as a whole has been talked about in great length. To better understand the concerns, let’s look at the numbers.
The first number to look at is profit, which of course is the money left after everything is paid for. Most people think that this restaurant costs are just food, staff, energy and rent; but we also pay for bins, water, insurance, loans (including equipment leasing), point of sale fees, marketing, bank charges, pensions, sanitation and rodent control, and of course VAT. Each business is unique but this list covers most of the business costs. And after you pay all these items you will be happy to have a profit margin between 3-5% on average. This is why restaurants have the lowest cash reserves of any sector, according to research by UK Hospitality.
Second, covers. The average small and medium restaurant in the UK has between 20-40 covers which is to say if the business is at maximum capacity it will have 20-40 customers in place at one time. Very often this is not enough people to cover all the bills (see above), so the business needs to turn the tables at least once to increase the numbers. More often than not, this is a requirement for survival, but having a packed out restaurant also adds to the atmosphere and the buzz of the place, which so many customers enjoy.
Third, limited space. How many small restaurants and cafés have the space to accommodate more than a handful of people at a time while keeping everyone 2metres apart? For example, our ramen restaurant and takeaway, Bia Rebel, where we could fit about 20 people at a time, cheek by jowl on a busy Friday night, is 16 square metres. So under current 2 metre guidelines, we would only be able to fit 4 people in. Ok, so, people will wait outside, right? Maybe. But what about people waiting outside either of the food businesses that are next door to ours, or at the bus stop that is directly outside our door?
Finally, limited time. Of the 24 hours available to you, how many are you realistically going to get customers? A food business normally has two busy periods in the day and they are for lunch and dinner. In a perfect world, the restaurant or pub would only employ people during these hours but we have to prepare food, clean customer areas and have staff in place just in case a customer comes to the business outside of normal busy periods. And of course you need to pay the staff even if there are no customers to cover the cost of having staff in place.
Before coronavirus, if a small to medium-sized food business needed to make a 3-5% profit in order to survive, they would need to serve between 40 to 80 customers per day in a 20 to 40 seat space during an optimum seven-hour period. Many businesses were finding this tough even before the lockdown. With social distancing this becomes impossible. Unless we want to extend our trading hours to include times when most people are asleep and hope that customers come at 6am to beat the queues.
Therefore, customer numbers will be reduced for sit-in. A lot of businesses might think ‘let’s all do takeaway’ and jump on the food delivery platforms such as Deliveroo, Uber and Just Eat. Well, let’s look at how that breaks down. These companies charge 30% for their service plus VAT on the total bill amount which takes the charge to 36%.
While you can claim back some of the VAT if you are VAT registered, let’s look at a food bill of one hundred pounds on a delivery platform to see how our restaurateur fares: Food 25%, Staff 25%, Pension 6%, Rent/rates 8%, Other 10%, VAT 20%, Delivery 36% which gives us a combined total of 130%.
Or to put it another way, for every one hundred pounds spent with your establishment through an online delivery platform you are subsidising it to the tune of thirty pounds. How can a business that only generates a 3-5% profit margin think that by adding on a 30% additional base cost they can save their business? Even if you are one of those rare businesses that make 15% you’re still out of pocket by 15%. The delivery platform model only works if they are an additional 2nd or 3rd tier revenue stream and not the main source of income. If they are your main source of revenue you are dead.
But all this talk is only concerned with customer distancing. What about the restaurant staff? Well, I suppose we can make the front of house staff wear face masks and gloves and ensure they change them after each interaction with a customer (and people thought plastic straws were bad!) This is doable but not really practical, nevermind how it’s going to look to have your waitress look like a surgeon ready for the operating theatre.
And what about the typical restaurant kitchen? Well it is usually a dark back room so small it could trigger claustrophobia. How do we distance those employees to the recommended 2 meters? Do we build an extension on the back of the kitchen and space out existing equipment that was placed there with the express intention of having no social distance in order to maximise the operating efficiency? The answer is, of course, NO you can’t.
If social distancing is enforced in restaurants, we need to accept that this is the end of an era, the end of small local food businesses where people came together to share life experiences whilst breaking bread for a reasonable sum of money. Maybe the new normal for eating out is one of occasional dining at very expensive prices reserved for the mega-rich. Maybe all takeaway will be overpriced and low quality just so a business can survive.
What can be done to help mitigate this? Well, we could cut VAT collection to be in line with supermarkets. For example, if we buy a loaf of bread it is zero VAT, but if we toast that bread and sell it to a customer, the government takes 20%. This makes the hospitality sector quite the cash cow for HMRC, if we think the sector is worth just north of £89bn each year. Then there is the substantial job losses which at last count was some 3.9 million people working in hospitality making it the fourth largest employment sector in the UK.
If the government puts these stringent measures in place to keep people from gathering to a minimum number with no other changes to government policy, then the hospitality sector as we know it is a thing of the past. All the modifications proposed thus far – takeaway, masks, screens, outdoor dining – they are the equivalent to the Titanic house band playing as the ship went down.
You can either have people separated by one or two metres or you can have restaurants and pubs. You cannot have both. If the government is going to send out police or others with enforcement powers over us to monitor adherence to social distance, then they should do so with the knowledge that it will be the end of our beloved industry.
By Brian Donnelly, chef and owner of Bia Rebel in Belfast