Restaurants Group Outlines Bailout Proposal

07 May 2020 | 01.19 pm

Restaurants Group Outlines Bailout Proposal

SME Recovery Plan stakeholders make the case for all small firms

07 May 2020 | 01.19 pm

Industry professionals have joined forces with restaurants large and small across the country to come up with a plan to support the restaurant industry during “the gravest crisis it has ever faced”.

The Save Our Restaurant Coalition is presenting its plan to government and political parties over the coming days.

“Restaurants and cafes across the country have realised that returning to normal will take a very long time,” said coalition member David Maxwell of Boojum. “It may take two years or until a Covid vaccine is developed before we can expect normal trade to resume. Restaurants simply can’t survive on 50% of their normal sales.”

SORC’s plan calls for direct grants towards fixed costs, directing the banks to deal with debt sensitively, and a continuation of the employment supports.

“There are 80,000 families affected by this in the restaurant industry alone. Shuttered storefronts in towns and villages, and small and large businesses, built with sweat and passion, which will go to the wall if we don’t do something,” said Maxwell.

SORC’s survival plan centres on labour costs, overheads and debt. The main features of its proposal are ‘step down’ measures as follows:

• Labour Costs Step Down

Existing wage subsidy scheme remains in place for the duration of the restaurant sector lockdown period. For the 24 month period post restaurant sector lockdown the following applies:
• Current subsidy is paid by government where turnover is down 80-100% on 2019 figures
• 70% subsidy (based on current wage subsidy scheme methodology) is paid where turnover is down 50-80%
• 50% subsidy (based on current wage subsidy scheme methodology) is paid where turnover is down 25-50%
• Subsidies are initially claimed on a self assessment basis but are subject to independent audit every 12 months.

• Occupancy Costs Step Down

• Government agrees to cover costs on a stepped basis, similar to the Danish model
• 100% Grant towards OC as long as business is not permitted to open
• 80% grant towards OC where turnover is down 80-100% on 2019 figures
• 50% grant where turnover is down 50-80%
• 25% grant where turnover is down 25-50%
• Landlord also gives from 20% reduction pro-rata, and tenant agrees to pay revised figure to agreed terms
• Grant paid monthly, on sales reported by business in an amended monthly P30 report. Subject to independent audit every 12 months.

• Debt Repayment Step Down

• Rescheduling of all debt repayments (interest and capital) during the restaurant sector lockdown period
• Interest only repayments for the 12 month period post restaurant sector lockdown
• Restructured capital repayments, based on repayment capacity, during months 13 to 24 post restaurant sector lockdown. • • Full interest payments during this period
Covenant modification for this period to ensure no breach is triggered by the step down methodology.

The restaurants lobby is also calling for:
• Refund of preliminary tax paid for 2019.
• Deferral of January – March 2020 VAT for two years, repaid over one year.
• Innovation fund for restaurant diversification.
• Reintroduce a rebate to help employers cover the cost of redundancy payments for two years.
• Allow businesses owners to access their pension funds for the purpose of re-investing in their businesses.
• Restrictions on SBCI funding relaxed.
• State funded vouchers to the value of €750 per household ring-fenced to hospitality and non-essential retail sectors.

SCOR’S steering committee consists on Brody Sweeney (pictured), Camile Thai Kitchen; David Maxwell, Boojum; Stuart Fitzgerald, LEON Restaurants; Michael Wright, Wright Group Restaurants; Brian Montague, Winding Stair Group; Andreas McConnell, Philip Lee Solicitors; Brian Geraghty, Crowe Ireland.

SCOR’s founding supporters also includes Rocket Restaurants, Chapter One, Insomnia, Kays Kitchen, Brambles Group, Dylan McGrath, Press Up Group, Gourmet Food Parlour, Sprout & Co, Offbeat Donuts, Jump Juice, Dublin Pizza Company, Freshii, Loko Restaurant, Chopped, ITSA Group and Bunsen.

SME Recovery Plan

A group of stakeholders under the rubric of  SME Recovery Plan has called for dialogue with the next government to shape a fully comprehensive plan to ensure the recovery of the SME sector.

The SME Recovery Plan group is calling for measures to reverse the current surge in unemployment, capitalise small businesses to support a post-COVID economic recovery and tax revenues to pay for general government services.

Group member John Moran, who was in charge of the Department of Finance a decade ago, stated: “Government action must recognise three core principles in handling this crisis: 1) That SME’s are vital to our social fabric 2) SMEs need a bailout with a compensation fund and enhanced liquidity supports, and 3) SME’s need a post crisis boost to demand.

“People have called for liquidity to be provided for viable businesses,” Moran added. “Government has responded with increasingly scaled measures to help businesses cashflows. While commendable, this adaptive approach now needs to be replaced by the next government with an approach that is comprehensive in scale and design. It must accept that equitable distribution of compensation for losses must form part of the plan.”

Download National Small Business Recovery Plan

Moran’s call was echoed by the Irish Hotels Federation. Elaina Fitzgerald Kane, president of the IHF, stated: “We are now in a fight for survival as an industry, with thousands of businesses facing a catastrophic outlook unless the required supports are provided without further delay. Over 90% of hotels have been closed since March yet 50 days later there are still no sector specific supports designed to address the unique challenges we face.

“We are calling on the government to introduce a zero Tourism VAT rate for 12 months, a waiver on local authority rates and charges until the impact of Covid-19 restrictions has abated and for a minimum of 12 months, as well as targeted liquidity measures to provide working capital for tourism businesses to survive and restart.

“We are also asking for a continuation of the job subsidy scheme so that businesses can keep their teams together and supported financially until businesses have recovered,” she added.

Pharmacy Woes

Elsewhere, Ireland’s 1,900 community pharmacies say they are struggling to cope with soaring costs and falling revenues.

An Irish Pharmacy Union survey of 430 pharmacies found that retail sales in pharmacies have declined by an average of 36% across the sector. At the same time, pharmacies have had to invest in new physical infrastructure to combat Covid-19 infection.

One in five pharmacies have laid off staff, while another two in five will be forced to so in the next two to three months. A quarter of pharmacies have reached their credit limit with medicine wholesalers, impacting their ability to purchase further supplies, while many more have had to defer payments to creditors, restructure loans, or expand overdraft facilities.

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