BUSINESS
05/03/2020 08:58 EDT | Updated 05/07/2020 16:54 EDT

Canadian Business Survey Finds 4 In 10 Companies Can’t Survive 90 Days Of Social Distancing

Many business models just don't work when everyone has to stay two metres apart.

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MONTREAL — The dining room at Pazzo Pizza and Taverna in Stratford, Ont., is closed due to the pandemic and its entire staff has been let go, but as far as small businesses go, this might actually be one of the lucky ones.

Unlike many others, it has no rent to pay, and the mortgage has been temporarily deferred. That gives business partners Larry McCabe and Jeff Leney some breathing room to ride out the COVID-19 crisis.

But McCabe is acutely aware many Stratford businesses are facing much more immediate financial problems ― problems made worse in this tourist town by the closing of the entire season of the famed Stratford Festival.

And he knows when his dine-in pizza restaurant reopens it will not be what it once was.

“What our business looks like is going to be very different, the number of employees will be very different, the use of interior space will be very different,” he told HuffPost Canada.

Watch: Trudeau unveils rent relief for small businesses. Story continues below.

 

McCabe says he’s been told to expect that when the restaurant reopens, social distancing rules will require the dining room to have no more than 50 per cent of its previous capacity. And he says he is preparing for the possibility of repeat lockdowns in the future.

“We’re looking at how we can stagger reservations so that that can happen,” he said. 

He’s confident people will want to sit on the patio in the summer weather ― but not sure if they’ll be comfortable in an indoor dining room. He and Leney are even looking into the possibility of serving customers in the parks that line nearby Lake Victoria. 

And keeping the staff safe from infection will be a priority. “It’s not just, how do we sell things? It’s, how do we do things safely?” McCabe said.

“We’re redesigning everything.”

Clara Leney
Jeff Leney (left) and Larry McCabe pose in front of Pazzo's Taverna & Pizzeria, the restaurant they run in Stratford, Ont.

It’s not only restaurants that are redesigning everything ― practically any business that involves people congregating in some way will have to rethink its practices as the world reopens to new social distancing rules.

Airlines, for instance, are looking at the possibility of removing middle seats, and having seats face in different directions. And as if flying post-9/11 wasn’t uncomfortable enough, it’s likely to get even more so: Canada has announced it will now require air travellers to wear face masks in flight, among other measures.

But the prospect of a new normal with far fewer passengers has the industry unnerved ― to the point that the CEO of discount European carrier Ryanair lashed out at social distancing rules as “idiotic.”

While most entrepreneurs haven’t reacted quite as harshly, at least in public, many don’t see good prospects under these conditions. 

Major problems ahead

In a joint survey with the Canadian Chamber of Commerce, Statistics Canada reported that nearly four in 10 Canadian businesses ― 39.7 per cent ― say they can survive no more than 90 days being partly or fully open with social distancing measures in place.

A full 17.5 per cent of businesses said they can tolerate no time at all under these conditions.

The survey was somewhat vague about what “social distancing” specifically means for any given business, leaving it to respondents’ imaginations. But that degree of negativity suggests business owners see major problems ahead.

As it waits for the lockdown to end, Pazzo’s is surviving by taking delivery orders ― something the dine-in pizzeria has never done before.

While it may seem those food delivery apps that have exploded in popularity in recent years would be a good solution, McCabe discovered they’re of little help to his business.

“When they’re taking 30 per cent, there’s no margin. You just end up going broke faster.”

Simply operating puts Pazzo’s in the minority: According to data from Restaurants Canada, 53 per cent of the country’s restaurants are simply not running in the lockdown. 

How many will reopen when it’s lifted is an open question ― as is whether their customers will return. 

There is no way to know, but McCabe estimates Pazzo’s will be earning 30 cents for every dollar it used to earn, once the lockdown ends.

“There’s enough work for three or four of us, but in the summer we would have 70 staff. We won’t get back up to that probably for the next couple years.”

They’re working on “shock-proofing” the business against future closures, but ultimately, “we can’t just keep opening and closing,” he says. “That’s not tenable.”

Going where the demand is

Their lender has granted them a mortgage deferral, and they plan to “pass along the savings” to a tenant on their property, a clothing store owner who recently had a baby.

McCabe is looking into the federal wage subsidy the government has launched, but says it’s hard to ask the government for money for wages when you don’t even know how many people you will need for your business. And in any case, these are temporary measures, not solutions.

“There will be a point where you don’t have support, and you will have to function in some way,” he said.

In the meantime, McCabe and Leney are even considering the possibility of changing the business Pazzo’s does ― in essence, going where the demand is.

“We may be doing a different thing because we own our own property ― whether we get into groceries, whether we get into other areas of sales.”

Alternately, “we have two kitchens. Under some circumstances one could be a community kitchen. We could help, and people here would love to help.”

“It’s not just, how do we sell things? It’s, how do we do things safely?Larry McCabe, restaurant owner

McCabe worries mom-and-pop businesses simply won’t be able to keep up with the complexity of the changes coming, and may choose to stay shuttered. But he’s more worried about those that took on large amounts of debt before the crisis, when the economy was hot.

“It’s a lot of debt without any equity. They don’t own their buildings. They can postpone rent for three months, but after that, eventually you still have to come up with a model that will work for the next few years ― if everyone’s going to be honest with themselves.”

But as the initial shock of the economic crisis wears off, McCabe is seeing attitudes change, and he has reason to hope.

“There are a lot of positive things that will come out of this as well,” he said. “People will be forced to really look at the people in their community, their strengths and how they can work together.

“We started out being very negative about this, everyone was shocked, and now we’ve come out of shock to ask, ‘What does this mean, and what can we do?’”

CORRECTION:An earlier version of this story referred to Pazzo’s restaurant. It is in fact called Pazzo.