Victoria’s Bear & Joey restaurant closed on its fourth anniversary Sunday, unable to rise above the debt load accrued during an unprecedented time for the hospitality industry.
When Peter Wood, who successfully ran restaurants in Sydney, Australia, signed a lease for 1025 Cook St. in July 2019 and began building that December he could not foresee a global pandemic on the horizon.
Opening in May 2020, he admitted at the time it was either crazy or a stroke of genius.
Four years later, after deals to sell the business over the past six months collapsed, he and co-owner and wife Stephanie are talking with lawyers about potential bankruptcy.
“It was a huge array of emotions on Sunday, it’s a huge all-round loss to us,” Wood said.
The couple put everything they had into the business, other people’s money, more than two years of planning and most importantly building their team.
“We’re going to take a minute and pause and let the dust settle and deal with what we need to deal with,” Wood said.
The debt for the 70-seat, 2,500-square-foot restaurant started with almost $700,000 in construction costs committed “before COVID was a thing” and accumulated with multiple shutdowns due to public-health restrictions. There was $12,000 a month in rent and almost $30,000 in wages approximately every two weeks, he said.
“It all just caught up to us I’m afraid. It gets to a point where it’s like there’s being bullish and stubborn on making something work and then there’s just looking at the debt load and what realistically a business can provide and there was just a big disconnect.”
“Going through COVID without any government assistance was a near impossible task,” he said. Bear & Joey did receive a $40,000 Canada Emergency Business Account loan but it was a drop in the bucket, and not the government rent and wage subsidies that they needed.
Victoria consultant Frank Bouree said more mid-size independent restaurants may fold in the wake of the pandemic and the endless economic challenges that followed. “We’re going to continue to see some of this kind of fallout.”
Revenues have increased this year, he said, and new high-end restaurants have opened, such as Marilena Cafe and Raw Bar on Douglas Street in Victoria, as well as burger joints and cafes, but the impact of the last four years has not ended, he said.
“There’s still growth and there’s still things happening in the industry, but it’s with the big players and it’s the small cafes, but the ones in between are struggling.”
As for Bear & Joey specifically, “they probably had just about everything going against them and I give them credit for their courage, but it’s a tough business.”
Bouree said restaurants that have “just barely” made it through winter are hanging on for the cash-flow of summer “to dig themselves out of that hole.” Others couldn’t wait.
Smith’s Pub on Courtney Street abruptly closed last month after 17 years in business. Patrons found a notice dated April 11 taped to the door thanking staff, friends and customers for their support. “We didn’t want to go out like this, but things happen — Smiths.”
Shatterbox Coffee in Victoria Public Market at the Hudson, bought in 2017, also closed last month.
“The margins on a restaurant historically have been around five per cent bottom line before taxes so there’s not much wiggle room,” Bouree said.
Challenges for the food and beverage industry include the pandemic, repayment of government loans distributed during the pandemic, inflation-driven food costs, higher labour costs, higher rents and mortgage payments, and affordability worries keeping would-be diners at home.
“Overall, wage costs in restaurants are what are killing most of them,” said Bouree, adding there’s heavy competition for hospitality workers and B.C. still has one of the lowest unemployment rates in Canada.
Ian Tostenson, president and CEO of the B.C. Restaurant & Foodservices Association, said the closing of Bear & Joey exemplifies “the trouble that we’re in right now. We haven’t had much of a runway between the end of the pandemic and now. Rather than bouncing back after two years of closings, “it was one problem after another” including labour shortages, he said. “I would argue that our industry was the hardest hit, and it’s going to take the longest to recover. So the closure in Victoria, unfortunately, is what we’re seeing a lot of throughout British Columbia right now.”
The industry is hoping for lower interest rates, decreasing inflation, increased tourism, a strong summer patio season, reduced red tape especially in the area of liquor licence approval times, and “there’s no question that the Vancouver Canucks will help us” by being in the playoffs.
“We see sales growth coming at the end of this year and certainly going to 2025,” said Tostenson. “There is optimism.”
Recent growth has been in smaller speciality establishments that have lower labour costs, he said.
At Bear & Joey, Wood hopes to keep their skincare business and might consider a coffee-roasting company. The affordability worries have people rethinking a $6 latte and more willing to invest in good coffee at home, he said.
Before that can happen, however, there is much work ahead in closing the restaurant — most importantly paying staff and reimbursing deposits on bookings. Everyone will be repaid within 10 working days, he said.
One client, anticipating trouble in getting back her wedding-reception deposit, sought repayment through her credit card company. Wood said had that customer waited “literally two more days” for restaurant management to sort out reimbursements, she could have been repaid over the next two weeks but it’s in the hands of the credit card company now.
“If bankruptcy is the route, that is a devastating thing for everyone involved, but we wanted to make sure we got that money back to people before we went any further,” Wood said. “These people have had their events and weddings turned upside down and we’re so incredibly sorry for the stress caused.”
Wood said his family will continue to be part of this community and “we’ll have future ventures so the last thing we’d ever want to do is to have people like that or small businesses out money.”
Dealing with banks is one thing, he said, “but having debts like that, we didn’t want that.”
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