Winnipeg restaurateurs fear they’ll have to close with rent due, no guarantee customers will return

By | May 15, 2020

Some Winnipeg restaurants say they may have to close their doors because they can’t pay rent as the coronavirus pandemic devastates the economy — and without changes to the federal government’s rent assistance program, advocates in the industry fear that will become a trend.

Edward Lam owns three Japanese restaurants in Winnipeg that started to reopen for takeout and deliveries last week, including Yujiro and Saburo Kitchen.

He said Yujiro is doing well and he’s overwhelmed with the support. Saburo Kitchen has also been doing all right — it’s surviving, he says.

But he’s considering shutting down his third restaurant, GaiJin Izakaya on Regent Avenue.

Since its reopening on the Mother’s Day weekend, he said sales have been half what they normally are, and rent at the Regent Avenue strip mall is higher compared to his other locations. 

“It’s so stressful,” Lam said. “I don’t know what the landlord will do. If we can’t pay rent, [will] they close us down, lock the door … sue me for it?” 

Lam said he managed to get half of his rent for April, May and June deferred, but starting in July, he’s going to have to pay that back. 

Lam said he’s considering closing down his third restaurant GaiJin Izakaya because he can’t afford the rent payments. (GaiJin Izakaya/Facebook)

His rent for that restaurant is approximately $9,000 per month. Starting in July, it’s going to be around $15,000 per month. 

In order to make payments, Lam said he has to make at least $10,000 in net profit each month at that location, which is not realistic at this point. 

He’s applying for a loan to keep paying for the five-year lease he signed for GaiJin Izakaya. But it won’t really help his situation, because he will eventually have to start paying it back, he said. 

If he can’t make rent payments for GaiJin Izakaya, Lam is concerned he might have to declare bankruptcy and shut down his other restaurants too. 

“Then, I’d lose everything and 75 staff are gone. Yujiro has been around for 15 years and it’s going to close because of that?”

For now, he has to choose between making minimum rent payments and paying staff.

Lam said he’ll be able to keep his head above water until June. After that, he needs to decide whether to close GaiJin Izakaya.  

Tony Roma’s location closes for good

Winnipeg restaurateur Danny Gonen has already shut down one of his businesses — the Tony Roma’s location on Nairn Avenue — because he couldn’t make rent payments. 

Gonen, who also owns Tony Roma’s locations on St. James Street and Pembina Highway, says he wanted to find a different solution. Even if his currently closed restaurants reopen, he fears he won’t have the same customer traffic he did before.

“People are probably going to be afraid … to venture out, and a lot of them are not going to have the the extra disposable income due to their overall economic situation,” he said. 

He said he asked his landlord, Superior Management, to defer his April and May rent to the back end of his lease, and offered to pay 10 per cent of his net revenue in rent when he reopened.

He said Superior Management declined the offer, asking him to pay 50 per cent of the usual rent and the deferred amount at a later date. 

The Tony Roma’s restaurant on Nairn Avenue is now closed. Its signs have been removed. (John Einarson/CBC)

On May 5, he said Superior Management terminated his lease and he was locked out. 

“It’s not a happy moment,” Gonen said.

Superior Management did not respond to CBC’s request for comment. 

Gonen said he approached his landlords for the two other locations with the same proposal. He’s still waiting to hear back.

“I’m concerned not only about this location, I’m concerned about the whole industry — the whole retail industry.” 

Waiting on rent assistance

Lam is still trying to find ways to avoid shutting down his businesses, including approaching his landlord about applying for the federal government’s rent assistance program, set to roll out this month.

The Canada emergency commercial rent assistance, or CECRA, program will see the federal government give qualifying landlords a forgivable loan to pay 50 per cent of their tenants’ April, May and June rent.

The landlord would have to cover at least 25 per cent, and tenant not more than 25 per cent.

But it comes with a series of conditions, including a requirement that the property owner reduce the tenant’s rent by 75 per cent from April to June.

The impacted tenant must also have experienced at least a 70 per cent decline in revenue. 

Lam said his landlord is waiting for more details on the program, and hasn’t made a commitment yet.

A photo of Lam’s takeout orders. He says the support for his first restaurant, Yujiro, has been overwhelming. (Yujiro Japanese Restaurant/Facebook)

Jonathan Alward, the Prairie region director for the Canadian Federation of Independent Business, said the program is overall a positive step, but it needs improvements.

The criteria that revenue must have dropped by 70 per cent, for example, should change because it’s “very black and white,” he said.

“There are a lot of businesses somewhere in between that have been really significantly impacted,” said Alward.

“You have incredible costs, but maybe their business is designed to operate at a thinner margin, like a restaurant, for example — so that’s a really big problem.” 

Another issue is that the program relies on the participation of the landlord to make it successful.

Alward said a recent CFIB survey indicted most business owners don’t believe their landlord will move forward with the program. 

“This is a significant bill that the federal government is asking them to take on. There’s still a lot of uncertainty [and] the program hasn’t even launched yet fully,” said Alward.  

His organization is calling on the federal and provincial governments to offer businesses a 50 per cent rent subsidy, regardless of whether the landlord can participate in the program. 

Working with tenants

Lam said he understands his landlord also has bills to pay, and that the landlords of his other two restaurants — Yujiro and Saburo Kitchen — have forfeited his rent during the months when he wasn’t operating. 

“They are super awesome,” he said. “They actually told us, ‘don’t worry about rent, we’ll probably come up with something.'”

Anup Chhibba also wants to help her tenants.

She owns a Petro-Canada gas station in Anola, about 40 kilometres east of Winnipeg, and rents out the land next to it to a family restaurant. 

Chhibba said she decided to forgive around 30 per cent of her tenant’s rent when she saw their business struggling and not operating at full capacity. 

“For me, it was better to have some renters than not to have any rent at all. So I had to forgive them some rent,” she said. 

But Chhibba’s business is struggling too, with gas sales plummeting because fewer people are travelling. She has mortgages and loans to pay, too.

Chhibba said businesses with commercial properties like hers also need help.

“They depend on the rent that pays part of their living expenses for the business, so when you’re not getting that rent, then a lot of their expenses will not be met and eventually the business will have to close their doors,” she said. 

Shaun Jeffrey, executive director of Manitoba Restaurant and Food Services Association, said landlords need to support their tenants by being open to all suggestions. 

“They’re experiencing situations that could have never been predicted,” he said. “They have to take that into consideration when they’re talking with their tenant.” 

That’s something Gonen understands too. He’s waiting to hear back from the landlords at his Tony Roma’s locations on St. James Street and Pembina Highway. 

“The problem is that neither landlord or tenant knows today what the future holds,” said Gonen. 

“All those expenses eventually will need to be paid, and they’re all going to come and hit the tenants at some point of time, but the revenue that you’ve lost over the time will never come back.”

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