Starting next Wednesday, restaurants, bars and cafes will be able to open their doors again, subject to restrictions. But after a painful two-and-a-half-month coronavirus shutdown, getting back to business still leaves the industry in deep financial distress and no prospect of any help from the government for now.
“About 10 to 15% of all the restaurants and cafes won’t reopen this month or ever, simply because they don’t have any way of paying suppliers, workers and rent,” said Tomer Mor, the CEO of the organization Misadanim Chazakim B’yachad (Restaurateurs Strong Together), which counts hundreds of members. “The industry has gotten a shekel of aid from the government. Only a handful of restaurants have gotten government-backed loans, and then they’ve been much less than they asked for.”
On Tuesday, the Health, Finance and Economy ministries reached an agreement with restaurateurs to allow them to open on May 27, subject to cabinet approval. The agreement allows establishments to be fully occupied by diners so long as the total doesn’t exceed 100; in places were the capacity exceeds that, only 85% of seats can be filled.
They are banned from hosting live events or allowing dancing, but recorded music with a DJ will be permitted. Diners must be kept at least 1.5 meters apart and their temperatures must be taken when they enter. Takeout counters will have to have a partition to separate workers from customers.
Sources at R2M, a restaurant group with five popular branches, said that despite the agreement, not all of its restaurants will open next week or anytime in the foreseeable future.
“During the entire [lockdown] period we operated Yehuda Halevy 79/81 Delicatessen and Bakery restaurants. We still haven’t reopened the restaurant over the Yehuda Halevy Delicatessen. Our M&R Brasserie on Ibn Gvirol [in Tel Aviv] will reopen, but not the first week,” said Ruti Broudo, one of the group’s partners.
“We still don’t know if the public is comfortable enough yet in terms of anxieties. If the coronavirus fears are still there, they won’t come. We’re in businesses to fill restaurants and make people happy. We want to hear the sound of dishes and cutlery and see life coming back. But one thing is certain, we can’t open five restaurants at the same time,” she said.
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Broudo said that many of her workers were anxious to return to their jobs, but that she will only be able to take some of them back.
“The challenge we face right now is to see whether we can operate the restaurants under the new system. In addition, there’s the challenge of coping with the debts we amassed during the months we were closed. All the restaurants ran up debts, throwing away food and covering fixed costs. I was optimistic and thought that if I didn’t pay rent or municipal taxes, I wouldn’t run up debts, but that’s not what happened,” she said.
A survey conducted by Dun & Bradstreet Israel found that about 4,000 restaurants are likely to close this year. Even during normal times, the business is very risky – only about 60% of them survive past their first two years. That’s because its an industry with a low barrier to entry and individual restaurants are vulnerable to changing customer habits and trends. Regulations are onerous and costs are high.
Even so, in an ordinary year, the number of restaurants that close is exceeded by the number of new ones that open. This year, however, the number of restaurant closings is expected to climb 40%, D&B forecasts.
During the coronavirus crisis, restaurants and bars could apply for loans from a state-backed loan fund operated by the banks. But most applicants were turned down because the business is seen as too high-risk.
Prime Minister Benjamin Netanyahu and Moshe Kahlon, who was the finance minister until this week, promised to set up a separate fund for high-risk business borrowers with government guarantees of up to 50% of the loan. But the fund still hasn’t been set up.
The terms for grant applications to a 6 billion shekel ($1.7 billion) fund for businesses that take back employees who had been on furlough have yet to be announced. Other grants to businesses that were awarded in March and April haven’t been paid out, and forms for grants due to be paid this month haven’t been sent out.
Many restaurateurs say that they need to get a loan before they can reopen for business and cover their starting-up costs.
“The grants for returning staff on unpaid leave is conditioned on our bringing back at least 75% of workers, but the restaurant industry isn’t expected to bring back more than 70% of its old payroll, so the grant isn’t relevant to us,” said Shai Berman, CEO of the Israeli Restaurants and Bars Association.
“We’re entering on a hard, new reality. It’s not going to be a reality of strong business. It’s hard to predict what will be in the coming days, but by the end of the year more than 4,500 businesses will have closed. Without aid, they have no chance of surviving,” Berman warned.
He predicted that more expensive restaurants and cafes would have a harder time in the near term. “It will be difficult for them to remain profitable and they’ll need to find a new direction,” he said.
Shachar Segel, a partner of the restaurant chain of celebrity chef Eyal Shani, said the business would have to shrink. All of the restaurants are reopening, but only about 60% of the staff is being brought back.
“It will grow as the situation demands. We’re now facing a dangerous and problematic period. We’re entering terra incognita ... . We don’t know what the government’s involvement in the industry will be. We’re in a situation mainly of uncertainty,” he said.
Segel said the chain was making some structural changes, meaning downsizing. He assumes that turnover will reach only 60% of its level in ordinary times and the business has to adjust. “Without a doubt this is the most complicated managerial task I’ve ever experienced,” he said.
Restaurateurs face added pressure from suppliers, many of whom have cut down on the credit they offer customers. This is critical because in lieu of bank loans, restaurants’ ability to put off payment on supplies for 30 or even 60 days is often a critical source of working capital for them.
Dorian Copitt, CEO of a group that comprises Bayern Market and other restaurants, said many suppliers were now demanding cash, or at most, credit of 10 days. “Suppliers were also badly hurt because so many restaurants didn’t pay them. Now they’re being asked to send supplies to those very same restaurants,” he said.
Not everyone believes the situation is so bleak. The celebrity chef Haim Cohen, for one, said he was planing a festive reopening for May 27. “If I had reopened two weeks ago, people wouldn’t have come. It made sense to reopen the restaurants relatively late. The rules, all told, seem reasonable,” he said.