Updated: 12th June 2020
As lockdown restrictions are eased, those within the hospitality and leisure sector are among the last establishments to be given the official go-ahead to reopen. While some have been able to transition to offering take-out and delivery options, for the vast majority of hospitality businesses this simply cannot compare to a full venue during a busy weekend.
Having already missed out on the traditionally busy Easter period as well as the two Bank Holidays in May, which would have ordinarily seen beer gardens packed with revellers keen to take advantage of the long weekend and the unseasonable hot weather, pubs and restaurant owners across the country will be keen to hit the ground running and make the most of the remaining summer months.
However, things may not be smooth sailing for those operating pubs, bars, and restaurants. A recent Real Business Rescue study has shown that night-time economy start-ups are at the greatest risk of failure during this time. In fact 39% of bars and restaurants are experiencing significant distress by their fourth year of trade not permitting the unprecedented business interruption caused by the ongoing coronavirus crisis.
Going out for meals and drinks is very much a one-off purchasing decision; once someone has decided not to go to a particular restaurant one weekend, it is unlikely they will visit twice the following weekend to make up for the lost visit.
Essentially, once a sale is lost, it is lost for good. Due to this, the hospitality industry is not prone to the same pent-up demand other sectors can rely on for boosting sales once lockdown restrictions are lifted. While many individuals will undoubtedly be keen to resume social gatherings, it is unlikely that people will visit pubs, bars, and restaurants to excess in order to make up for what they missed out on during the enforced closure period.
This means businesses within in the hospitality industry will be resuming trade from a standing start, potentially with depleted cash flow, and in an environment of low consumer confidence.
Despite lockdown restrictions easing, it is predicted that social distancing measures are likely to be enforced for the foreseeable future. For an industry which thrives on large-scale social gatherings, this could be a bitter pill to swallow and could well affect the ongoing viability of many pubs, clubs, bars, and restaurants across the country, particularly those operating out of small premises with little outside space.
Where space is at a premium, further restrictions on the level of patrons a venue can service, could make it simply unviable for smaller establishments to re-open. Figures from a recent study suggest that ensuring customers remain two-metres apart could reduce capacities of some pubs by 70%. In this scenario, takings could reduce to just 30% of pre-Covid levels, with outgoings remaining consistently high. Unless venues are able to find a way to bridge this shortfall in income, many could find themselves in acute financial distress over the coming months.
It could be a slow process waiting for trade to resume to pre-coronavirus levels. A combination of reduced capacity due to social distancing requirements coupled with hesitancy on behalf of customers to return to these types of venues.
It is not just patience which will be required while sales bounce back, but also a healthy reserve of funds. Unfortunately, for many, cash flow will have taken a hit over the lockdown period with overheads still needing to be met, despite income being slashed to zero.
If you are worried about how your pub, bar, or restaurant business is going to survive, you should make it a priority to seek expert help and advice. By speaking to a licensed insolvency practitioner, you will be able to understand your options, allowing you to make an informed choice when it comes to taking the next step.
There are a range of business rescue and recovery techniques which could help you stabilise your company during this period of upheaval, and the experts at Real Business Rescue are here to help you navigate your options.
This could include accessing emergency funding to provide an immediate boost to your cash flow, or embarking on discussions with creditors to renegotiate your existing payment terms. This could free up some much-needed cash at a time where trade may take some time to recover.
If your situation is more serious and you are experiencing increasing pressure from creditors, you may need to consider a formal insolvency arrangement such as a CVA or company administration.
If you believe your company is currently insolvent – that is, it is unable to meet its liabilities as and when they fall due – you have a responsibility to your creditors to seek professional insolvency advice. A licensed insolvency practitioner will be able to assess your situation and advise whether the company should be placed into voluntary liquidation. This is done through a process known as a Creditors’ Voluntary Liquidation – or CVL. Liquidation is a formally way of closing down a company which has growing debts and no likely chance of being able to repay these. As part of the process, all company assets will be identified and sold for the benefit of creditors. The company will then be formally shut down, its name removed from the Companies House register, and it will cease to exist as a legal entity.
If you would like to discuss the possibility of a rescue, recovery, or voluntary liquidation process for your pub, bar, restaurant, or nightclub, call the experts at Real Business Rescue today on 0800 644 6080.
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