The future of a beloved B.C. chain of fried chicken restaurants is uncertain as the repayment deadline for a federal loan approaches.
Adeel Jahangir, co-owner of Chicken World, is among hundreds of thousands of small and medium business owners who took out a Canadian Emergency Business Account (CEBA) loan during COVID-19, when public health restrictions limited access to restaurants.
He accessed the maximum amount possible — $60,000 — and if he pays back $40,000 by Jan. 18, Ottawa will forgive the remaining $20,000. If he can’t meet the deadline, however, he’ll owe the principal plus interest by Dec. 31, 2026.
“Worst case scenario is you close down the business. Whatever you have, you just pay back, and try to find a job,” Jahangir said Wednesday.
“Chicken World has made such, I would say, improvement or expansion that we have grown to five locations in the past few years, and for me, it was like a dream coming true. But now the demons are coming back.”
Jahangir, a former KFC employee, launched Chicken World in 2019 with his brother. Since then, its popularity has exploded thanks — in part — to a special blend of South Asian spices and menu items named for characters in the 1975 Bollwood film, Sholay.
The Vancouver-born chain now has two locations in the city, two in Surrey, and one in Victoria. The margins for the franchises are thin, he added, while the costs of everything — food, labour, rent — keep going up.
“The pressure is crazy. I have sleepless nights, long thoughts about it and not being able to enjoy with family at all, because I know it’s coming,” Jahangir said.
His bank has offered him a loan to help him repay the CEBA loan, but that helping hand would come with interest, so the restaurateur said it’s of limited use. Jahangir said he wants to stay in business, but is having trouble envisioning a path forward.
“The passion is there, the power is there, the willingness is there, but my hands are tied to do more because it is scary,” he said.
He’s not struggling in isolation; last month, Restaurants Canada released a report revealing half of food service companies are operating at a loss or just breaking even.
Sales have improved in the wake of the pandemic but profits are down “due to soaring operating costs” and low foot traffic that never recovered from pre-pandemic levels, Restaurants Canada found in its Foodservice Facts 2023 report. As it stands, only 12 per cent of restaurant operators have double-digit profit margins.
According to the B.C. government, some 122,890 businesses across the province accessed CEBA loans worth more than $6.6 billion.
Emily Boston, a policy analyst for the Canadian Federation for Independent Business, said only about 15 per cent of them have repaid those loans to date.
“You can imagine for many, they’re scrambling either to try to make this deadline so they can still access the forgivable portion, or are coming to terms with the fact that they’re going to have to pay the entire loan amount of $60,000 plus interest of five per cent,” Boston said.
“The mood is not great. Small businesses are feeling very unconfident about the next couple of months as well as the next year.”
Restaurants Canada has previously said bankruptcy filings in the food service industry have increased 116 per cent since 2022, and more restaurants are expected to shutter in the coming months.
The advocacy group has also called on Ottawa to provide struggling small businesses with a three-year extension on CEBA repayments with a “scale-down model” on the forgivable portion.
The federal government has extended the CEBA deadline twice — first from Dec. 31, 2022, to Dec. 31, 2023, and then from the end of this year to Jan. 18, 2024.
According to the federal government, $20,000 will be forgiven and no interest will be charged on a loan of $60,000 as long as $40,000 is repaid by Jan. 18. Similarly, $10,000 will be forgiven on a $40,000-loan if $30,000 is repaid by the deadline. Other forgiveness scenarios are outlined on its website.
In an emailed statement Wednesday, the press secretary for Finance Minister Chrystia Freeland said the “bottom line” is that businesses have three years to repay CEBA in full.
“The additional flexibility that we announced is significant support for small businesses who might still be struggling to make ends meet,” wrote Katherine Cuplinksas.
Boston, meanwhile, is calling Ottawa’s extensions insufficient, and “a bit of a slap in the face to small businesses” who were “crying out” for help and only got an 18-day extension for interest-free repayment from Dec. 31.
“We’re asking the federal government to extend the forgivable portion deadline by another year so that small businesses have a chance to repay this back, because it’s clear that right now many of them aren’t going to be able to do so, and they’re going to be at an even more disadvantaged position than they were when they first took out this loan in the pandemic,” she told Global News.
The average debt of small businesses in B.C. is about $100,000, Boston added.
“Asking them to take on more is definitely not something that’s going to help them right now.”
Jahangir agreed.
“It’s worse than the pandemic,” he said of his current situation. “Yes, this is the I think the rock bottom.”
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