Vancouver-based pub chain the Donnelly Group says it has filed for creditor protection to deal with pandemic-related debt.
In a Tuesday media release, the company said it had announced plans to initiate proceedings under the Companies’ Creditor Arrangement Act, and that the B.C. Supreme Court had granted an initial order.
The Donnelly Group owns 11 pubs and restaurants in Vancouver and five more in Toronto, as well as the Barber & Co. barber shops and Bomber Brewing.
“Despite the often startling perception of this filing, it’s very much a constructive versus destructive financial tool that will first bring added stability and then growth to our businesses operating in the embattled hospitality industry,” Donnelly Group founder and CEO Jef Donnelly said.
“This will be a survivor’s tale, one that we’re saddened to recognize cannot be told for many of our hospitality peers due to the tragic effects of the pandemic.”
In the release, the company said the restructuring was a result of the effects of the COVID-19 pandemic and not a reflection of its “team performance.”
Ian Tostenson, president and CEO of the B.C. Restaurant and Foodservice Association, said the province’s restaurants came out of the pandemic optimistic — only to “walk into a wall.”
“The wall was the shortage of labour, it was the inflation we’ve been faced with, it was increasing costs put on by government — paid sick leave, more holidays, the increase in the minimum wage,” he said.
“Who is going to pay for a $25 hamburger? It gets to a point where restaurants can’t pass that on.”
Tostenson said many B.C. restaurants are currently operating at 80 per cent capacity because they can’t hire enough staff, and the more than half are currently losing money.
He said inflation and the labour market show signs of stabilizing, but that the industry needs government support.
“Government’s got to step up and start looking at ways to lower costs, to reduce red tape and regulation, faster approvals — if you want a patio you shouldn’t have to wait six months,” he said.
“Those are hidden costs. And when you’ve got an independent restaurant particularly, where the owner is probably working seven days a week … they’re exhausted and anything we can do to take the burden off, especially administration, off them, it helps.”
Earlier this month, industry group Restaurants Canada said bankruptcy filings in the food-service industry had increased 116 per cent since 2022, and that the situation was expected to worsen as restaurants continue to deal with fallout from the pandemic.
“Restaurants are really in a post-pandemic fight for survival with half of our industry being unprofitable,” Restaurants Canada Western Canadian vice-president Mark von Schellwitz told Global News Morning in a May 18 interview.
“And the reasons are pretty obvious, we’ve got soaring inflationary cost increases, we’ve got pandemic-related debt that needs to be paid back, and we’ve got labour shortages that are preventing a lot of our members from opening at full capacity.”
The organization says a key issue is the repayment of Canada Emergency Business Account (CEBA) loans, which were originally issued to help companies bounce back from COVID-19. The loans must be repaid by the end of the year.
It’s calling on the federal government to extend the repayment period by 36 months, with a scale-down on the amount of the loan that’s forgivable the longer a company takes to pay.
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