Industry Spotlight: Hospitality – Bars and Restaurants
Updated: Nov 9, 2021
Hospitality is undeniably one of the hardest hit sectors during the Covid-19 Pandemic. With three government mandated lockdowns in the last 2 years, thousands of establishments have closed their doors for good. According to a report issued by consultants CGA and AlixPartners, almost 10,000 licensed premises closed permanently in 2020. It is estimated that 640,000 jobs were lost across the sector, despite government support.
As well as the closures, further challenges included social distancing measures, outdoor only openings, curfews, tier systems, mandated mask wearing, the ‘pingdemic’ and the rule of 6. Particularly affected were small establishments that couldn’t viably open due to the restrictions in place, as a result of limited space or no outdoor provision.
It’s no surprise that bars and restaurants have become a noticeable trend in the insolvency statistics and we have definitely noticed an uptake in hospitality related instructions. The key issues we have noted in the sector are as follows:
Inability to trade due to lockdown
Loss of staff
Supplier issues and rising prices
Repayment of bounce back loans and CBILs
Rent and/or mortgage arrears
Covid-19 compliance costs
No online or delivery option
Winding up petitions
We have been aware of many companies seeking advice as early as summer 2020, but the continued government support has resulted in decisions being deferred. However, since winding up petitions for debts above £10,000 came back into operation on 1st October 2021 and furlough finally ended, decisions are now being made for such businesses.
The assets that a bar or restaurant can own are included but not limited to; commercial catering equipment, furniture and decor, vehicles, wet and dry stock, trademarks and branding, websites and social media accounts, customer databases and goodwill. There is also potentially a leasehold interest (which can often be a liability rather than an asset) and occasionally a freehold interest, although this is rare due to the rising costs of property.
So how can we help? A valuation is a key part of early advice. It can clarify your position and aid with the decision-making process. It is also a way of identifying surplus assets or elements of the business that can be sold off to raise capital. In an insolvency situation, any sale of a business or assets is going to be subject to scrutiny, and a valuation report will demonstrate to creditors and any proposed insolvency practitioners that Market Value has been achieved.
If we can be of assistance to you or any of your clients, please do not hesitate to get in touch on 01425 200366 or email@example.com.