Supermac's owner Pat McDonagh has said that the Irish fast food chain is likely to regain just 70% of its pre-COVID-19 crisis business in a best case scenario.
Rent Issue
Talking to The Sunday Independent, McDonagh said that he believes that a general review of rents is needed for the entire restaurant sector or "a lot of businesses will fold". According to McDonagh, some international property funds that have acquired sites at which Supermac's operates outlets are "refusing to play ball" on rent reviews, and are threatening to take legal action to enforce rents.
Supermac's has made deals with some of its landlords and its own franchisee tenants to pay half of usual monthly rental rates. The fast food chain has also granted its own franchisees an initial two month break from paying rent. However, McDonagh said that several of the chain's own landlords have issued legal letters in response to the proposal.
McDonagh told The Sunday Independent, "Some of [the landlords] are very, very understanding and you can deal with them on the basis that you agree a percentage. Some of them are kind of sitting on the fence. And then there's the 20% who are not listening, not taking no for an answer.
"The ones that are particularly avaricious that may have a couple of sites that they bought and they're the most difficult to deal with."
Insurance Issue
McDonagh also said that, with premiums rising, insurance is an increasing issue for Supermac's as well. He stated, "It was unsustainable up to now, and I know a lot of people who aren't bothering reinsuring, which is a dangerous situation.
"But, as I say the premiums were unsustainable up to now but I think in some cases they are nearly impossible now for businesses to be able to pay."
SMEs
McDonagh believes that whenever a new government is formed, it needs to have "a certain representation from business owners and from small business because they are going to be the pillars of the future for the country".
He said that the next government should focus on SMEs as the path to recovery, and that SMEs have been overlooked in favour of promoting foreign direct investment.
He asserted, "SMEs around the country have been neglected or forgotten about in the last couple of years when you've heard all about foreign direct investment. Now we'll really see the soldiers standing up who will lead the battle forward.
"No business in this sector is coming back to 100% of what they were taking prior to this. At best you're talking 60% or 70%."
Closures And Reopenings
The adverse impact that the COVID-19 crisis has had on business will result in some Supermac's outlets remaining closed for the foreseeable future, and 10% of the chain's outlets may not reopen at all. At present, 75 of the approximately 110 Supermac's outlets have reopened.
McDonagh said, "If a vaccine were found and things were happening again you would certainly relook at those. But there is no point opening them if you are going to lose money.
"In some cases, it won't be worthwhile depending on the location. It's interesting that the outlets that were busiest before the recession are now the quietest, say in the city centre locations because there is nobody practically in the city centre. When that opens up they will come back."
However, McDonagh noted that Supermac's is in a more favourable position that a lot of other restaurants that are facing social distancing challenges due to the chain's drive-through and delivery options, and added that businesses in general must remain optimistic, saying that businesses must "learn to live with [the virus] and survive. And then hopefully, if they do find a vaccine things will come back. But it will take a few years. This isn't an overnight or a year-long thing."
© 2020 Hospitality Ireland – your source for the latest industry news. Article by Dave Simpson. Click subscribe to sign up for the Hospitality Ireland print edition.
