Since leading a buyout of the Mexican restaurant brand Boojum in 2015, David Maxwell, the Belfast based businessman, has been implementing a faced paced expansion plan across the island of island.

In recent weeks however, he has not been thinking about expanding his nationwide restaurant chain. Instead, with the industry decimated by Covid-19, he has been in survival mode – working with suppliers, staff and landlords to help navigate the company through the crisis.

While he is confident about his own business, he is increasingly concerned about the wider sector, and has now become involved in the Save Our Restaurants coalition, a group for restauranteurs who have developed proposals they believe will help many within the industry survive.

The aim of the campaign is to maintain employment in the industry when the shut down ends. To be this, it has proposed a package of tiered remedies to address three main issues – labour costs, occupancy costs and debt repayment.

Here he explains the background to the campaign and the detail of its proposals.

IK: Under normal circumstances we’d be doing this interview in person and you would be bringing me up to speed on the rapid expansion and success that your company has had over the last four or five years. Instead, we are in very different circumstances and you’re talking to me about a campaign you’re involved with to try and save restaurants across the country. Now, we’ll come to that and the various proposals that the group has put out in a moment. But just to bring us up to speed on your own business, you might explain the scale of it at the moment and the impact of Covid-19.

DM: So, Boojum has been a well-documented story over the last three or four years. We’re a successful Irish business, trading all over the island of Ireland. We have invested millions in 13 new outlets over the last four years, creating hundreds of jobs in Northern Ireland and all over Ireland and we’ve had some success in doing that and built a great business, a Mexican fast casual business that trades in all the major cities across Ireland.

And I suppose that’s not the point of this story. I mean it’s a good background, and lead in to where we are today but yes, we’re in a very difficult situation as an industry now. Covid-19 has hit hospitality extremely hard, extremely quickly. And unfortunately, it’s resulted in nearly 90% of our industry being shut down.

IK: And it is a massive industry, David, if you think about it. There’s 80,000 people across 6,500 restaurants and I suppose the fear is that 80% of those are in deep, deep trouble at the moment.

DM: Hugely, hugely. We’re in this funny space now where everything has just kind of stopped and that’s, that’s been – this sounds silly – that’s been the easy part.  Shutting the industry down is actually the easy part. Rebuilding this industry is the tough part and that’s why our group has kind of come together to try and figure out a plan of how that gets done.

So, look, as an industry, we have this great multiplier effect. I listened last night to Edwin Poots who’s the environment minister in Northern Ireland representing the agrifood industry and he said the impact of food service shutting down – or 90% of it being shut down – had a 40% impact in that sector alone. And unfortunately, retail and grocery weren’t able to pick up those volumes. And that’s just one side of what we do. There are billions spent in the eating out market across the island of Ireland annually. A huge portion of that filters back into other sectors. In 30%, a normal restaurant business, their P&L might look like 30% of cost of goods, 30% labour, some overheads, occupancy costs and a very fine margin on the bottom line. The average restaurant might make only 10%. You might go to some restaurants and they seem to be very busy, but those are fine margins and we need that high volume to make these businesses work. 

But that multiplier effect – for every £100 spent in our restaurant after tax, about £90 of that goes, filters out into the local supply chains, service sectors, whatever it may be.  I mean we use, a hundred different suppliers in our business across the island of Ireland, some large, some small and some of them are very reliant on what we do. And equally even outside our sector, we support a lot of the gig economy now with the delivery side of our business, hundreds of drivers across Ireland at the moment are reliant on the volumes that go through our delivery. And they’re not even in our P&L, they’re in someone else’s P&L, so this great multiplier effect, so I think, if we can figure out a way to preserve, to help our industry rebuild and preserve the diversification within that, it will also support so many other sectors.

IK: And I suppose that’s what you’ve come together, you’re sitting on the advisory committee of Save Our Restaurants, a coalition with Brody Sweeney and others. Before we get into the details around the proposals you’re putting in relation to labour, occupancy costs and debt, what prompted you to get involved in this?

DM: It started out as a number of phone calls between some concerned, worried business owners, I mean first of all Boojum, we were trading very well leading up to this period and then within almost two weeks – and it was that sudden – we went from 100% to 20% trading and it was … I mean it was an extreme shock.  And, you know, so we were hyper-focused on that and you can imagine the concerns that go with it and there were periods within that two weeks where we had no wage subsidy schemes announced, we weren’t sure what government were going to do, lots of concerned employees, concerned managers and it was a very, very difficult period.  So, you become very insular in those moments and you just want to protect your teams, your people, your business.

“We want people to understand what’s happening, and there’s so many stories of hardship and across the business, across the industry, people literally hanging on by a thread.”

IK: You’re fighting.

DM: You’re fighting, yes. Survival.  And this is only about survival. So, everything we put forward, this is about survival of businesses, of our industry.  So, look, we went through a period of reflection on our own business working with our suppliers or banks, and thankfully we have such an amazing base, an amazing supply chain and people who just really understood the problem straightaway and couldn’t do more for us. And I hope others have the same. It’s been amazing to see an entire industry and supply chain come together and try and face these problems together, and without that kind of co-operation, you know, it would be very, very difficult. 

So, we lived that journey and then,  I suppose we might be better positioned than some, and even myself personally, I’ve spent 25 years in this industry, I think I’ve done nearly every job and lived nearly every experience from starting a first restaurant with credit cards to working with banks in funding expansion plans and everything in between. So, I think I had a unique kind of view to bring to all of this and I wanted to share my experiences in this industry with others and see if we could help out and I wanted to look back on this period to say that, you know, David Maxwell and Boojum did absolutely everything they possibility could to protect all of the jobs in our own business but also the jobs across our entire industry, the amazing people that make up this industry and the supply chain that feed off it.

There were a number of phone calls that happened, a few people came together and what started out as a blank piece of paper quite quickly became a bit of a plan. It’s not perfect. We’re not economists, we are not politicians, we are not lobbyists.

IK:: Well, you are business people.

DM: Exactly, so we want to bring that operator, first-hand view of exactly what’s happening in our industry.  Try and articulate that as best as we can. We want people to understand what’s happening, and there’s so many stories of hardship and across the business, across the industry, people literally hanging on by a thread.

*****

“Businesses cannot afford their current fixed costs. You cannot trade at 30, 40% and be expected to pay all your fixed costs when, at the best of times, average restaurant margin is only 10%.”

IK: Well let’s talk about that plan, David, let’s get into the details on it. It’s a step-down plan in the sense of it’s phased, it’s tiered and it’s designed to keep businesses open and also to keep people in jobs.  And the first – there’s three key points, one’s the labour, once occupancy costs and the third is debt and there’s a range of supplementary proposals that I’ll come to at the end, but let’s talk about labour for a start.  You are saying that essentially the existing wage subsidy scheme will remain in place for the duration of the restaurant sector lockdown period be extended out and then there’ll be phased, tiered payments for the next 24 months depending on how bad a restaurant is faring based upon their 2019 numbers.

DM: As I say, we started with a blank page and there was a number of ideas brought forward, brilliant ideas brought forward, but actually what this needs to be is extremely simple for government to understand and also for restaurateurs to apply for or to make use of.  The wage subsidy scheme is a brilliant scheme. We trade in the UK and in Ireland and I have to say that the wage subsidy scheme in Ireland is very generous and it’s helped us unbelievably, as we’ve scaled back our business. So, it’s really just continuing that and that does two things.  One it’s active and most businesses have applied for or are making use of that scheme at the moment.  So, it becomes quite simple in that it’s just a continuation of something.

But what we’re very clear on, this group of people, is that whilst we’re trying to articulate a problem, some of us have a broad range of impacts across our business, so we’ve got people in our group who are trading at 0%, we’ve got people in the group that are trading nearly 90% and, you know, you’ve got Boojum somewhere in the middle, 25-40% now and thankfully we’ve been able to kind of scale up our operation on the takeaway and delivery side. 

But what that represents is a good cross-section of our industry, and the approach that we would like to take or are suggesting is taken is that there’s an equitable distribution of supports back into the industry that is based on turnover. So, what that will do is it will protect the most vulnerable. And the most vulnerable through all of this are the kind of fine dining independent restaurants, sit-down restaurants, smaller venues who will not be able to deal with the social or physical distancing measures as some people are calling it now as they’re introduced.

So, we know there’s going to be a gradual phase out of a lockdown and, a slow release of restrictions. We know that there’s going to be a significant lack of international tourism. We know there’s going to be a lot of concerned consumers out there who we have to encourage to get back into restaurants and the combined effect of all that is just, you know, it’s going to be very difficult for some to deal with.

So, our plan looks at distributing the support that’s available into the right areas. Restaurateurs are a proud bunch, we’re strong entrepreneurs, you have to be in this game, you have to be thick-skinned and you have to be up for a challenge and that’s just at the best of times. So, you know, it’s … we’re not looking for just a handout here but there’s no balance sheet, there’s no amount of capital in this industry that will be available to take on this problem. It will need help and we’re also obviously looking for an equitable distribution but also a kind of a grant-based system and not a loan-based system because we just don’t think debt is the instrument to get businesses through this period.

“These measures will help but it’s not a guarantee that all businesses will survive”

IK: Absolutely and that was a point Patrick Honohan made recently on this podcast  So, the proposal on the labour side is – I don’t want to say relatively straightforward – but it’s a tiered phased basis based upon the current wage subsidy scheme that’s in place.  The second area that you’re looking at is around occupancy costs and I suppose this is where it gets a little bit, a little bit more fraught, so we’re looking at things like rent, rate, water, business insurance, landlord’s insurance, utility bills and what you’re proposing is that again on a tiered basis depending on the impact the individual restaurant or restaurant chain has dealt with, you’re proposing that government subsidises those occupancy costs for viable restaurants for a two-year period post the lockdown ending.  And this aims to try and make many of those fixed costs variable and in line with actual sales.  So, you’re trying to right-size your cost base essentially with some government support.

DM: Exactly. A lot of the fixed cost in our industry was agreed at times when we weren’t facing potentially trading at 30% so it’s a simple equation. Businesses cannot afford their current fixed costs. It’s impossible, you know, you cannot trade at 30, 40% and be expected to pay all your fixed costs when, at the best of times, average restaurant margin is only 10%.  It’s just simple mathematics.  Nothing more, nothing less. 

But look, those fixed costs are, some of them are rents into private landlords who require being paid to survive. Some of them are services, utilities. Funds have to flow and that’s the point here. We need to subsidise the cost base so the business survives, but we also need funds to flow to some of those providers where the fixed costs sit. So, there are some initiatives we’ve seen in the UK where I think the hospitality industry are keen for a nine-month rent free, a break, and it will be bolted on to end of leases. There are some challenges in that but this scheme looks again at the impact on turnover, looks at the most vulnerable, those businesses that are suffering the most and then comes up with a fair kind of scheme that will get the grants into those businesses that need it, into the areas that need it. 

So, fixed costs, when you operate a business like a restaurant, the two things that keep you up at night are how you’re going to pay your staff and how are you going to pay your rent.  It’s quite simple. And those rents were agreed pre-Covid when revenues were significantly higher and now in a period of lockdown where some are trading at 0%, those costs are not manageable and when everyone is telling us this is going to be a long recovery, social-distancing and physical-distancing are here to stay and we’re looking at a two year period for sales to recover and in that time period, we need to cost base, to fix costs, to vary as the business recovers.  So, if there is a V-shaped recover – I don’t think anyone’s expecting it – then the amount of support required would be significantly lower. If there is a longer recovery and it does take two years, well, then the support is there and goes into the right areas and ensures that strong viable businesses pre-Covid-19 have a good chance of survival through all of this and if we can get support into those two areas, labour and occupancy costs, then that will give most businesses a better chance of survival.

It won’t save everybody. It simply won’t and this is not a plan that will save absolutely everyone, this is unprecedented set of circumstances facing the hospitality industry and people need to prepare themselves for their favourite local restaurant and coffee shops and others having a very, very difficult period now for the next two years.

These measures will help but it’s not a guarantee that all businesses will survive but it’s our sole aim to bring all of our experience to the table, to put forward a set of measures that give the entire industry and the most vulnerable within that the best chance of survival and so there’s a lot of reports that have been issued across the world that look at risk assessments across the hospitality industry.

If you think about our industry as a kind of a style of service, I think JP Morgan released a report that suggested that fine dining was most at risk and QSR, i.e.  your branded kind of restaurants were least at risk. And if we just lay our support in and allow anyone within hospitality access to the same level of support, it will unfairly support those who are least at risk and unfairly, you know, there will be those who need more support may not get it.  So, that’s what we’re trying to do here is to understand that.

“We’re asking the restaurant industry to do a lot as a nation to protect people but it’s throttling their businesses and it’s impacting our ability to recover”

IK: And just to put a bit of flesh on that for people listening, the proposal regarding occupancy costs piece is broadly based on the Danish model – 100% grant towards operating costs when the business is not allowed to open, 80% where turnover is down between 80 and 100% on 2019 figures, 50% grant where it’s down between 50 and 50% and 25% grant where turnover is down 20 to 25%.  So, it’s not a one size fits all solution and I think the message in this is it needs to be targeted at the right businesses who are viable but who need just that little bit of help at that period.

DM: Absolutely, so equitable distribution of support but also this is funded by taxpayers and this isn’t about protecting profits, far from it. This is about survival and protecting jobs.  I mean our entire industry has written off the next two years from a profitability perspective, this is about protecting jobs within our industry and ensuring we have a diverse hospitality industry at the end of it.  And that, you know, when the economy recovers and you want choice that you can go to those fine dining restaurants, you can go and have a coffee, you can go and grab a quick snack, you can go and have a sit-down lunch, whatever it may be, but to do that, to make sure that happens, then the support needs to go into the right areas to those who are most affected by Covid, and much like we’ve done that in public health, I think we should do that within the economy as well.

When we all look back on this period as a nation, we want to say we did everything we possibly could to protect every life. I mean we all have grandparents who we’re cocooning or shielding, we all have vulnerable relatives with underlying illnesses and rightly so, you know, we would give up everything in the morning for our family.  But as a nation as well we should be looking back and say we did everything we could to protect those businesses that we really asked to do a lot through this period. No one invited this, it caught everyone by surprise and a lot of businesses have suffered a lot as a result, because they’ve shut down to protect the nation. Now in a rebuild process, we should do everything we can to protect those vulnerable businesses as confidence is at a low and social-distancing measures are introduced which ultimately what that means in the restaurant industry is that the businesses are throttled so even if there strong demand there, that demand cannot be serviced because of the number of seats permitted in a restaurant or the amount of space required to be between customers. I don’t know of too many other businesses that kind of face that.  Some people have factories, they can put on a second shift or stagger shifts or implement things that ensure that their output remains constant.  The difference between our industry and that industry is that our sale has to occur at that moment when that demand exists. 

And that’s typically at a lunch time or in the evening or at the weekends and if those peak sessions are limited by the number of seats that are now permitted or the amount of distance required between customers, we can’t recreate that sale at any other time.  We can’t put on a second shift and say, ‘Guys, you can’t have your lunch now, you can’t have it at three o’clock,’ or, ‘You can’t eat dinner Friday at seven but we’ll get you at 11pm.’ That doesn’t happen.  And so there’s a nuance about our industry that has to be considered and we need to design measures that understand that and get the support in as a result.

So, we’re asking the restaurant industry to do a lot as a nation to protect people but it’s throttling their businesses and it’s impacting our ability to recover.  It will impact our ability to recover.

“This needs to be a grant-based system and equitable distribution and it needs to be targeted and protect the most vulnerable within our industry”

IK: Now, David, parts one and two, labour and occupancy costs, are essentially asks upon the state. The third one is in its dealings with the bank debt, so what you’re looking for is lenders to agree to rescheduling the repayment of loans, of fundraising leases, of hire purchases, mortgages for two year post the lockdown ending, based, that is, on clients who had performing loans at the end of last year before COVID came into effect.  So, it’s not a bailout for companies who hadn’t been performing anyway; these were all loans that were up to speed.  So, you’re talking about things like rescheduling debt repayment, interest only repayments, restructured capital repayments, modifying covenants.  I suppose the message is, you know, the banks can either play ball in this or they’re going to be dealing with an awful lot of casualties.

DM: I mean it’s a pretty simple choice.  The point here is that there’s no point in government stepping in with grants for banks not to assist. My experience so far has been quite positive, the banks are very supportive so far and understanding of the problem.  I think by setting a kind of benchmark on viability, none of this should be about protecting a business which was otherwise going to fail.  Taxpayer funds are not there to be used like that and banks should not be encouraged to save businesses that should not have been saved.  And we’re quite clear on that.  Where you set that line, I don’t know, but we seem to think if you’re unable to pay your rent, you’re in rent arrears and you’re behind on your loans and your business is suffering because of underlying issues other than Covid-19 then it would be hard to justify taxpayer funds going into those types of businesses and to encourage banks to be rescheduling debt as a result. So, that’s not for us to figure out but it’s just a suggestion that we would put forward. 

IK: But you’re trying to be sensible about it.

DM: Of course, how you ask for things and what you ask for are important so again we’re not economists, we’re not bankers, we know our business, that’s for others to put forward.  I mean we put forward a couple of suggestions with, you know, we used the word ‘viable’, it’s for someone else to determine what viable is, but like, yes, we’re encouraging governments to encourage banks to act in a way that’s fair and to understand again our sector’s hit particularly hard because of all of this and we’re going to have probably a slower recovery than most other industries.

I think the Central Bank of Ireland issued a report that looked at the economy by sector and they identified businesses who are at risk and I think the Central Bank stated in the report that 100% of hospitality businesses were in that high-risk bracket and other sectors weren’t as affected.  So, you don’t have to be an expert to get to that conclusion, but others are.  And so, banks need to be flexible.  We’re suggesting, look, if you can repay your debt on your current trading performance, then you may not need your debt rescheduled.  If you need to go to an interest-only arrangement, go to interest only.  And I think that will be a discussion between the individual business and the bank, but there needs to be some guidance from the government to encourage banks to act in a certain way.

Again I don’t know what that looks like and our group aren’t necessarily saying what it should be but there should be some flexibility in banking to make sure that the businesses survive through this period and that any available cash goes into the right areas, supporting the businesses, protecting the jobs, but ultimately the banks need to be repaid too.

“If we don’t save the restaurant industry, there will be thousands upon thousands of job losses and the government will be required to support those employees through welfare”

IK: Now they’re the three key points, we won’t get into the supplementary proposals in as much detail but there is a range of them and if anybody’s looking, they can go onto your website.  Corporation tax rebate, deferral of VAT, clarity around reopening is a big one.  Innovation fund for restaurants to encourage diversification.  Restrictions on SBCI, so that’s the Strategic Banking Corporation of Ireland funding to be relaxed, because we know that’s an awful lot about innovation.  Consumer stimulus, which is an interesting proposal, David, around putting a €750 fund essentially for everyone, free state funded vouchers so they can go out and spend and I think the Japanese did something similar, and also to allow business owners to access their pension funds.  So, I suppose without getting into all of them, there’s a lot that the government and policy makers can do to help an industry in this time of crisis.

DM: es, there’s various different phases in all that.  There’s crisis management initially, what can we do, you need to stabilise these businesses at some point and then there will be a time when we need to stimulate demand through various measures, whether that’s through tax or through simple measures like just literally getting money into the hands of consumers.  So, again, what we wanted to put forward is just a range of ideas, a palette that you could pull down from.  Others are doing the same.  There’s some brilliant work being done across our industry, across other industries and there’s a lot of shared common thinking between the industries and the bodies that represent, and so, you know, it’s really now I think people who have ideas should be bringing them forward.  This is the time it needs to happen and then for government to understand all of their options and make the best decisions going forward.  But ultimately these are horrible choices. Again this has caught everyone by surprise and governments are faced with, you know, very, very difficult choices, but the reality is if we don’t save the restaurant industry, there will be so many other industries that will suffer as a result because of that multiplier effect. 

If we don’t save the restaurant industry, there will be thousands upon thousands of job losses and the government will be required to support those employees through welfare and so our suggestion is get the money into businesses, let them do what they’re good at, save jobs and let them work through this period of physical and social-distancing and through a recovery period, because we will do that, we will fight for every single penny, every single job that we need to fight for but we will need help doing it.  But get the money into businesses.  The opposite of that is not a path that people want to go down but our industry is not well capitalised, it’s not capitalised to support all these jobs and loans will not cover this.  This needs to be a grant-based system and equitable distribution and it needs to be targeted and protect the most vulnerable within our industry to ensure we have a diverse hospitality industry at the end and all jobs are protected.

IK: Well if anybody wants to read the entire document, it’s worth a run-through.  It’s sorc.ie – Save Our Restaurants Coalition – and it’s a pretty heavy team behind it.  There’s yourself, Brody Sweeney, as I said, from Camile Thai, Stewart Fitzgerald from Leon Restaurants – this is just the steering committee – Michael Wright of Wright Group Restaurants, Brian Montagu of the Winding Stair Group, Andreas McDonald of Philip Lee Solicitors and Brian Geraghty of Crowe Ireland Accountants.  So, it’s a good cross-section even, you know, as you said, it’s not just, you’re not just representing yourselves or, you know, kind of quick dining or whatever else, it’s a broad selection right across the industry.

DM: So, what started out as a small group of operators, then we had some advisors in there to make sure that the conversation didn’t go to the ridiculous – again we’re not economists so thankfully we had some guys as kind of sense checkers in the room when we were bringing some ideas together.  And that’s kind of grown out now, there’s been a lot of brands who have shown support and independent restaurants across the country and we’re getting lots of positive messages through the website to encourage us to keep going.

IK: Well look, David, thank you very much for joining me here today.  That’s David Maxwell of Boojum and from the Save Our Restaurants Coalition.  I hope you and your family and all your staff are staying safe and we’ll probably check in with you in a couple of months’ time to see where the campaign is and how much has been implemented and where the status of the industry is at that point.

DM: Sure, would love to.  Thank you very much.

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