The COVID-decimated bar and restaurant industry is getting a lifeline: cheaper alcohol.
The Ontario government is scheduled to announce Friday that bars and restaurants will get a 10 percent discount off the retail price when buying imported cider, beer, spirits and wine from the LCBO, Star learned.
“We recognize the challenge Ontario restaurants and bars have faced during the course of the pandemic, and reducing the prices they pay for beer, wine and spirits will help support these small business owners and thousands of workers. they employ, “said a senior government. source familiar with the movement.
The discount, which is being debated by the cabinet Wednesday afternoon, has long been sought after by Ontario’s hotel industry, which argues that a wholesale discount for licensees is common practice in most parts of the world, including 11 other provinces and territories.
“This is not something strange. It’s the norm and it will help some places survive, ”said James Rilett, vice president of Restaurants Canada in Central Canada.
Typically, Rilett said some of that discount would be passed on to customers in the form of lower menu prices, but given the hammering that most restaurants and bars have suffered due to repeated closures and capacity restrictions during the pandemic, suspects that the majority will not stop paying. prices.
“Their costs for everything have gone up and they’ve gone into a lot of debt,” Rilett said, noting that the 10 percent discount will only partially offset an increase in the minimum wage for service personnel, which is scheduled to increase. at $ 15 an hour in January. The wholesale discount would take effect in early 2022.
“This is a game changer,” said Erik Joyal, managing partner of Ascari Hospitality Group, who estimated that his company spends approximately $ 1 million per year on LCBO.
While bars and restaurants currently get a five percent discount from the LCBO, it is more than wiped out by a six percent license margin they also face; that means that licensees effectively pay one percent more than the retail price. The government plans to eliminate the licensee’s margin and extend the discount to 10 percent.
The move, according to estimates prepared by Restaurants Canada in a letter to Ontario Finance Minister Peter Bethlenfalvy earlier this year, will cost the LCBO $ 61.6 million per year. Of that, $ 34 million comes from eliminating the licensee’s margin of six percent, while $ 27.6 million comes from expanding the discount to 10 percent.
While the discount will cost the LCBO a significant amount of money, some of it could end up being recovered by the government in HST revenue if alcohol sales at restaurants increase as a result, Rilett argued.
The restaurant industry also directly employs hundreds of thousands of people in Ontario, Rilett said. And those jobs would be less at risk once a discount was applied.
“People are making the decision ‘do I stay open or do I just throw in the towel?’ At this time. This will prevent some places from closing and will keep people employed, “Rilett said.
Small businesses have struggled through the pandemic, none more so than restaurants and bars, said Ryan Mallough, Ontario regional director for the Canadian Federation of Independent Business.
“Many places are suffering. Even when they haven’t been locked in, there have been capacity restrictions for most of the last 20 months, ”Mallough said, adding that small businesses in Ontario have averaged $ 190,000 in debt during COVID. Restaurants and bars across Canada have added $ 300,000 in debt on average during COVID, Mallough said.
Reference-www.thestar.com