Cocktail bar, Italian restaurant call it quits amid COVID-19 challenges for F&B sector

Cocktail bar, Italian restaurant call it quits amid COVID-19 challenges for F&B sector

(rp) Jekyll and Hyde shophouse
Mr Chua Ee Chien, the owner of Jekyll & Hyde, said he decided to close the bar after failed negotiations with his landlord and the uncertain economic conditions. (Photo: Rachel Phua). 

SINGAPORE: From S$1,726 in February to S$1,545 in March and then S$723 in April. The average daily sales at downtown cocktail bar Jekyll & Hyde steadily dropped as the COVID-19 pandemic hit business.

By April, sales were down by 70 per cent compared to five months ago in November, as the bar could only do deliveries and takeaways once dine-ins were off limits under the “circuit breaker” measures that started on Apr 7. 

Even before that, its owner Mr Chua Ee Chien had been busy negotiating with the real estate management company that represents the landlord to reduce rent. Companies in the central business district had begun directing workers to telecommute, and the number of customers he could serve was limited by safe distancing protocols.

(rp) Jekyll & Hyde owner
Mr Chua Ee Chien is the owner of downtown cocktail bar Jekyll & Hyde, which will close after its tenancy ends in June. (Photo: Rachel Phua).

After weeks of e-mails and phone calls, his landlord agreed to cut his monthly rent from S$14,000 to S$5,750 for either the rest of the year, or until Singapore returned to the DORSCON green level, whichever arrived earlier. But there was a catch – Mr Chua had to sign a personal guarantee, meaning he would become personally liable for payments to the landlord if the business was unable to fulfil them.

READ: COVID-19: Delivery and takeaway models unsustainable, say restaurant owners

Mr Chua said that he found the personal guarantee order unwarranted, since the landlord was already holding on to a S$42,000 deposit. And with the uncertainty over how long the COVID-19 situation will last, Mr Chua chose to cut his losses and will close shop once his tenancy ends on Jun 14.

“It's a terribly unfortunate situation we've been placed in,” said Mr Chua, who bought over the six-year-old bar in 2018. 

“I’ve poured a lot of time and effort into this over the past two years, and sacrificed a lot, including money and countless hours with the team, (who have) slogged away to carry the bar (this) far,” he said. 

This request for a personal guarantee came only after Mr Chua had made one more appeal -that if he failed to settle his rent on time at the end of each month, he would pay 5 per cent interest on top of the S$5,750 rent. However, the landlord's condition was that he should pay the full S$14,000 if he did not meet the stipulated monthly deadlines.

From the landlord's perspective, the tenant's request to pay 5 per cent interest instead of the original amount had "set off alarm bells", a spokesperson from the asset management firm representing the landlord said.

There was also the risk that the S$42,000 deposit would not be enough to cover the cost to renovate the shophouse and unpaid rent if the bar folded before the end of the year, the spokesperson added. She asked that her company not be named as it would jeopardise their relationships with other tenants.  

(rp) Jekyll and Hyde tras street bar
Jekyll & Hyde is one of two known food and beverage outlets that will close as business goes south due to the COVID-19 pandemic. (Rachel Phua).

Now that Jekyll & Hyde's closure is drawing near, one of Mr Chua's three full-time employees is now looking for another job in a new industry, he said. 

Mr Chua has been working with the other two to scout for a small joint where he can continue to sell bottled cocktails and keep them on the payroll until he finds a permanent space when the virus blows over. 

“(But) there are no certainties,” Mr Chua said. 

HARSH TIMES AHEAD

Even with financial help such as wage subsidies and a property tax rebate from the Government, the food and beverage (F&B) industry faces huge uncertainties.

Aside from circuit breaker measures, the lack of tourists and safe distancing rules will batter the industry, said restaurant operators and analysts, as relief measures can only help players shore up cash flow in the short-run.

Many independent restaurants operate in tight liquidity conditions and high overheads as rental rates have continued to rise in recent years, said Mr Pua Wee Meng, a consumer industry leader at Deloitte Southeast Asia.

He expects the industry’s outlook to remain in the doldrums, particularly among eateries heavily reliant on the dine-in crowd, as consumers continue to practice safe distancing for some time. 

READ: 'It’s about trying until our last breath': New F&B players cook up survival plans for COVID-19 crisis

Restaurant operators also face the challenge of managing food costs during this difficult time, Mr Pua said, having to gauge the amount of ingredients to procure against uncertain demand, while balancing wastage and the risk to food quality. 

It would be even harder for those with “low-loyalty patrons”, such as those that cater to the mass market or tourists.

And though many restaurants have introduced online delivery services during the circuit breaker, this strategy squeezes their already-tight margins with higher costs in packaging, resources to manage the orders, transportation and high commission payments to third-party delivery platforms, Mr Pua added. 

Even before the circuit breaker came into play, a survey published at the end of March among 174 F&B business owners representing 249 establishments found that 93 per cent had seen a decline in revenue.

The study by restaurant booking platform Chope also reported that 80 per cent of those polled said they were reducing staff to cut costs and a third had imposed compulsory leave for full-time employees.

Nearly four in five businesses then said they were not prepared to last longer than six months if the situation did not improve. 

The industry’s workers are also on shaky ground. In its latest macroeconomic review published on Apr 28, the Monetary Authority of Singapore (MAS) noted that the F&B industry is one of the sectors where workers are “most vulnerable” to lay-offs as competitive pressures among F&B operators were already acute.

Many of these firms tend to be small and could face significant credit constraints, which would limit their ability to hold on to their workers, MAS added.

Two-and-a-half weeks ago, Ashok Melwani broke the bad news to his team of 50, some of whom had been with him for more than 20 years, that he was calling it a day at both of his Modesto’s restaurants.

After 17 years at The Elizabeth Hotel, Modesto’s@Elizabeth ceased its dine-in service when April came to a close, although its kitchen will run till the end of May to cater to guests serving their stay-home notice. 

And in June, Modesto’s@Orchard at Orchard Rendezvous Hotel will shut its doors after 23 years. 

Mr Melwani chose to wind things up after predicting that he would bleed for the rest of the year if he continued, he said. The tourist clientele, which the restaurants are heavily reliant on, has all but dried up. 

In March, he lost about S$200,000, he said, while April's earnings are still being calculated. Both outlets were only able to keep going by relying on what he accrued last year, when profit margins were between 6 to 7 per cent, he said.

(rp) Modesto's Orchard Rendezvous Hotel
The Modesto's Orchard Rendezvous Hotel branch will close in June after being in business for 23 years. (Photo: Ashok Melwani).

“I cried at home the night I gave out the (retrenchment) letters,” said Mr Melwani, who laid off the first batch of 15 at the end of last month. 

“I (would) rather the affected staff get on with looking for new jobs as soon as possible, (since they) probably need to look at (other) industries at this time,” Mr Melwani said. 

To help his retrenched staff members, Mr Melwani is looking for job leads among his friends and acquaintances. So far, three of them, including two foreigners, have managed to secure a position elsewhere.

He also launched a mini-fundraising campaign, setting aside 40 per cent of takeaway sales proceeds in May to help former employees who are in between jobs. 

READ: More companies announce wage cuts, no-pay leave amid COVID-19 economic downturn

The employees have been understanding, he said. Some of the longer-serving ones have sent him messages to say they appreciate whatever support he is trying to give.

Former customers have also sent their regrets. One told him how he had, without fail, celebrated his birthday with his extended family at the Orchard Road branch every year - now that tradition would be broken. Another said: “My daughters are going to cry when they hear this.”

“I think I’ll cry too, when this is all over,” Mr Melwani said. “Now I’m just focused on ending the business well.” 

Editor’s note: This story has been amended to reflect that Jekyll & Hyde’s rent was due at the end of the month, not the start. We apologise for the error.

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Source: CNA/rp

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