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Chris Heinhold: Would a reduced Vat rate have saved my restaurant? Probably not
@Source: irishexaminer.com
Just over seven years ago, when my partner Emer and I came across the idea for a board game cafe while traveling in Poland, it just made sense that we would open our own place and do something different. Looking back from this vantage point, it makes so little sense.
We got the keys for our cafe on Castle Street in Cork City on the same day we discovered Emer was pregnant with our first baby. To say ours was always a family business would be an understatement. The unit we moved into required rebuilding, as it did not have a real wall, or toilets, and the beautiful stonework had been covered in decades of plasterboard and needed to be uncovered by hand.
We were both studying when we began to put together our business plan and test the concept, and it was only with the help of good friends and family that the idea was able to develop. From pop-up events at The Roundy, to opening our own doors, took only a few months thanks to a Kickstarter campaign and a friendly bank manager.
Friendly and all as they were, it was that initial bank loan that sowed the seeds of our downfall. Fresh out of university, our presentation and writing skills enabled us to gather more debt than was sustainable even at that stage. And then, covid.
Before the pandemic, we had opened another venue in our hometown of Bantry, with the concept that our idea was scalable. Fortunately, we had also built a website to sell the board games that people were enjoying with their coffees, beers, and cakes. Those online sales kept our growing family above water through 2020 and into 2021.
The cafe on Cork City’s Castle Street never reopened after the first lockdown, being too small for social distancing, and it was quickly apparent the Bantry outlet was much better off focusing on food and drinks, so that is what we did. Pivoting became our new normal.
Over the seven years we were in business, we pivoted repeatedly. Hospitality is an amazing industry to work in. More than that, it is a way of life. It’s addictive. But the margins are tight, the hours are long, and the expectations are high. You are only as good as your last customer interaction, your last flat white, your last tapas dish.
The supports which government provided businesses like ours through covid were a lifeline. But as they wound up, Russia’s invasion of Ukraine led to an energy crisis, which rolled into the cost-of-living crisis, which was continuing to build when Revenue unfroze all the warehoused debt from those lockdown years.
The initial debt with which we had started our little business ballooned out of all proportion, just as the bills kept going up.
Despite both Emer and I taking full-time jobs outside of the business and not earning anything ourselves from the cafe, for the last year that our doors were open, it was only ever going to end one way. We had run out of pivots, run out of final chances.
I had been pumping money from my full-time job in to cover the gaps, and it had to stop. On January 28 this year, we served our last coffee and I began the process of insolvency. The process of bankruptcy is a fascinating one, and it genuinely feels like it was set up to get people back on their feet rather than as a punishment.
Could a reduction in the Vat rate to 9% have helped us stay open? Probably not. For us, like many small businesses that are owner-operated and continue past their logical end point, no one solution could have saved us from closure.
When you are staying open to pay debts and keep people employed, and not to build the business or turn a profit, you are being led by your heart rather than your head.
That is not to say the Government shouldn’t do what it can to save small businesses such as ours. The entire sector operates on razor-thin margins, unless you operate at scale. There is a reason you see the same brands mushrooming across the country. There is a reason big chain restaurants continue to turn a profit, while independent businesses shut up shop.
In the recent past, State supports have been applied to the entire industry, delaying closure for people like us, while adding to the profits of multinationals and franchises. This is clearly problematic, and we need to think about what sort of hospitality offering we really want.
It is vital that a way is found to support independent hospitality businesses, as distinct from the large-scale operations. If we fail to do that, we stand to lose so much of what makes us, ‘us’.
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