A restaurant guide to the coronavirus crisis, what to do and what to expect next.
A restaurant guide to the coronavirus crisis, what to do and what to expect next.

The global outreach of the Coronavirus crisis, or Covid-19 as it’s now commonly called it will soon reach the UK with full force.

This is bad, very bad news for the hospitality industry… Check the Hilton share price below, does this means that investors believe Hilton lost almost 2/3 of its value due to a bad flue?

Hilton share price hit by covid crisis

 

Well, probably not just because of the flu. But we can expect a chain of events that going to have some long-lasting effects that we are going to briefly discuss.

 

Some basics about coronavirus

It was first discovered in Wuhan in December 2019. Like all other flu (or influenzas) it has been transmitted to humans via animals (apparently from bats this time according to livescience).

Hum delicious bat soup!

 

Most animals get influenza, my cat gets it every two winters, he looks miserable and sneezes for a week. But the problem is that they can be transmitted to humans.

This creates a lot of new mutants viruses which our body is not used to fight, meaning they can be stronger (higher death rate) or more contagious. This is why each year labs have to create a new vaccine against the new form of influenza (standard flu).

The median incubation time is 4.8 days which means that after that you start showing symptoms but it can be up to 14 days.

Shedding down to two days: viral shedding means that the virus has infected a host and is now being released in the environment. This means that you might be infecting people many days before symptoms appear.

 

What are the symptoms?

Basically, they are the same as standard flu. Both causes fever, headaches, tiredness, and coughing.

Covid-19 shows standard flu symtoms

They can lead to severe respiratory complications which could kill.

But you might not even show any symptoms at all.

 

What shall staff do if they are showing symptoms?

#1 Stay home

#2 Get a facemask. Contrary to what many think facemasks are for the sick not the healthy

#3 Contact your manager right away

#4 Monitor your symptoms

 

NHS recommends contacting 111 if:

  • you feel you can’t cope with your symptoms at home
  • your condition gets worse
  • symptoms do not get better after 7 days

 

Do and don’ts

Clean clean clean…

After being airborne viruses will land on various surfaces. You need to constantly clean these with soap.

Don’t be fooled by materials that you believe are “clean”. Scientists have proved that the virus survived the longest on plastic and stainless steel (see this article from MIT technology review).

No time to relax, just clean all the time!

The virus is fairly easy to kill according to researchers so keep cleaning with soap or alcohol:

  • Your hands (min 20 seconds always do it when you reach work/home)
  • Working surfaces
  • Menus
  • Bottles
  • Elevator buttons
  • Door handles
  • Glasses
  • Garbage bins
  • Chairs and tables
  • Packages from suppliers

 

Amend staff operational procedures

Add extra cleaning requirements, for example:

  • All staff mush wash hands every hour.
  • All staff mush wash hands after handling:
    • dirty plates;
    • outside packaging (supplier for example);
  • Never shake hands and avoid physical contact.
  • All staff mush wash hands after going outside.
  • All staff must wash hands after entering the bathroom (even if they don’t use it).
  • All staff should frequently use hand sanitizer.
  • All menus should be cleaned before handling to clients or disposed of after the client is done.
  • If you caught, use a tissue and throw it right away. If you caught in your hands wash them right away without touching anything else.
  • Stay home and alert your manager if you show any flu symptoms even mild.

 

Amend kitchen operational procedures

  • All staff must wear mask gloves and a hairnet while being in the kitchen. A new mask shall be used every day.
  • Wash all ingredients with soapy water before prep, rinse well and keep covered.
  • All surfaces must be washed with soap or disinfectant every hour.
  • Wash thoroughly all kitchenware.

 

Front of the house and guests interactions

  • Offer all guests to wash their hands with hand sanitizer.
  • Wipe all high traffic and sensitive area every 30 minutes:
    • Elevator button
    • Stairs ramps
    • Door knobs (particularly the entrance door)
    • Toilet and sink handles
    • Menus
    • Reception desk
    • Bar area
    • And any other area that is frequently touched
  • Try to spread out guests.

 

Don’t gather

Boston, where more than 70 people are believed to have been infected at a conference held by the biotechnology company Biogen.

Don’t gather it’ll get you canned (credits: equatordiving / Alex Sofanov)

 

Don’t touch your face

It seems that most transmission happens via human contact followed by touching your face.

Sadly no, it’s not ok to touch yourself with covid-19…

Contrary to what they advertise it’s not ok to touch yourself

Sadly this reflex is hard to beat:  studies show that people touch their faces more than 20 times every hour.

Always cover your mouth with a tissue or your sleeve when sneezing. Put used tissues in the bin.

 

Keep a safe distance

By staying from 0.5 to 2 meters away you will avoid most of the droplets coming from a contaminated person.

Touching a contaminated person or surface and then touching your face is a sure way of getting sick

 

How long will it last?

Well this is a very tough question, an epidemiology study by Imperial College (actually this is what Boris and Co use to make their decisions) indicates that it’s not likely to be over with what they call Non-Pharmaceutical Intervention:

  • social distancing
  • home isolation of suspect cases
  • quarantine

But a vaccine will take over 18 months to develop.

Just as a side note, the flu jab people get protects against a range of flu, not just one.

Until then they see two potential ways:

Mitigation: what the UK is doing which is mainly social distancing. They believe that this will still lead to hundreds of millions of death.

Suppression: what Italy and China did (ie close everything and keep people home).

But even with suppression, they believe that “transmission will quickly rebound if interventions are relaxed”. Ss soon as you let people get back to their normal lives you will create new epidemics that will need to be stopped by another round of stringent measures.

Although not all scientists agree on that, it coronavirus might give us a summer break. “Other viral respiratory diseases are seasonal, including influenza and therefore in many viral respiratory diseases we do see a decrease in disease in spring and summer,” Dr. Nancy Messonnier, director of the CDC’s National Center for Immunization and Respiratory Diseases “And so we can certainly be optimistic that this disease will follow suit.”

 

The economical battle

As we’ve discussed earlier this is just not about people getting sick. It’s just not even about a month of quarantine if that happens.

The problem is like restaurants people have fixed costs, rent, school fees, insurance, and many more. Many people will suffer from that crisis and will lose a large part of their savings.

Let’s get one thing clear, the government will not step-in to the level of the loss particularly the loses affecting employees.

Just as a reminder compensation payment for redundancy:

  • In France, on average 72% of your previous salary.
  • In the UK, maximum £71.70 per week

It is unlikely to change and extra measures are likely to only target the poorest tranche of the population.

They are just not prepared for that and this is just not the way government work. If you give everyone 2k per month you just create inflation, their worst nightmare.

To avoid that they prefer to provide lending facilities by inflating their balance sheet. Troubled businesses will be able to get very low rate loans (potentially 0%) meaning that once all costs are reduced to the minimum this minimum can then be repaid borrowing at 0 interest.

Another way to look at it is that the UK GDP is £2.6tr, so just two months halving the GDP requires 260 billion pounds…  At the heart of the crisis for the whole of Europe the buyout (buying bad assets) was EUR 60bn per month.

The way we see is that people will be bearing most of the cost. A small percentage will go through insurances and another small portion will come from government. But the one who will suffer the most is the “workers”.

This is confirmed with the latest plan announced by the government:

  • £330 billion worth of guaranteed loans, which means businesses can access funds on ‘favourable terms’.
  • Businesses will be eligible for a cash grant of £10,000.

 

 

Filing for liquidation

There is no shame to file for liquidation (the business equivalent of the individual bankruptcy) when things get really bad. Actually, it’s not about things just getting bad, the economic formula is simple. If you don’t foresee that you will receive positive cash flow soon it might be the right time.

It might be time to liquidate your restaurant? (source: Javax Chartered Accountants)

Something to remember is that the hospitality business is extremely tough. Even outside crisis times, the stats have it that more than 2/3 of the restaurants don’t get to see year 4.

Even if you don’t yet consider this route I would advocate talking to your accountant. In the event of bankruptcy all assets should be sold to repay all due amounts in the following order:

  • Secured creditors with a fixed charge: most likely banks who’s loan have been secured by assets like property or vehicles.
  • Preferential creditors: mainly employees
  • Secured creditors with a floating charge: stocks, raw material, etc.
  • Unsecured creditors: this covers trade creditors, suppliers, customers, contractors
  • Shareholders

They are various ways to liquidate a company in the UK, for more details check the HMRC website. But basically, a liquidator will be pointed to ensure a fair distribution from the sale of the company assets. You may also check this great pdf guide.

 

Insurance

This is a very tricky subject because the devil is in the details. You would need a solicitor to review the various insurance contracts that the company has.

But looking at what is happening with the existing owners who have been through that process outcome does not look very positive.

Most restaurant owners saw insurance as a parachute. Until it failed. (source: unofficialnetworks)

This is particularly true for smaller businesses that haven’t had a specific insurance policy drafted. According to The Association of British Insurers, standard policies do not include forced closure by the authorities.

Business interruption cover is generally worded in a way to compensate for damage to premises, following more standard events such as fire and flood.

So most businesses will not be entitled for compensation even if the government had forced them to close.

Some businesses might have bought cover for infectious diseases at an extra. But these still suffer from two major drawbacks:

  • Typically covers only in the case the restaurant is closed by the authorities as a result of disease at the premises.
  • Covid-19 is never included on the list of diseases covered by this insurance.

Ok so how to find if you’re one of the lucky ones covered by insurance.

First, you need to know that Coronavirus was labeled by the government as a ‘Notifiable Disease’.  If your policy covers these diseases (without a specified list) or contagious diseases, you may have some cover in specific scenarios. You shall find this under the ‘Extensions’ section of your policy.

 

 

 

All of that is terrible news for the hospitality industry and we expect that many will not see 2021.

It saddens me even more that this is Restaurant Solutions’ first post. But working on allergen transparent menus which is another major hospitality burden we felt like we needed to share some light on our discussions with the trade.

 

The fact that experts believe that suppression in the UK could be achieved with social distancing only is also a tough one.

This means that eateries will not have to be legally closed but patrons will be advised to avoid them.

As we’ve seen in the insurance part for most if not all policies this will not allow compensation but the loss of business will mean either cash bleed or temporary closure.

Sadly the government has not yet proposed any form of financial help to support the workers of the hospitality business. Let’s be honets, statutory sick leave at £94 per week is not going to cut it.

Emma McClarkin, the head of the British Beer and Pub Association put it “Forced pub closures without a meaningful support package will have a catastrophic financial and social impact”.

We believe there is another, more insidious, long term impact. Very little of the hospitality staff are British. Waiters, chefs, sommeliers that are on a very low wage can’t withstand the burden of unpaid leave.

We already hear stories of colleagues leaving back to their home country.

This associated with Brexit means there will not be a young, motivated, flexible workforce anymore, to support businesses, when things will pick up again.

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