It’s no secret that the hospitality sector has endured a very tough couple of years. Even notable celebrity chefs and well-known chains have been forced to downsize or close their doors completely over the last few years, thanks to soaring costs and an abundance of competition.
According to research, around eight hospitality businesses closed for good every day in the last three months of 2024. A further 3,000 are expected to shut up shop in 2025.
It’s easy to see how smaller, independent cafes, bakeries, restaurants and the like could be overwhelmed with the challenges of the industry. For some small businesses, like our client, the Warrington Café (*name has been changed) one unexpected event can have disastrous consequences.
The car park problem
With a small team of six people, the Warrington Café occupies a prime location in the Warrington suburbs. Well established in the local community, it was a thriving business with a steady stream of regulars and passing trade. All that changed when the café’s landlord was approached by a third-party with a proposal to run the adjoining car park.
The new car park managers installed traffic cameras and a new ticketing system. Car park users would have just 45 minutes free parking before being charged. Nonpayment or lack of a ticket would trigger an automatic penalty charge.
The impact of this rule change was catastrophic for the Warrington Café. Where customers could previously pop in for a leisurely coffee or lunch, they would now very conscious that they couldn’t linger, for fear of being issued with a parking ticket.
With trade seriously down, the Warrington Café approached the landlord to find a solution, but he refused to reconsider. As a result, business continued to suffer and with fewer customers, the future seemed bleak. Rent, utility bills, staff costs and food bills continued at the same rate, but with a lack of cash flow, the café started to fall behind on its bills.
In a bid to attract customers back to the café, the owners decided to put some of their own money into the business to fund a renovation. While this created a stylish, desirable new space, it was an expensive project and didn’t address the root cause of the issue: the car park charges which were putting customers off visiting.
When the landlord eventually realised the huge amount of damage the cameras and parking system were causing, he removed them but by that point, the Warrington Café had spiralled into a huge amount of debt.
Business restructuring
With free car parking restored, the Warrington Café had a chance of survival – if they could clear their mountain of debt. That’s where we came in. The café owners appointed our business rescue specialists to help them take back control of their cash flow and restructure the crippling debt payments that were preventing the business from moving forwards.
We dealt with HMRC and negotiated a payment agreement with them and then spoke with suppliers and the landlord to create a more sustainable payment plan for the café’s arrears. The entire debt was restructured so the café could continue trading and pay down its debt in a sustainable way.
Today, the Warrington Café is a thriving business and popular local venue. It has won back its regular custom and is now back in the black.
If your business has been impacted by a change in circumstances beyond its control, you might feel powerless to turn things around. We can help. We specialise in turning around struggling businesses and returning them to profitability. Contact us on 0800 433 7016 for a free consultation.
