Australia’s hospitality sector has been one of the hardest hit in recent years. Extended lockdowns, staffing shortages, soaring wage and supply costs, energy price spikes and cautious consumer spending have combined to create the perfect storm for many operators. Too many good businesses, often family-owned and deeply embedded in their local communities, have reached the point where directors can no longer see a viable path forward.

At Rodgers Reidy, we are seeing a continued increase in enquiries from hospitality owners who are exhausted, cash-flow negative and staring at mounting ATO debt and unhappy trade suppliers. The good news is that the Small Business Restructuring (SBR) process, introduced in January 2021, continues to prove itself as the single most effective tool for eligible companies to reset and survive.

We recently concluded an SBR appointment for a multi-venue hospitality group in regional Victoria that perfectly illustrates what is possible when directors act early and engage experienced restructuring practitioners.

The Situation

Our client operated three popular food & beverage venues (two pubs and a large bistro/restaurant) that collectively employed 42 full-time, part-time and casual staff. Pre-COVID the group traded profitably with combined annual turnover exceeding $5 million. Lockdowns and trading restrictions resulted in severe revenue loss while fixed costs continued. When trading eventually resumed, the accumulated debt (primarily ATO, trade creditors and bank facilities) had reached approximately $920,000 – still under the $1 million SBR eligibility threshold, but sufficient to choke cash flow and prevent any meaningful recovery.

Directors had personally supported the business throughout the pandemic but had reached the limit of their capacity. Without intervention, the likely outcome was voluntary administration or liquidation – meaning almost certain closure of at least two of the three venues and the loss of all 42 jobs in a regional community where alternative employment options are limited.

The SBR Process & Outcome

Rodgers Reidy was appointed as Small Business Restructuring Practitioner. Working closely with the directors (who retained full control of day-to-day trading), we:

• Prepared a realistic cash-flow forecast that demonstrated a clear return to profitability once the debt burden was addressed
• Negotiated payment holidays and discounts with key suppliers who wanted to retain the client relationship long-term
• Formulated a restructuring plan that proposed a dividend of 38 cents in the dollar, paid over 3 years from future trading profits
• Achieved unanimous creditor acceptance of the plan within the required 15 business day decision period

The restructuring plan was approved, and the company successfully exited the SBR process within 8 weeks of appointment.

All three venues continue to trade profitably today. All 42 jobs were preserved. Creditors will receive a return far superior to a liquidation scenario. Directors have a sustainable balance sheet and renewed confidence in the future.

Why SBR Works So Well for Hospitality Businesses

Hospitality businesses are particularly well-suited to SBR because:

• The underlying trade is usually viable once legacy debt is dealt with
• Directors/owners typically live and breathe the business – retaining control under SBR (unlike VA or liquidation) is critical to maintaining customer relationships, staff morale and supplier support
• Most debts are unsecured (trade suppliers, ATO, landlord arrears) and creditors generally prefer to keep a good ongoing customer rather than force closure
• Speed: the entire process is usually completed in 2–3 months

Since the regime commenced in 2021, Rodgers Reidy has successfully completed more SBR appointments than any other firm in Australia across virtually every industry sector. Our hospitality experience extends to cafes, restaurants, pubs, hotels, catering companies and function centres in every state.

The message to directors is simple: if your company has liabilities under $1 million and you can demonstrate a viable underlying business, SBR offers a genuine second chance. Acting early is everything, the sooner you seek advice, the more options are available.

If you or someone you know is navigating financial distress in the hospitality space, please reach out. A confidential discussion costs nothing and could save everything you’ve built.