The demise of Hong Kong bakery chain Crostini has sparked fears of a wave of catering industry closures after a Covid-related rent deferral scheme expired, with one representative saying around 2,000 firms may have to shut if they cannot pay outstanding sums this month.

A branch of Crostini at Time Square, Causeway Bay. File photo: Weizshaum KIAMZOU 300, via Wikicommons.

Crostini, which had at least 10 branches in the city, announced its shutdown on Tuesday night. Its founder Huang Guanghui told HK01 that cash flow dried up when landlords started demanding repayment of outstanding rent after the government’s three-month protection period ended in July.

Huang said business at his cake shop chain had fallen by two-thirds since the start of the Covid-19 pandemic more than two years ago, and he had already used his own assets and loans from friends to inject over HK$80 million into the company.

“I am sorry for my customers, really, and my colleagues, but there’s nothing that I can do,” Huang told the online media outlet.

Simon Wong, president of the Hong Kong Federation of Restaurants and Related Trades, said Financial Secretary Paul Chan had apparently thought Hong Kong’s Covid-19 situation would be under control by the end of July.

But as the window of protection waned, Wong said that in August around 8,000 catering firms – which amounted to more than 50 per cent of the sector – had been urged by landlords to repay rent arrears.

Wong, speaking on RTHK on Thursday, said around 60 per cent of them had reached agreement with landlords, such as payment by instalments or a discount.

A vacant shopfront in Tsim Sha Tsui. File photo: Hillary Leung/HKFP.

But more than 2,000 companies may have to close down if they cannot reach a deal by the end of September. “Such a situation should not be underestimated,” Wong added.

“At the moment the Covid-19 situation is still serious, and the borders are still closed, basically there aren’t any tourists. In this regard, we truly are like a desert island.”

Wong said local consumption has remained weak despite the government’s recent handout of electronic shopping vouchers, while social distancing restrictions had prevented the catering sector from benefiting from large banquets.

When asked if the government should extend its eviction ban for three more months, Wong said this would only create greater rental pressure. “On the contrary, more shops will consider closing down.”

Lawmaker Chan Siu-hung told the same radio programme the requirement to repay months of outstanding rent in one go was the “straw that broke the merchant’s back.”

Chan urged the government to offer tax cuts for landlords who were willing to exempt tenants from immediate payment of overdue rents, and to extend its interest-free loan programme for property owners who rely on rent payments.

Unpaid staff and disgruntled customers

Also speaking on RTHK, the Eating Establishment Employees General Union’s Chiu Kwun-chung said it had received requests for help from nearly 100 former Crostini employees.

A branch of Crostini at K11, Tsim Sha Tsui. File photo: Peachyeung316, via Wikicommons.

Around 70 of them were full-time staff who did not receive their salaries in September or redundancy payments. The rest, who worked part-time, did not get their wages for August and September. Chiu estimated that the total amount owed was between HK$3-5 million.

There were also hundreds of customers holding prepaid cake coupons. A woman who started a social media contact group for them on Tuesday night told the programme it already had over 500 members.

The group administrator, who gave her name as Yandy, said members on average had purchased around 200 cake coupons at a cost of HK$6,000.

She said the Consumer Council had told her they could request refunds from credit card companies, but the consumer watchdog “cannot help” if they had paid in cash.

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Peter Lee

Peter Lee is a reporter for HKFP. He was previously a freelance journalist at Initium, covering political and court news. He holds a Global Communication bachelor degree from CUHK.