Part 1 - The Debt.
The Debt
How hospitality establishments became by design subservience to the Governments debt programmes
When governments ordered the hospitality sector to cease trading in March 2020, they created a dependency that would outlast the pandemic itself. The industry did not just accept loans; it entered into structured subservience—trading equity for liquidity, autonomy for survival, and future earnings for present solvency.
The Subservience Model
The architecture of pandemic relief was not designed to preserve independent hospitality—it was designed to prevent systemic collapse while ensuring compliance. In the United States, the $800 billion Paycheck Protection Program operated as a mechanism of behavioral control: keep your staff, maintain your lease, follow the rules, and we will convert debt to grant. Fail, and the debt remains yours alone.
This was not aid; it was conditional obligation. Restaurants that accepted PPP loans found themselves bound to government payroll mandates, restricted from optimizing labor costs, and trapped in rental agreements they could no longer afford. The 177,000 US restaurants that failed to secure RRF funding before exhaustion were left with only the EIDL programme—$28 billion in non-forgivable debt at 3.75% interest, now bleeding cash flow from operations that have yet to recover 2019 margins.
The British Mechanism
Britain's approach was more explicit in its structure. The Bounce Back Loan Scheme (BBLS) and CBILS distributed £76.85 billion not as relief, but as secured obligation. With government guarantees protecting lenders, banks bore no risk while hospitality operators absorbed £19 billion in real debt. The "Pay As You Grow" options—presented as flexibility—simply extended the duration of subservience, pushing obligations into an era of rising rates and compressed consumer spending.
90% forgiven
$38B EIDL outstanding
21.9% hospitality outstanding
2.3% default rate
83% hospitality uptake
20.3% bankruptcy rate
The Transfer
The critical mechanism of subservience was not merely the initial debt burden, but its securitization and transfer to institutional investors. Non-bank lenders like Ready Capital (NYSE: RC) originated $19.1 billion in PPP and SBA loans, then sold the guaranteed portions into securitization trusts (RCLT 2023-3, RCLT 2019-2). By Q4 2024, Ready Capital alone had sold $1.64 billion in guaranteed loan portions to institutional investors at weighted average premiums of 9.8%.
This transferred risk from the government to listed REITs and private equity. Hospitality CMBS delinquencies reached 7.23% by July 2025 (up 180 bps YoY), with 10.48% of loans in special servicing. As independent operators defaulted, their debt obligations became assets for distressed funds. Colony Capital defaulted on $3.2 billion in hospitality-backed loans, while Brookfield Asset Management and other listed REITs acquired distressed properties from failed operators.
Meanwhile, private equity executed a consolidation play. PE-backed platform acquisitions in the restaurant sector jumped 66.7% year-over-year in 2025, with average exit values increasing 110.7% to $920.1 million. Firms like Hony Capital (Pizza Express) and Calverton UK (Byron Burger) acquired distressed chains that had utilized BBLS and CBILS, effectively transferring government-backed debt to corporate balance sheets while eliminating independent competition.
The Canadian Extinction
No jurisdiction illustrates the subservience trap more clearly than Canada. The CEBA programme offered $60,000 per business—interest-free, with $20,000 forgivable if repaid by December 2023. Eighty-three percent of hospitality establishments accepted, the highest uptake of any sector.
But the programme was designed with a cliff: miss the forgiveness deadline, and the debt converts to a term loan with immediate repayment requirements. By 2025, accommodation and food services recorded a 20.3% bankruptcy rate among CEBA recipients—double the national average. The subservience became insolvency.
Those that survived did so by cannibalizing future investment. Average hospitality debt loads reached $333,000 versus $177,000 across all small businesses. Capital that should have modernized kitchens, expanded seating, or invested in staff training instead services debt incurred to survive a government-mandated closure.
Structural Transformation
The debt programmes accelerated a consolidation that governments quietly welcomed. Independent operators, unable to navigate complex application processes or absorb unforgiven debt loads, closed at rates of 18 per day in the UK during late 2022. Chain restaurants, with dedicated finance teams and existing credit facilities, captured market share—rising from 25% to 31% in Spain, similar shifts across North America and Britain.
This was the unspoken design: reduce fragmentation, increase corporate compliance, and replace the messy ecosystem of independent proprietors with standardized, regulatable chain operations. The debt served as a selection mechanism, filtering out small players while consolidating power among entities better positioned to serve as instruments of economic policy.
Strategic buyers—large corporate restaurant groups—reduced M&A activity by 37.1% in 2025, while private equity increased platform acquisitions by 66.7%. This divergence reveals the true architecture: independents were not meant to survive as autonomous entities, but as acquisition targets for listed franchisors and PE platforms with access to capital markets.
The vast majority of payments are being made as expected... however, 21% of BBLS borrowers have accessed Pay As You Grow options.
— British Business Bank, June 2025
| Programme | Mechanism | Transfer Destination | Current Status | Beneficiary |
|---|---|---|---|---|
| US PPP | Forgivable loans securitized via SBA 7(a) | Ready Capital RCLT trusts, Institutional investors | 90% forgiven; $1.64B+ sold to REITs | Listed REITs (RC, BX, BPY) |
| US EIDL | Non-forgivable term debt | SBA direct; no secondary market | $38B outstanding; 12% distress rate | US Treasury (direct) |
| UK BBLS | Govt-guaranteed bank loans | Debt collectors; PE firms (pre-packs) | 21.9% hospitality outstanding; 2.3% default | Private Equity (Hony Capital, Calverton) |
| Canada CEBA | Partially forgivable term loans | Major banks (RBC, TD, Scotiabank) | 20.3% bankruptcy rate; $9B+ repaid | Canadian Banking Oligopoly |
The Future
Four years after the initial lockdowns, the hospitality sector remains indentured. UK operators carry the highest concentration of outstanding COVID debt of any industry. US restaurants still service EIDL obligations while listed REITs hold securitized PPP assets. Canadian survivors operate under reduced capacity, having liquidated assets to meet forgiveness deadlines.
The "recovery" is statistical, not structural. Transaction volumes have normalized, but ownership has consolidated, margins have compressed, and autonomy has diminished. The government programmes succeeded in preventing immediate collapse, but they achieved this by transforming independent entrepreneurs into debt-servicing subordinates of state financial architecture—while transferring the underlying assets to institutional investors and listed firms.
In Part 2: How Russia's invasion of Ukraine weaponized global food systems—cutting wheat and grain corridors to the Global South, triggering fertiliser scarcity across European agriculture, and rerouting natural gas flows to drive input costs that reverberate through hospitality supply chains.
