Hospitality sector struggles – but restructure offers recipe for reinvention

By Emma Mos, Partner, Jirsch Sutherland

The latest figures from ASIC highlight the continued strain on Australia’s hospitality sector. Between July 1, 2024, and May 25, 2025, more than 1,000 businesses in the accommodation and food services industry – mostly cafes and restaurants – shut their doors. It’s a sobering reflection of the pressures faced by small business owners in the wake of the pandemic, rising costs, and staffing challenges.

But while many are doing it tough, not all roads lead to closure. For viable businesses burdened by legacy debt, the Small Business Restructuring (SBR) process can provide a much-needed path forward.

A pizza shop’s recipe for recovery

A family-run pizza restaurant on the NSW South Coast is one such example. The business opened just before COVID hit and was quickly impacted by lockdowns and restrictions. Recovery was slow, hampered further by staffing issues and a breakdown in the relationship between the two directors.

By mid-2023, the business had accumulated significant debt and was struggling to meet strong local demand. We worked with the remaining director to implement a Small Business Restructuring plan that gave them the breathing space needed to regain control of the business. The plan involved an upfront third-party contribution and monthly repayments over 10 months, delivering a return of approximately 20 cents in the dollar to creditors. With all contributions now made and the final distribution underway, the restructuring process is being finalised.

Beyond the numbers: a business rebuilt

Importantly, this restructure did more than stabilise finances – it became the catalyst for a broader business transformation. Working closely with our team, the director used the breathing space created by the restructure to overhaul operations, lift capacity, enhance awareness and rebuild customer confidence.

Operational improvements

We helped the director assess and realign staffing levels, simplify the menu to reduce waste, and introduce cost-saving measures while maintaining service standards. An experienced chef was also brought in to streamline kitchen operations and improve output.

Doubling capacity

Installing a new commercial pizza oven has doubled production capacity, allowing the business to meet demand it previously couldn’t service. A new team was hired, bringing fresh energy and professionalism to the front and back of house.

Community engagement and marketing

The business also ramped up its marketing efforts. Through targeted social media campaigns, collaborations with local businesses, and involvement in community events, it reconnected with existing customers and attracted new ones.

Clearer leadership

With one director stepping away, the remaining director gained the clarity and control needed to drive the business forward with a unified vision.

This case is a strong reminder that restructuring isn’t just about numbers – it’s about giving business owners the opportunity to reset and rebuild. The pizza restaurant had all the fundamentals: a good product, loyal customer base, and local demand. What it lacked was the breathing room to make necessary changes. The SBR process provided exactly that.

A practical solution in tough times

With insolvency rates rising and pressure mounting on the hospitality industry, I encourage directors to explore their options early. If your business is viable but weighed down by debt, SBR can offer a practical, affordable solution that preserves your operations and protects your future. At Jirsch Sutherland, we’re seeing more small business owners use this process not just to survive – but to emerge stronger.

Emma Mos
Partner
Jirsch Sutherland