POPULAR burger joint Milky Lane has appointed a restructuring practitioner as it faces mounting financial pressure.
As the cost of produce and wages rise, director Pete Haselhurst said it's been a tough time in the market.
"We've been here for six or seven years, Newcastle has been fantastic, it has been fantastic, but in general it's becoming harder and harder to make hospitality work," he said.
"When it comes to making a decision to restructure for a short period, we just get it done.
"We have to continue moving forward."
Restructuring allows owners to keep control of their business, property and affairs while putting together a plan to restructure the company and repay its debts with the help of a practitioner.
For a company to enter restructuring, directors have to show that the company is insolvent or likely to become insolvent in the future, according to the Australian Securities and Investments Commission.
Chifley Advisory's Gavin Moss and Henry Kwok were appointed to restructure Milky Lane earlier this week.
Mr Kwok said the number of businesses taking up the relatively new scheme has grown dramatically in the last 12 months, with even more expected this financial year.
"It's a scheme provided by the government during the COVID period to assist small businesses to restructure liabilities and offer them a way out in terms of continuing to trade," he said.
"Restructuring is a way for businesses to get a second chance and to address their liabilities."
The process takes about 35 days and Mr Kwok will help Mr Haselhurst prepare a restructure plan to present to creditors.
Restructuring practitioners don't take control of the company, the scheme allows directors to remain in the driver's seat and trade as normal.
Mr Haselhurst said the option to restructure liabilities likely saved a lot of Australian businesses from mass liquidations as a result of the impacts of the pandemic.
"It's not liquidation or administration, it's a reset," he said.
"It's there to continue good businesses that operate that can't scratch a few debts, to give them some support."
Mr Haselhurst said he wanted to make it clear that all of his suppliers have been paid in full, along with his employees and employee entitlements.
The business employs almost 30 people and Mr Haselhurst said the restructure will allow them to keep staff on.
"The whole reason we looked at doing this is because we want to retain our community and staff, we have employees that have been there for seven years now," he said.
Mr Haselhurst added that the popularity of food delivery services had also had an impact on income, and encouraged locals to return to dining in where they can.
"Restaurants don't make money on delivery, it's good cash flow but delivery fees are around 30 to 35 per cent, so if you look at your cost of goods being about 30 per cent and labour 30 per cent, you're not left with much," he said.
"It's difficult for hospitality venues because disposable income is being erased by interest rates, it's a tricky position right now and as a community we have to stand together."
Milky Lane isn't the first Newcastle hospitality business to confront financial pressures recently.
Islington's Pino's Restaurant chef and owner Dion Pophristoff announced this week he would hold his last dinner service on Sunday.
He told the Newcastle Herald he couldn't recover from the combination of rising food costs, repaying rescheduled Business Activity taxes and staff shortages.
