'It's a death sentence for our business': How a pioneering Stockholm food truck lost out on Covid-19 support

Erez Ofer and his wife Stephanie started their food truck family business, now called Falafel Stockholm, in 2014, hoping to recreate the hummus, falafel rolls, and fresh salads they had enjoyed while living and studying in Tel Aviv. 

From the start, their food truck has been a hit, catering for conferences for companies like H&M and Björn Börg, and big events like Stockholm Pride, and even being featured in an advert for the accounting software company Visma. 

But the onset of the coronavirus pandemic meant they had to rapidly change their business model. 

"We barely had any catering or events, so we had to work our asses off with the food truck," Erez says.

"We had to have the truck open for lunch and dinner every day, in different parts of the city, all over, because you're only allowed four hours in the same spot, and we were able to have only a seven percent reduction in summer sales compared to the year before, which I'm really proud of." 

Photo: Falafel Stockholm

What he didn't realise is that all of this extra work would turn out to be counterproductive due to the increased costs it required and the criteria for receiving government support.

In order to receive support under the Swedish government's coronavirus business support programme, called 'omställningsstöd' or 'adjustment/transition support', a business needs to show a minimum drop of 40 percent in sales. 

But Falafel Stockholm's huge adjustment efforts actually led to decreased sales. 

The problem was that in order to keep sales steady, the business has significantly ramped up its costs, pushing it into a net loss. 

"It took a toll on the costs of the company, because we had to be open for much longer, we had to have our employees there for much longer, more driving, all that kind of stuff," says Erez.

As a result, the company expects to make a loss of about 300,000 kronor this year on 1.5 million kronor in sales. 

It was only at the start of March 2021, after waiting more than six months to be able to send in a request for Omställningsstöd for August to October 2020, that he learned that his business would not qualify. The Swedish Tax Agency has been directed to only consider sales reductions of 40 percent when considering the economic impact of coronavirus on a business.

This is not the only way that Falafel Stockholm has fallen through the gaps. To be able to take the food truck out daily, he and his wife have hired more staff. But he can't get help paying employees' wages under the korttidspermittering (short-term lay-offs) system, which allows employers to temporarily get the government to supply up to 60 percent of employees' salaries, if their working hours are reduced. 

"Based on their policy, if you're able to hire new people, then you don't need korttidspermittering and they're not thinking that sometimes as a business, you need to grow in order to be able to survive." 

"If you're only looking at the sales, it doesn't tell the whole picture of what's going on in the business, and it's not just us, there are a lot of other businesses that are having similar problems." 

But despite contacting authorities to explain the situation, he said he has only received a standardized answer to his letter that he did not find helpful.

Eva Bodén, an advisor at the Swedish Tax Agency, said that Erez is not alone in his frustration at not qualifying support. 

"There are a lot of others who think they are losing out because of the way this has been set up," she said, adding that many businesses had also seen their support reduced when the rules changes in July after a decision by the European Commission.

"It's always the case that when you bring in a law that there are some people who don't benefit." 

She said that many restaurants, which have seen revenues fall after they were stopped from selling alcohol in the evening, and then closed after 8.30pm, were likely to qualify. 

The Vegan Schmegan truck, as it was previously called, at the Matholmen food festival in Stockholm. Photo: Falafel Stockholm

In January, before learning that they would not be eligible for omställningsstöd, after seven years searching and with the help of investors, Erez and Stephanie opened their first restaurant in the Vasastan district of Stockholm. 

Despite great reviews and an enthusiastic reception from the couple's regular customers, the restaurant's sales are being depressed by the pandemic.

"I'd say, it's probably on average about 5,000 or 6,000 kronor a day, which is not enough to get by," Erez says. "Considering our costs, we need around 7,000 or 8,000 minimum per day, which I think is a very reasonable expectation. I'm not in this to be greedy or get filthy rich. I'm doing this because it's something I feel passionate about, fresh homemade food." 

However, even this extra money means that their business will not qualify for omställningsstöd for all of the coming year, despite shouldering heavy start-up costs. The couple say this is basically a death sentence to the business. 

The Falafel Stockholm restaurant has got great reviews but hasn't been as busy as hoped. Photo: Falafel Stockholm

Right now, Erez, Stephanie and their five children are going deeper and deeper in debt to keep the business going. 

"We can't afford to pay taxes, so we are having to go into debt and take a loan from the tax authorities, and we're going to have to take another loan from ALMI (Sweden's state-owned bank for small business startups) to help us get through this as well.

"But you know, there's personal liability for these loans, and also there's an interest that needs to be paid. It's really tough, we have paid our taxes for years, we and all of the other small businesses in similar situations have gotten royally screwed."