More than half of Canadian restaurant owners are either operating at a loss or are barely breaking even, a new report from Restaurants Canada reveals.
Thirty-four percent of restaurants were in the red as of March of this year compared to seven percent prior to the COVID-19 pandemic, while 17 percent are only just breaking even compared with five percent four years ago, the report says. Only 12 percent of restaurant owners enjoy a double-digit profit margin.
The news comes despite a Restaurants Canada prediction that total foodservice sales would climb to $110 billion by year’s end, up from $100 billion in 2022 and 2019’s pre-pandemic sales of $95 billion.
“This is directly related to the hangover, or the aftershocks, of the pandemic,” Restaurants Canada president Kelly Higginson told The Globe and Mail.
“We’ve got operators with a heavy amount of debt. We’ve got operators having to negotiate the same interest rate challenges that Canadians are managing on a day-to-day basis. And we’ve got heavy, heavy inflation that has just smacked the industry.”
Rising costs across the board are heavily impacting the bottom line of restaurants country-wide, causing owners to raise menu prices at record rates, the report said. The cost of food in particular is forcing menu prices to increase, and restaurants’ own costs are rising even more.
Menu prices climbed 6.6 percent in June, but the price of food sold at grocery stores shot up 9.1 percent, according to Statistics Canada.
Smaller Menus, Fewer Options
Escalating food costs force restaurant owners to walk a fine line of trying to recoup costs while not angering customers. Canada Foodservice industry analyst Vince Sgabellone said many consumers will make adjustments to their spending at restaurants.“Lower income consumers will feel the pricing pressures more, and thus will adjust their foodservice spending sooner and more drastically,” Mr. Sgabellone said in the report.
“Others will moderate their restaurant spending by downsizing their meals, cutting back on extras, or searching for a deal. This will create downward pressure on average eater checks, even as menu prices rise.”
Many restaurant owners have made the difficult choice to change up their signature dishes or remove items from the menu altogether, simply because the ingredients have become too costly. This has led to a trend of smaller menus with fewer options.
“In an effort to contend with rising food costs and supply-chain problems, restaurant owners are paring down their food and beverage offerings,” the report reads. “They’re also trimming their menus to speed up and simplify their delivery and take-out processes, which have been growing in popularity.”
Another concern identified by Restaurants Canada is a chronic employee shortage in the food service industry. The report says there are 173,700 fewer restaurant employees now than there were in 2019.
“Restaurants have the highest job vacancy rates of any industry, accounting for one of every six private-sector job vacancies in Canada,” it said.
Lack of workers is a serious problem, the report noted, because restaurants require a high level of staff to be run effectively.
Lower participation of 15 to 24 year olds plays a role in current labour shortages, the report noted, adding that many people in this age group are postponing entering the workforce to focus on their education.
