Canadian Restaurant Industry Rebalancing in a Post-Pandemic Economy

  • National Newswatch

More and more restaurants across the country are making the difficult decision to shutter their operations, or are succumbing to bankruptcy, as conditions become increasingly unfavourable for small businesses. Many of these are businesses that, to an outside observer, are flourishing – they are the restaurants that are full every night and have a line up for coffee every morning.

The truth is that, in a post-pandemic economy of high interest rates, high inflation, and high debt loads, it’s becoming more and more challenging for restaurant owners to find their balance. And it’s resulting in business closures.

Communities of all sizes across Canada are losing businesses that hold a special place in our hearts: our data shows that, of the top five industries in Canada, restaurants generate the highest net-positive impressions among Canadians. They form the building blocks of our communities, employ our neighbours, and provide us with a place to share important moments with our loved ones.

More than holding sentimental value for Canadians, the foodservice industry is an economic engine. Restaurants across the country generate $100 billion in sales (accounting for 4% of Canada’s GDP), are the 4th largest employer in Canada, employing 1 million people, and serve 22 million customers every day.

The impact of the pandemic, 3 years of volatility, and steep inflation have taken a toll on the future success of restaurants. According to a survey conducted by Restaurants Canada, 84% of foodservice companies reported lower profits in 2023 compared to 2019, and over half of all foodservice companies are currently operating at a loss or just breaking even compared to 12% pre-pandemic. This decline in profitability is not a reflection of the quality of service or the ability of restaurants to provide a good meal; rather, it is a result of the challenging economic environment and reduced discretionary spending among Canadians.

The reality is that operating a restaurant in Canada has never been more challenging than it is today, and hidden costs, along with broader economic challenges, are killing businesses. As we head into the winter months, which historically see lower guest counts as Canadians choose quiet nights in over meals in a restaurant, these challenges will continue to compound. With heavy debt loads hanging over 66% of foodservice businesses, high inflation and skyrocketing operational costs are taking their toll.

Hope is not lost, however. There are concrete policies that our government can pursue to support our favourite restaurants and revitalize community gathering places:

Improving Business Conditions for Foodservice Operators:

To ensure the survival and success of the foodservice industry, it is essential that government and policymakers take concrete steps to support restaurant profitability. Lowering the small business tax rate from 9% to 8% would provide much-needed relief to restaurant operators, allowing them to pay off debt, invest in energy-saving equipment, and expand employee benefits. Additionally, maintaining a cap on the alcohol excise tax escalator and allowing restaurant meals to be fully deductible business expenses would further incentivize growth and investment in the industry.

Creating Jobs & Streamlining Pathways to Employment:

Furthermore, addressing labor shortages is crucial for the long-term viability of restaurants. What our industry needs is a dedicated stream in our immigration system for the restaurant industry. Current immigration streams have proven to be a poor fit for our industry and have done little to prevent massive labour shortages from wreaking havoc on businesses. Restaurants Canada, together with our tourism industry partners, have asked the federal government to implement a pilot for such an immigration stream.

The importance of restaurants extends beyond their economic contributions. They serve as gathering places, where people come together to share meals, create memories, and build social connections. Independent restaurants are an integral part of the social fabric of our communities, and their closure would result in the loss of vibrant meeting spaces and cultural hubs. The industry is the top provider of first-time jobs in Canada, with one in five Canadians between the ages of 15 and 24 currently employed in a restaurant and are the first employer for half of all newcomers to the country.

When restaurants are closing en masse, it represents more than economic hardships: losing restaurants means losing jobs, community gathering points, and the places that we bring so many newcomers and young Canadians to the workforce. Helping our favourite restaurants regain their balance will bring vibrancy back to the industry and keep more doors open this winter.

Kelly Higginson is President and CEO of Restaurants Canada.