Rising Costs and Changing Trends Put Canada’s Restaurant Industry on the Brink

With climbing costs outpacing revenues, the future of many Canadian restaurants hangs in the balance, industry report reveals.

As the Canadian restaurant industry battles escalating costs and shifting consumer habits, the future seems uncertain for many establishments.

The Canadian restaurant industry, which notably bore the brunt of the COVID-19 pandemic, is now facing a grim prognosis with financial burdens mounting faster than the surging prices, according to a recent report by Restaurants Canada. Despite a significant rise in total spending at restaurants, forecasted to surpass $110 billion this year, an increase of 10% from last year, escalating costs are pushing a growing number of establishments towards the risk of insolvency.

As per the report, over half of the Restaurants Canada members are operating at a loss this year. This bleak situation starkly contrasts with 2019’s figures, where only 12% were considered at risk. “It’s very challenging because everything that goes into operating a restaurant has increased double digits,” expressed Richard Alexander, the executive vice-president of Restaurants Canada, in an interview with CBC News.

Escalating Costs and Decreasing Demand

Frédéric Dimanche, the director of the Ted Rogers School of Hospitality and Tourism Management at Toronto Metropolitan University, isn’t surprised by these difficulties. The sector, being inherently reliant on in-person experiences, was one of the hardest hit by the pandemic. Despite the aid from government programs, the demand for dining out hasn’t bounced back to pre-pandemic levels, and recent data is showing signs of decline.

Statistics from OpenTable illustrate a decrease in restaurant demand by approximately 3% this month across Canada. In certain cities, the situation is more pronounced; Edmonton has seen demand drop every month since April, while Toronto has experienced a five-month consecutive fall.

Alida Solomon has run Tutti Matti, a restaurant in downtown Toronto for almost 21 years, and she says the situation for restaurateurs like her is dire right now. (Tess Ha/CBC)

Wage and Rent Increases Add to the Strain

Alida Solomon, who is nearing the 21st anniversary of her downtown Toronto restaurant Tutti Matti, highlights that while wage increases to retain staff are a concern, rent hikes in the downtown core, averaging between 20 to 35 percent, pose a much larger challenge. “Food inflation is over nine percent,” Solomon detailed. “The cost of food plus rent, plus wage increases — which are totally valid, wage increases are normal in the face of inflation — but it’s just the whole package.”

Pandemic Aftermath Alters Consumer Behavior

Another blow to the industry comes from the lasting impact of the pandemic on consumer behavior. Solomon pointed out that the once-thriving lunch crowd at Tutti Matti has dwindled, necessitating a reduction in their lunchtime operating hours. This shift reflects a broader change where consumers are showing less appetite for dining out, a sentiment echoed by Toronto diners who’ve noticed increased prices and diminishing portion sizes.

Restaurateurs: The New Age Entrepreneurs

While Solomon admits Tutti Matti isn’t turning a profit currently, she considers keeping the doors open a victory. However, the precariousness of the situation has led many like her to contemplate the tough decision of closing down. Dimanche stresses the necessity for restaurateurs to develop entrepreneurial and business management skills beyond culinary expertise to navigate the current economic landscape.

As the industry faces this critical period, the coming months will be decisive. Restaurateurs, staff, and patrons alike are holding their breath, hoping for a sustainable turnaround that would save not just businesses but the cultural fabric of Canadian cities enriched by these dining establishments.