Half of Canadian restaurants operating at a loss or ‘just breaking even’

Click to play video: 'Toronto announced as first Michelin destinations in Canada'
Toronto announced as first Michelin destinations in Canada
RELATED: The Michelin Guide is officially in Toronto. More than 70 restaurants have been listed on the guide, which recognizes the places to eat. Brittany Rosen has more – Sep 14, 2022

Restaurants are facing a bumpy road to recovery after years of pandemic-related challenges. They’re now dealing with rising expenses, low customer counts, high debt and low profitability, according to Restaurants Canada.

“Restaurant operators are struggling financially, with half of our operators operating at a loss or just breaking even,” said Christian Buhagiar, the CEO of the national organization.

“Those that are making money, it’s like two to three per cent, so those margins are extremely thin,” added Mark von Schellwitz, Restaurant Canada’s vice-president for Western Canada.

“They’re doing everything they can to get through this.

“It’s a resilient and innovative industry and we’ve had to do all sorts of things over the last couple of years just to keep our doors open. But as a result of that, we do have what I call the post-pandemic hangover and there are a number of obstacles that are preventing us from fully recovering, the labour shortage being one of them, the inflationary costs on everything — all our inputs are going up significantly.

Story continues below advertisement

“Plus, with 85 per cent of our members taking on debt during the pandemic, you’ve got a rising interest rate environment.

“And, as a result of the labour shortage alone, we’ve got a lot of our restaurants only operating at about 80 per cent capacity because they simply don’t have the staff to be fully open,” von Schellwitz said.

Click to play video: 'Tip inflation: Why Canadians are tipping more than ever'
Tip inflation: Why Canadians are tipping more than ever

Restaurants Canada expects nominal sales to return to pre-pandemic levels before the end of the year. Traffic still remains below 2019 levels.

“We’re really pleased a lot of restaurant guests are coming back,” von Schellwitz said.

“We certainly want to encourage those customers to come out the way they have, but of course we’re still not at those pre-pandemic levels, especially in downtown centres where we still don’t have a lot of people working in their offices.”

Story continues below advertisement

In its 2022 edition of Foodservice Facts, the not-for-profit association said there are some positive signs:

  • 90 per cent of Canadian consumers said they still receive good value for their dollars from restaurants
  • 89 per cent feel comfortable eating indoors at a full-service restaurant
  • 74 per cent have a positive view of foodservice workers, the highest of any private sector industry

Canadian restaurant owners have been resilient and creative, von Schellwitz said, and despite their food, utility and rent costs rising, are doing what they can to pass as little of those costs onto customers as possible.

He said menu inflation is anticipated to be around 7.8 per cent this year.

“The profitability has been really difficult… with utility costs going up 22 per cent. People forget we’re big users of natural gas. We have to cook your food, we have to clean your dishes. Plus, when you’re talking about beef prices up 16.8 per cent, chicken up 10 per cent, dairy up nearly 20 per cent, it makes it really difficult.”

Story continues below advertisement

When it comes to governments’ role, von Schellwitz asked legislators to try to “do no more harm.”

“No regulations, no more costs. We’re really having a difficult time as it is, dealing with the inflationary pressure, dealing with the labour costs, increases and shortage, and of course, having to pay back debt.”

Click to play video: 'Canada’s inflation soars to nearly 40-year high of 8.1% in June'
Canada’s inflation soars to nearly 40-year high of 8.1% in June

More debt

Based on a survey of independent full-service restaurants, Restaurants Canada found:

  • 85 per cent of independent full-service restaurants took on new debt due to COVID-19
  • 23 per cent had debt of less than $50,000
  • 44 per cent had taken on debt between $50,000 and $100,000
  • 35 per cent had debt greater than $100,000

High food costs

According to Restaurants Canada, rising food costs are among the top challenges currently facing food service operators across the country. Soaring food costs have meant menu prices have spiked to an all-time high.

Story continues below advertisement

The average quick-service restaurant menu prices are up 6.7 per cent, and full-service restaurant menus are up 6.5 per cent, the association found.

Alcohol prices at licensed establishments rose by 3.8 per cent.

Staff shortage

Though food service remains one of Canada’s top employers, the industry has huge challenges filling vacancies. Restaurants Canada says that means the industry is lagging behind other sectors when it comes to job recovery.

In June 2022, there were 171,715 job vacancies in the food service industry, a threefold increase from pre-pandemic levels.

Restaurants Canada found operators are shifting business models to navigate the labour shortage:

  • 72 per cent increased hours worked by ownership and management-level staff
  • 64 per cent reduced hours of operation
  • 77 per cent raised wages

Takeout dining exploded during the pandemic, von Schellwitz said. Still, many restaurant owners would love to welcome back their customers in person.

“A lot of our members want their guests back in the restaurant. That’s where the real experiential thing happens. You want that ambience, you want people getting together, having a good time.

Story continues below advertisement

“We would encourage our guests to be a little bit patient if the service isn’t quite there if you’re in a shortage situation, and please keep supporting the industry as we go through this difficult time.”

Click to play video: 'Inflation forces North Vancouver restaurant to raise prices'
Inflation forces North Vancouver restaurant to raise prices


Sponsored content