A new report from Restaurants Canada reveals that a large number of restaurants across the country have been operating at a loss for the past six months.
The annual report, released Monday, projects Canada’s total food service sales year. The industry is estimated to take in $110 billion in total sales by the end of 2023, up from $100 billion in 2022.
In 2019, total food service sales was $95 billion.
Despite the rising number, 34% of restaurants have been operating at a loss since March 2023, compared to only 7% in 2019, the report found.
Another 17 % of restaurants said they were only breaking even.
Restaurateurs are facing higher bottom line costs in all directions from wages and ingredients to insurance.
“This is directly related to the hangover, or the aftershocks, of the pandemic,” said Restaurants Canada president Kelly Higginson.
“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.”
In order to combat that inflation, restaurant owners are raising menu prices at an unprecedented rate, however it’s still not enough to keep up with the rate of inflation seen at grocery stores.
According to Statistics Canada, menu prices in Canada rose 6.4% in March 2023, but the cost of food at grocery stores also went up by 9.1%.
Customers are not happy when menu prices go up, noted Higginson.
“The scary part of increasing prices is the way you find out that you’ve pushed too far is that people stop coming back,” she said.
In Calgary, the owner of Annabelle’s Kitchen Leslie Echino spoke with the Globe and Mail about her experience navigating the post-pandemic economy.
Echino said that the price of cauliflower – an ingredient that she needs for one of her signature dishes – was around $3 several years ago and is now up four times that.
“I saw the price, it was over $12 per cauliflower. I almost had a heart attack,” said Echino. “I was like, ‘guys, this is only $15 on the menu.’”
The spike in prices has forced her to cut out certain menu items altogether.
“We’re not putting a steak on the menu right now because I don’t want to have to charge guests $45 for a steak,” she said. “That price point scares me.”
The pain of inflation can be better handled by restaurants that are chains as opposed to independent small businesses.
Market-research firm Circana recently published data showing the number of chain restaurants in Canada has risen since the pandemic, while the number of small independent restaurants has dropped by several thousand.
Federal data found that insolvency filings are highest amongst the food services and accommodation sector, with 70 fillings just in the month of August.
“We’ve had operators take out second mortgages,” said Higgison. “They have been maxing out lines of credit, credit cards. That can only go on for so long.”