After withstanding the once in a lifetime pummeling of the COVID-19 pandemic, Canada’s restaurant industry is still in dire straits and many businesses are in danger of going under.
That’s the main takeaway from a recent report from Restaurants Canada, which found that despite surviving the depths of the pandemic, the outlook for the industry as a whole looks bleak.
Total spending at restaurants is on track to top $110 billion this year, a 10 per cent increase from the previous year’s level, but costs are up by even more, which is pushing many to the brink of insolvency.
The group says more than half of its members are losing money this year. While that’s not uncommon in an industry known for its razor thin profit margins, in 2019, only about 12 per cent of the group’s membership were at risk.
“It’s very challenging because everything that goes into operating a restaurant has increased double digits,” said Richard Alexander, the group’s executive vice-president, in an interview with CBC News.
For the first five months of 2023, bankruptcies in the sector rose by about 50 per cent compared to the same period last year, and he says even more are coming. “It’s a really, really critical time.”
Escalating costs
Frédéric Dimanche, director of the Ted Rogers School of Hospitality and Tourism Management at Toronto Metropolitan University says he’s not surprised to hear that more restaurants are struggling.
The restaurant industry was hit perhaps harder than any other by the COVID-19 pandemic, since it’s an in-person experience.
Government programs designed to keep people employed and paying the rent helped, but those have now expired, and demand for dining out has not returned to its pre-pandemic levels.
If anything, it’s declining: data from OpenTable, a restaurant reservation system, shows that across Canada, demand has fallen by about three per cent this month, and it’s even worse in some cities. In Edmonton, demand has fallen every month since April, while in Toronto it’s declined five months in a row.
Featured VideoRepayment deadlines are looming for restaurants that took out government-backed CEBA loans to survive the pandemic — but many say they’re just not in a position to pay. We hear from industry insiders about what might happen if restaurants don’t get a break, and ask Minister for Small Business Rechie Valdez whether her government is heeding those concerns.
Meanwhile, costs keep going up.
“Many restaurants have had to increase wages in order to not only attract people but also to keep them,” Dimanche said. “The cost of doing business is increasing.”
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)
Rent increases hurt, too
Alida Solomon knows that all too well.
But as an entrepreneur about to celebrate her restaurant Tutti Matti’s 21st year in operation in downtown Toronto, she says wage increases to attract and keep her staff are nowhere near her biggest problem.
Most restaurants are seeing rent increases of between 20 to 35 per cent in the downtown core right now, which is a major expense to have to swallow on top of everything else.
“Food inflation is over nine per cent,” she said in an interview. “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.”
Costs increasing are one thing, but a bigger problem for her is that the pandemic changed the way people live, including demand for restaurants in downtown locations like hers.
Most restaurants typically live or die on their weekend and weeknight dinner rushes, but being where they are, Tutti Matti managed to supplement that need by catering to a downtown office crowd at lunch.
But she says lunch is non-existent now.
“We used to have people that would come every single day for lunch, but we’ve changed our hours of operation — we’re no longer open five days a week for lunch, we’re actually only open three because we found that Mondays and Tuesdays were just not working for us.”
Consumers are tapping out
Solomon says there’s less demand for dining out in general, and that echoes what diners on the streets of Toronto told CBC News this week.
Aly Dhalla says it’s hard to ignore that the price of a meal keeps going up, even as the quality and quantity declines.
“If you go out now, you’re paying more and it doesn’t taste as good,” he said. “Portion sizes are getting smaller — but you also understand the economic times for business owners who own restaurants, so you just put up with it. But it’s a little unfortunate.”
Inflation is taking a bite out of diners’ appetite for restaurants
Featured VideoOn the streets of Toronto, diners told CBC News that high prices, lower quality and smaller portions have them eating out at restaurants less often of late, a trend which is pushing many restaurateurs to the brink of bankruptcy.
Solomon says her restaurant likely isn’t turning a profit right now, but because she loves the business so much any day she can open the doors and keep her staff paid and diners fed is a win.
“But all of us at some point in the last year have had close calls with making that decision to pull the plug.”
She says restaurateurs like her are used to wearing many different hats depending on the day, from dishwasher to bartender, working in the kitchen and serving. But Dimanche says they need a whole different set of skills in order to survive right now
“It’s not because you know how to cook and manage a kitchen that you’re going to be able to do it,” he said. “You have to be also a business manager … an entrepreneur, and those are a set of skills that maybe some current restaurateurs don’t have.”
Human Resources Officers must be very busy these days what with the general turnover of employees in our retail and business sectors. It is hard enough to find skilled people let alone potential employees willing to be trained. Then after the training, a few weeks go by then they come to you and ask for a raise. You refuse as there simply is no excess money in the budget and away they fly to wherever they come from, trained but not willing to put in the time to achieve that wanted raise.
I have had potentials come in and we give them a test to see if they do indeed know how to weld, polish or work with wood. 2-10 we hire, and one of those is gone in a week or two. Ask that they want overtime, and their laughter leaving the building is loud and unsettling. Housing starts are doing well but way behind because those trades needed to finish a project simply don’t come to the site, with delay after delay. Some people’s attitudes are just too funny. A recent graduate from a Ivy League university came in for an interview. The position was mid-management potential, but when we told them a three month period was needed and then they would make the big bucks they disappeared as fast as they arrived.
Government agencies are really no help, sending us people unsuited or unwilling to carry out the jobs we offer. Handing money over to staffing firms whose referrals are weak and ineffectual. Perhaps with the Fall and Winter upon us, these folks will have to find work and stop playing on the golf course or cottaging away. Tried to hire new arrivals in Canada but it is truly difficult to find someone who has a real identity card and is approved to live and work here. Who do we hire? Several years ago my father’s firm was rocking and rolling with all sorts of work. It was a summer day when the immigration officers arrived and 30+ employees hit the bricks almost immediately. The investigation that followed had threats of fines thrown at us by the officials. Good thing we kept excellent records, photos and digital copies. We had to prove the illegal documents given to us were as good as the real McCoy.
Restauranteurs, builders, manufacturers, finishers, trades-based firms, and warehousing are all suspect in hiring illegals, yet that becomes secondary as Toronto increases its minimum wage again bringing our payroll up another $120,000. Survival in Canada’s financial and business sectors is questionable for many. Good luck Chuck!. at least your carbon tax refund check should be arriving soon.
NORMAN WELLS, N.W.T. – Imperial Oil says it will temporarily reduce its fuel prices in a Northwest Territories community that has seen costs skyrocket due to low water on the Mackenzie River forcing the cancellation of the summer barge resupply season.
Imperial says in a Facebook post it will cut the air transportation portion that’s included in its wholesale price in Norman Wells for diesel fuel, or heating oil, from $3.38 per litre to $1.69 per litre, starting Tuesday.
The air transportation increase, it further states, will be implemented over a longer period.
It says Imperial is closely monitoring how much fuel needs to be airlifted to the Norman Wells area to prevent runouts until the winter road season begins and supplies can be replenished.
Gasoline and heating fuel prices approached $5 a litre at the start of this month.
Norman Wells’ town council declared a local emergency on humanitarian grounds last week as some of its 700 residents said they were facing monthly fuel bills coming to more than $5,000.
“The wholesale price increase that Imperial has applied is strictly to cover the air transportation costs. There is no Imperial profit margin included on the wholesale price. Imperial does not set prices at the retail level,” Imperial’s statement on Monday said.
The statement further said Imperial is working closely with the Northwest Territories government on ways to help residents in the near term.
“Imperial Oil’s decision to lower the price of home heating fuel offers immediate relief to residents facing financial pressures. This step reflects a swift response by Imperial Oil to discussions with the GNWT and will help ease short-term financial burdens on residents,” Caroline Wawzonek, Deputy Premier and Minister of Finance and Infrastructure, said in a news release Monday.
Wawzonek also noted the Territories government has supported the community with implementation of a fund supporting businesses and communities impacted by barge cancellations. She said there have also been increases to the Senior Home Heating Subsidy in Norman Wells, and continued support for heating costs for eligible Income Assistance recipients.
Additionally, she said the government has donated $150,000 to the Norman Wells food bank.
In its declaration of a state of emergency, the town said the mayor and council recognized the recent hike in fuel prices has strained household budgets, raised transportation costs, and affected local businesses.
It added that for the next three months, water and sewer service fees will be waived for all residents and businesses.
This report by The Canadian Press was first published Oct. 21, 2024.
TORONTO – A new report says many Canadian business leaders are worried about economic uncertainties related to the looming U.S. election.
The survey by KPMG in Canada of 735 small- and medium-sized businesses says 87 per cent fear the Canadian economy could become “collateral damage” from American protectionist policies that lead to less favourable trade deals and increased tariffs
It says that due to those concerns, 85 per cent of business leaders in Canada polled are reviewing their business strategies to prepare for a change in leadership.
The concerns are primarily being felt by larger Canadian companies and sectors that are highly integrated with the U.S. economy, such as manufacturing, automotive, transportation and warehousing, energy and natural resources, as well as technology, media and telecommunications.
Shaira Nanji, a KPMG Law partner in its tax practice, says the prospect of further changes to economic and trade policies in the U.S. means some Canadian firms will need to look for ways to mitigate added costs and take advantage of potential trade relief provisions to remain competitive.
Both presidential candidates have campaigned on protectionist policies that could cause uncertainty for Canadian trade, and whoever takes the White House will be in charge during the review of the United States-Mexico-Canada Agreement in 2026.
This report by The Canadian Press was first published Oct. 22, 2024.
