71% of restaurants say profitability is declining: Restaurants Canada report

Well, with the growing uncertainty in

the economy, consumer confidence across

Canada is low. It's being felt in many

sectors and one of them is the

restaurant industry. It has warned

before of rising costs and uneven

customer demand. And a new report

released today suggests that it has now

reached dire levels. The CBC's business

reporter Angie Seth has more on this.

Okay, so what are some of the main

takeaways of this report?

>> Yeah, so this is their quarterly report

from Restaurants Canada and they they

had about 300 or so respondents. So a

small group of a very large

representation here. Um, but it does

sort of paint a picture in terms of what

we are seeing within the industry right

now. Um, and and sort of they hit hard.

We talked about sort of the impact of

COVID in 2019. Well, they're still

feeling that impact. Um, and and what

we're seeing is in this type of economy,

a K economy where in terms of you have

sort of on the one end you got the

higher income making more money, the

lower income not making as as much

money. That's spilling out in terms of

what we're seeing in the restaurant

sector. You're seeing visuals right now

sort of what we call our quick service

uh restaurants and then there's the

higher end restaurants. Interestingly

enough, based on some of the numbers,

the higher end higher end restaurants

seem to be doing a little bit better.

Comparison, overall, the industry is

not. So we're sort of going to break

down some of those uh numbers and that's

in terms of the economic struggles that

uh that they've been seeing uh and sort

of the impact the overall overall impact

of the last few years. Take a listen

here to uh Kelly Higginson. She's the

CEO and president of Restaurants Canada.

56% are reducing employee hours, 53% are

reducing shifts entirely. So as the

fourth largest private sector employer

in the country, we employ 1.2 million

people across the country, 40% of which

are youth. You're going to see a direct

impact on employment numbers. So a

massive amount in sort of in terms of

how many people they employ, but looking

at breaking it down a little bit more,

Arthi, in terms of the impact within the

industry there. So the real commercial

um food service is expected to decline

about 0.2% in 2026. They had a bit of an

increase in 2025, but they're seeing

some of that decline. And we break it

down further, 49% of operators are

talking about uh reporting lower sales

in 2026 already. 54% are reporting fewer

guests that are coming in. 71 uh

reporting uh report a declining

profitability, which is uh which is

obviously a big concern as you can see

there. Now when we make the comparison

between quick service and full service,

quick service restaurants are hit the

hardest at 81% decline uh profitability.

Um, that's 70 70% hit full service. So

they're still seeing a decline on both

sides, but full service is still doing

better. 36% of operators are operating

at a loss or breaking even. That's

triple levels of 2019. So as we've been

sort of pushing to say, okay, are we

seeing more people coming back and

whatnot? We are, but the numbers are

showing a different uh scenario in terms

of what those numbers actually mean and

we're nowhere near what we're seeing in

2019 right now.

>> And of course, part of that too is the

fact that prices on menus are going up

and may even go up further as we

continue to watch the situation in the

Middle East and the the trickle-down

effect or ripple effect from all of

that. Um, let's also talk about what the

industry suggests need to be done to

change to recover. Well, I mean and

there's a lot of factors in here. You

you talked about sort of the cost of

things. Food costs um you know, are up

uh for them. Labor of course is is an

issue there in terms of people keeping

people employed. 69% reporting customers

dining out less due to those

affordability constraints. So

Restaurants Canada is basically saying,

you know what, well there needs to be a

step up when we look at the number of

visits we've had within the industry,

123 million visits daily to restaurants,

125 billion dollars of annual sales.

That equates about 3.9%

of GDP. So what they're saying, one

thing they would like to see happen from

the government, they're sort of pushing

for what we saw last year, is the

removal of the GST on prepared foods.

Take a listen further to uh Kelly

Higginson.

Last year when the government removed

GST from all food and we had an almost

10% increase in sales, we had an

incredible amount of job creation within

our sector. 24,000 jobs were created in

the slowest two months of the years

being January and February.

So overall, they're saying sort of there

needs to be that focus, there needs to

be that support coming from the

government. We'll see sort of what

happens there, but they're also talking

about what they're seeing in the energy

sector as well. And you've reported on

this. Enabling accelerated capital cost

allowance to the food industry. So

allowing them to get access to funds so

they can look at um growth. They can

look at what their operational needs

are. They can look at in terms of that

expansion. We don't notice it, but a lot

of restaurants have closed down. Um, and

then again, they're not as busy as

perhaps we would like to see.

Interestingly enough, again, not in

those fast food restaurants as we would

see in those sit-down restaurants, but

overall, the industry is saying, you

know what, it's going to take a lot for

us to get back to that 2019 levels.

We're going to be speaking to an

economist uh a little bit later and

bring more of that to you in terms of

what they see as the bigger picture and

what more needs to be done. Okay, Angie,

thank you for this. That is CBC's

business reporter Angie Seth.