Canada’s restaurant industry is seeing stronger-than-expected sales growth in 2026, but rising operating costs continue to outpace revenue growth and erode profitability, leaving many operators at risk of closure and with less capacity to invest, according to Restaurants Canada’s Q2 Quarterly Report released on Monday.
The findings highlight the growing disconnect between sales and profitability and underscore the importance of an investment climate that enables restaurants to grow, invest, and create jobs, said the national organization.
Canada’s restaurant industry generates $125 billion in annual sales, contributes nearly four percent of Canada’s GDP, and generates $2.25 in economic output for every dollar spent—well above the national average. Restaurants are Canada’s fourth largest private sector employer, with 1.2 million workers, 40% of whom are youth, it said.
“Stronger sales are always welcome, but they aren’t enough to offset the cost pressures restaurants continue to face,” said Kelly Higginson, President and CEO of Restaurants Canada. “When restaurants are constantly managing rising costs and shrinking margins, investment slows, employment stagnates, new equipment isn’t purchased as quickly, renovation plans are delayed and plans to expand are put on hold. That has repercussions well beyond the restaurant industry.”
Quarterly Report at a glance:
- Real commercial foodservice sales are expected to grow by 1.5% in 2026 (inflation-adjusted), a slight improvement over the Q1 forecast.
- 64% of operators say their profitability is lower than last year.
- 41% of operators are operating at a loss or breaking even, up from 36% in March.
- Rising fuel prices are hitting restaurants twice, through increased food, transportation and operating costs, and reduced customer traffic and spending.
- 73% of restaurant operators say current tax policies at all levels of government are limiting their ability to invest and grow.
- 71% say they would be more likely to invest if restaurant capital investments were eligible for accelerated tax write-offs like in other sectors.
Despite ongoing profitability challenges, the restaurant industry continues to be a major engine of employment and economic growth. During the first half of 2026, the restaurant industry added approximately 50,000 youth to its workforce compared to the same period last year, making it Canada’s largest net creator of youth jobs, and reinforcing its role as the country’s leading source of first-time jobs, said Restaurants Canada.
“Restaurants continue to create opportunities for Canadians, particularly young people entering the workforce,” said Higginson. “But that success shouldn’t be taken for granted. It depends on an operating environment that allows businesses to invest, grow and create even more jobs.”
The organization said the report’s findings are clear—stronger sales alone won’t restore restaurant profitability. It requires addressing the cost pressures affecting Canadians and restaurants alike, while creating the conditions for restaurants to invest again.
Restaurants Canada is calling on the federal government to:
- Permanently exempt all food, including restaurant meals, from the GST/HST to lower food costs for Canadians while supporting job creation and economic growth.
- Establish permanent full first-year expensing for restaurant capital investments under the Accelerated Investment Incentive to encourage reinvestment, modernization and growth.
“The restaurant industry continues to be an economic driver in communities across Canada,” said Higginson. “With the right investment climate, restaurants can continue investing, creating jobs and contributing to Canada’s economic growth.”
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