Foodservice Industry in Canada in Turmoil as Pandemic Drags on into October: Study

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A new survey by Restaurants Canada indicates 47 per cent of foodservice operators in Canada said they would increase their menu prices four per cent over the next 12 months and six out of 10 table-service restaurants are operating at a loss as of July.

It’s just one of many different impacts the foodservice industry has had to deal with in the past year or so including the fact there are less establishments now than there were before.

Prior to the pandemic, there was an estimated 65,000 restaurants in the country and estimates indicate more than 10,000 at least shut their doors for good during the economic crisis.

COVID-19 has had a devastating impact on the entire foodservice industry across the country but the industry believes it is poised to turn the corner as consumers return to dining out.

“While the economic outlook has significantly improved, Restaurants Canada remains cautious when it comes to the timing of the recovery,” said Chris Elliott, Senior Economist at Restaurants Canada. “We see our industry like a puzzle, trying to figure out what piece fits where, and figuring out how to fill in any gaps and holes in the industry. While our patios may be filling up and we can see that small pinhole of light at the end of the tunnel, it is not the time to relax or fall into old habits. We have survived the storm and now it’s time to learn from it.  It’s time to cautiously, yet optimistically, finish the puzzle. ”

But national food expert Sylvain Charlebois, Professor, Director, Agri-Food Analytics Lab and Former Dean of the Faculty of Management, Dalhousie University, in a recent op-ed piece that appeared in media outlets, including Retail Insider, wondered how many restaurants the country really needs to meet consumer demand at this time.

Sylvain Charlebois
Sylvain Charlebois

“The cost of food is becoming a real problem not only for consumers but for restaurant owners as well. The labour shortage, which existed before the pandemic, has only worsened since. Over the next year, it is predicted that 42 per cent of restaurants will experience an increase in the number of vacant positions, and more than 53 per cent plan to increase their employees’ salaries in the coming months. It’s great news for restaurant workers, who certainly deserve it, but someone will have to pay for it all,” he said.

“These macroeconomic factors will make it difficult for the sector to go back to its 65,000-restaurant mark. For households, restaurant visits (now with higher prices) will certainly be less frequent. The 35 per cent portion of the family food budget allocated to meals eaten out before the pandemic is not coming back anytime soon.

“Of the more than 15,000 to 20,000 restaurants that disappeared during the pandemic, some were excellent, leaving behind an incredible legacy for their customers. It’s sad to see many of these independent and family restaurateurs forced to abandon ship. But in truth, the pandemic also acted as a purgatory by eliminating several restaurants which lowered the quality of the sector. Food safety issues, food fraud, you name it. Some were already heading for closure and would have gone out of business, whether there was a pandemic or not.”

Charlebois said with many independents not surviving now major chains will represent the sector in a disproportionate way compared to before the pandemic.

“This should be a concern. It’s not just about the number of restaurants. Of course, the number has dropped. A lot of people have been discouraged by the pandemic and have decided to leave the industry altogether. It got people to think about their lifestyle, to think about their careers. It’s not surprising. Working conditions in the industry have never been ideal and I think the pandemic should get the industry to think differently about how it manages people, what it represents to people when they look for a career,” he said.

“I’m not convinced they’ve really thought about developing a business model which could make the industry more sustainable from a human capital perspective. I don’t think the sector will come back to where it was before the pandemic, anytime soon. It will take at least a few years if not more. Why? Because of market conditions. One, the cost of food is actually way more than before the pandemic which will make any restaurant operator concerned about competitiveness. Menu prices have to go up. The other thing is labour. You can do all you want but there are fewer people around who will want to work in the industry. So it’s more difficult for them to consider opening outlets or opening different locations. I do believe the number of restaurants will remain lower for a greater period of time and at the same time Canadians I don’t think will go out as much as they used to over the short term.”

Chef in safety mask hanging up sign closed on restaurant door.

The Restaurants Canada report said COVID-19 brought about a slew of new challenges and hardships for the entire industry across Canada. Some of the biggest hurdles to overcome as a result of the pandemic include labour shortages, higher food and overall costs, as well as higher debts, it said.

“Hundreds of thousands of employees across the restaurant industry have been laid off as a result of restaurant shutdowns, and more than 12,000 foodservice establishments permanently closing their doors since the start of the pandemic,” said the national organization. 

“Labour shortages, already an industry-wide problem pre-pandemic, will continue as the hospitality sector begins to recover and open back up. Workers have had to find other employment opportunities in other industries after losing their jobs in hospitality. The pandemic is forcing the industry to reevaluate how they recruit, pay and retain their employees, especially as restaurant owners are struggling to fill their workforce—only 39 per cent of restaurant operators are expecting to return to pre-pandemic staffing levels in 2022 and 20 per cent expecting to return in 2023.

“The pandemic also managed to bring up price hikes in the foodservice industry and led to restaurants  accumulating mounds of debt. Operational costs, food and menu prices and labour costs will continue to rise as the industry heads into the final months of 2021 and well into 2022. Many restaurants are already operating at a loss due to government shutdowns, and their debts seem to continue to grow as costs rise.”

But Restaurants Canada also cited a fairly positive outlook for the near future:

  • Commercial foodservice sales in Canada are predicted to grow from $13.7 billion in the first quarter of 2021 to $20.7 billion by the last quarter of 2022 (adjusted seasonally); and
  • Full-service restaurants are forecast to experience the strongest sales increase, rising, from a projected $25.6 billion in 2021 to $35.2 billion forecasted in 2022. 

The national organization said expectations for 2022 show a promising return to pre-pandemic numbers:

  • As of September 2021, almost 70 per cent of Canadians (12 and older) are fully vaccinated;
  • As a result of high vaccination rates, annual commercial foodservice sales are expected to increase to $63.9 billion, which is higher than the previous prediction of $61.1 billion. However, the industry is tempering optimism with vaccine passports coming into effect alongside a fourth wave of infection; and  
  • The projection of 2022 looks even more promising, as overall foodservice sales are expected to grow to nearly $80 billion, 3.8 per cent higher than pre-pandemic levels.

Article Author

Mario Toneguzzi
Mario Toneguzzi
Mario Toneguzzi, based in Calgary, has more than 40 years experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, faith, city and breaking news, and business. He is the Senior News Editor with Retail Insider in addition to working as a freelance writer and consultant in communications and media relations/training. Mario was named as a RETHINK Retail Top Retail Expert in 2024.

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