Canadian Restaurant Industry in Crisis with Consumers Unhappy as Prices Escalate [Op-Ed]

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The Canadian restaurant industry, once a thriving and beloved sector of our nation’s culture, is now facing a severe crisis. It is as much about survival as it is about maintaining its image. Recent survey results from our Lab in collaboration with Caddle have unveiled a harsh reality: less than 30% of Canadians are satisfied with their restaurant experiences amid higher menu prices. This alarming statistic should be a wake-up call for the entire industry and prompt the need for innovative strategies to adapt to changing consumer preferences and economic challenges.

As we approach the holiday season, it is crucial to recognize the state of the Canadian restaurant industry. We surveyed over 5,000 Canadians in Fall 2023, and the results have shed light on several concerning trends.

The Impact of Escalating Expenses

Milestones (CNW Group/Foodtastic)

The restaurant industry has been grappling with rising operational costs and food expenses, with an alarming 51 percent of Canadian restaurants operating at a loss, a dramatic increase from the 12 percent pre-pandemic figure. These escalating expenses are predominantly related to labour, rent, and food costs. The industry is at a critical juncture, and the challenges it faces demand immediate attention.

Observing Menu Price Increases

An overwhelming 81% of Canadians have noticed changes in menu prices over the past year. The consequences of this are far-reaching, with 80.1% of respondents admitting that higher menu prices influence their dining-out choices. Additionally, a significant 88.3% of Canadians reported dining out less due to overall food prices being higher than they were a year ago.

Changing Restaurant Selection Criteria

In response to rising menu prices, a substantial 84.2% of Canadians have become more selective in choosing a restaurant. Most notably, 77.1% of Canadians now prefer more affordable dining establishments. Discounts, rebates, and loyalty programs have become increasingly popular, with 76.2% of Canadians favouring establishments that offer these incentives. The survey also found that 89.7% of Canadians have become more budget-conscious when deciding on a restaurant.

Perceived Value for Money

The survey revealed that only 29.5% of Canadians expressed satisfaction with their restaurant experiences based on the money they spent. A significant 68.2% of Canadians have observed that portion sizes at restaurants have decreased over the past year, a phenomenon known as “shrinkflation” within the food service industry. The decline in service quality at restaurants, likely attributed to staffing challenges, is another issue plaguing the industry.

Dissatisfaction Varies by Province

Notably, the survey found that the level of satisfaction with restaurant experiences varies across provinces. Quebec and Prince Edward Island lead with 42.0% and 41.2% of respondents expressing satisfaction, while provinces like Nova Scotia, Saskatchewan, and Manitoba have much lower satisfaction rates, indicating that this issue affects Canadians across the country. In Ontario, satisfaction with restaurant visits over the last 12 months has been reported by less than 29% of diners.

The restaurant industry will adapt to the changing landscape of consumer preferences and economic dynamics. Fewer people visiting downtown has also been an issue, but expectations have clearly changed. This survey underscores the profound impact that rising menu prices and food inflation are having on Canadian consumers’ dining habits.

In a trading-down economy, while chains will likely continue to strive, independents, especially those who rent space to operate their establishment, will continue to be challenged by higher costs.

Strategies to address these challenges include finding innovative ways to control costs, maintaining quality and service standards, and providing value for money to customers. Adapting to the changing preferences of Canadians is the key to ensuring the survival and success of the restaurant industry in Canada. Innovation is not a foreign concept to the food industry.

Most importantly, this survey provides valuable insights into the struggles faced by the restaurant industry. We owe a lot to the restaurant industry over the years as it has allowed many Canadians to try new cuisines and taste many flavours of the world. But the restaurant industry is also known for its resilience. It will certainly bounce back.

Sylvain Charlebois
Sylvain Charlebois
Dr. Sylvain Charlebois is Senior Director of the Agri-Foods Analytics Lab at Dalhousie University in Halifax. Also at Dalhousie, he is Professor in food distribution and policy in the Faculty of Agriculture. His current research interest lies in the broad area of food distribution, security and safety, and has published four books and many peer-reviewed journal articles in several publications. His research has been featured in a number of newspapers, including The Economist, the New York Times, the Boston Globe, the Wall Street Journal, Foreign Affairs, the Globe & Mail, the National Post and the Toronto Star.

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