After a tumultuous first quarter, the outlook for the foodservice industry has moderated thanks to a cooling of tariff war rhetoric and a slight uptick in consumer confidence, but operators remain cautious, according to Restaurants Canada’s Q2 Quarterly Report.
Restaurants Canada said it expects real commercial foodservice sales to experience -0.5% to 0.5% growth in 2025 and a 0.1% to 0.6% decline in 2026.
In the first four months of 2025, commercial foodservice sales grew by a solid 6.6%, supported in part by the GST/HST holiday in January, explained the national organization. With headwinds picking up speed again and a majority of restaurants having to increase prices, Restaurants Canada is urging the federal government to permanently exempt all food, including restaurant meals, from GST/HST.
“Keeping food affordable needs to be a top priority for the government. Canadians from all walks of life rely on restaurants to feed themselves, whether it’s parents grabbing dinner on the way home from soccer practice, an elderly person who needs a hot meal delivered, or a busy student getting a breakfast sandwich on the way to school,” said Kelly Higginson, President and CEO of Restaurants Canada.
“Removing the GST/HST from all food is a no-nonsense way to improve the quality of life of Canadians and support the foodservice industry.”
Quarterly Report at a glance:
- Commercial foodservice sales are expected to reach between $98.5 billion and $99.5 billion in 2025, a slight improvement over last quarter’s forecast, but still below pre-tariff war expectations.
- Seven in 10 restaurant operators rate the current economic conditions just fair or worse. Only 31% say they are “good” or “very good.”
- While consumer confidence has improved slightly over last quarter, 48% of restaurant operators expect to be less profitable in 2025 than they were in 2024.
- Food costs (83%), labour costs (80%) and a weak economy (55%) were the top three challenges cited by foodservice operators.
- To deal with rising operating costs, foodservice businesses are raising menu prices (85%), cutting staff or hours (60%), increasing hours worked by owners or managers (54%), or changing suppliers or ingredients (53%).
- Overall, 41% of foodservice businesses are operating at a loss or just breaking even. This is an improvement over 2024, but still far below 2019 levels, when only 12% reported operating at a loss or just breaking even. Only 9% of operators report making a profit above 10%, compared to 36% pre-pandemic.
- While tariff uncertainty continues to weigh heavy on the foodservice outlook, consumer confidence, spending and debt levels are improving, offering a glimmer of hope for an upswing in mid-2026.
Restaurants Canada is a national, not-for-profit association advancing Canada’s foodservice industry. Restaurants are a $120 billion industry employing nearly 1.2 million Canadians and the number one source of first-time jobs in Canada, it says.
On Monday, Statistics Canada reported that total sales in the food services and drinking places subsector increased 0.4% in May to $8.5 billion.
Non-seasonally adjusted prices for food purchased from restaurants were up 3.3% in May when compared with May 2024. Unadjusted prices for alcoholic beverages served in licensed establishments increased 3.3% over the same period, it said.
In May, the largest increase in sales came from full-service restaurants (+1.2%). Higher sales were also observed in special food services (+3.1%) and drinking places (+0.1%). Sales at limited-service eating places (-0.8%) declined, added the federal agency.
In May, eight provinces saw increased sales. Quebec (+1.1%) posted the largest increase in dollar terms, followed by Ontario (+0.5%). British Columbia (-0.4%) saw the largest decrease in dollar terms. Sales also declined in Saskatchewan (-0.6%) following two consecutive months of strong growth.
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