Despite economic uncertainty and cautious consumer sentiment, Canada’s commercial foodservice industry has posted strong growth in the first half of 2025, continuing a recovery trend that began in mid-2021. According to new data from Circana LLC, traffic across the sector rose 3.2% in the first half of the year, while consumer spending increased by 5.7%.
The performance underscores both the resilience of Canadian foodservice and the evolving dining habits of Canadians, who continue to prioritize local experiences and social outings even as household budgets remain stretched.
Quick-Service and Retail Foodservice Outperform
The strongest gains have come from quick-service restaurants (QSRs) and retail foodservice. QSRs posted a 4.3% increase in traffic during the most recent quarter, while retail foodservice matched that figure with its best growth in years.
Retail foodservice, which includes fully prepared meals and beverages purchased from grocery stores, convenience stores, and warehouse clubs for immediate consumption, has emerged as a particularly dynamic segment. As Vince Sgabellone, Foodservice Industry Analyst at Circana, explained, this reflects consumer preference for convenience and affordability.
“We like experiences, and we all eat,” he said in an interview. “Even if it’s a five-dollar coffee a day, that adds up quickly. People still want the experience, even if they’re saving money elsewhere.”
Full-service restaurants, by contrast, saw a 0.7% decline in traffic, as Canadians increasingly chose lower-cost formats that require less tipping and tax. The trade-down trend is being reinforced by rising meal prices and a growing appetite for value-driven promotions.
Independent Restaurants Outpace Large Chains
One of the most notable shifts in the market is the success of independent and small-chain operators. These restaurants are growing faster than their large-chain counterparts, benefitting from both consumer interest in supporting local businesses and Canada’s rapidly diversifying population.
“The shop local movement that started during the pandemic still has legs,” said Sgabellone. “People are discovering a whole world of small operators offering authentic food from cultural communities across the country. These independents and smaller chains are growing faster than the legacy brands.”
This momentum has been reinforced by immigration-driven population growth. Canada has added more than five million people since 2019, many of whom bring diverse culinary traditions. “People want the food they’re familiar with, and they won’t necessarily find it at a legacy chain,” Sgabellone noted. “That creates opportunities for local entrepreneurs.”
Value-Driven Promotions Keep Consumers Engaged
Deals are playing an increasingly important role in attracting diners. According to Circana’s CREST foodservice data, non-deal occasions have flattened, while deal-driven visits continue to grow.
“Consumers are stretched, but they’re still going out,” said Sgabellone. “The growth is coming from deal occasions, whether it’s a buy-one-get-one offer, a combo deal, or digital coupons.”
Digital adoption has accelerated this trend, with half of all coupons now delivered through mobile apps or online platforms. “Almost half of all digital orders include some sort of a deal,” Sgabellone added. “Operators are using apps to push promotions, reward loyalty, and drive frequency.”
Digital ordering continues to expand at double-digit rates, a trend that has persisted over the past three quarters. Delivery alone surged 13% in the last quarter, as consumers embraced convenience despite the added costs.
“What goes hand in hand with digital ordering is deals,” Sgabellone explained. “Operators are competing aggressively in this space, using apps to encourage larger orders or offering free delivery thresholds.”
For younger Canadians, delivery has become especially important. Many urban Gen Z consumers do not own cars, making drive-thru less accessible. “Staying home and ordering in may be more expensive than picking it up yourself,” Sgabellone observed, “but it’s still cheaper than going out to a full-service restaurant.”
Lunch Leading the Way as Work Patterns Shift
Changing work patterns are reshaping demand across different dayparts. Lunch has become the fastest-growing segment of the day, supported by the gradual return to office work. With more Canadians commuting again, workplace-adjacent QSRs and cafés are benefitting from increased traffic.
Coffee and beverage occasions remain steady, but consumers are more price-conscious in their choices. “During the inflationary spike in 2022 and 2023, average spend only grew by two to three percent, not the eight to ten percent we saw with inflation,” said Sgabellone. “People adjusted by trading down, skipping extras, or choosing lower-cost formats. They preserved the experience, but made small sacrifices.”
Dining as an Experience
Beyond price sensitivity, dining out remains driven by the social and experiential value of foodservice. Circana’s consumer sentiment research finds that Canadians continue to prioritize restaurants as spaces to socialize, try new flavours, and enjoy time away from home.
“It’s not necessarily about hunger,” said Sgabellone. “It’s about getting out, trying something new, or just sitting in a coffee shop watching the world go by. That social and experiential factor is what keeps people coming back.”
Younger consumers are especially willing to splurge on experiences. “Gen Zers living at home may have fewer financial responsibilities but are earning incomes,” he added. “They’ll spend $200 on a special meal out, not every day, but for the experience.”
Food as a Retail Anchor
The expansion of foodservice is visible across Canada’s retail landscape, where restaurants and food halls are increasingly serving as anchors for shopping centres. Malls such as Toronto’s CF Fairview have repositioned around large food precincts, while concepts like Eataly demonstrate the power of food to draw repeat visits and animate retail environments.
“There are fewer restaurants in Canada today than there were in 2019, even with five million more people,” Sgabellone noted. “That means demand is being absorbed by those who are operating, and new entrants see opportunity. For international chains, the Canadian market looks attractive because of available retail real estate and continued population growth.”
Domestic Travel Fuelling Local Experiences
Reduced international travel is also shaping consumer spending. Many Canadians have scaled back or cancelled expensive vacations abroad, choosing instead to reallocate discretionary dollars to local activities.
“Money that had been put aside for vacations is now available,” Sgabellone explained. “People are spending locally, whether that’s restaurants, movies, or weekend trips. It’s very much a Canadian version of the ‘lipstick effect.’ You can’t afford Disney, but you can afford a new lipstick or a $7 latte.”
This reallocation of spending has benefitted QSRs, retail foodservice, and independent restaurants alike, reinforcing the industry’s resilience.
Outlook for the Next 18 Months
Looking ahead, Circana expects growth in Canada’s commercial foodservice industry to moderate in the near term. Broader economic forecasts point to slowing population growth, weaker housing starts, and a flattening economy.
“We are predicting the growth curve is going to flatten,” said Sgabellone. “We’re not forecasting declines, but we expect very low single-digit growth, likely in the one to two percent range over the next six to eighteen months.”
While the boom period of rapid recovery appears to be over, the industry remains on stronger footing than many other consumer categories. “Foodservice has that experiential component, and that keeps us slightly ahead,” Sgabellone added.
A Sector Positioned for Resilience
The first half of 2025 has reaffirmed that Canada’s commercial foodservice industry remains adaptable, innovative, and deeply tied to Canadian lifestyles. The sector’s ability to embrace digital tools, deliver value-driven promotions, and reflect Canada’s cultural diversity has fuelled growth in the face of inflation and cautious consumer sentiment.
For independents, immigrants, and entrepreneurs, opportunities continue to emerge, while international chains eye Canada as an expanding market with real estate availability and growing demand.
As Sgabellone summarized, “Canadians still want the experience. Whether it’s a five-dollar coffee, a local shawarma shop, or a digital deal from a QSR, foodservice continues to deliver what people are looking for — a sense of connection, indulgence, and everyday enjoyment.”
