High operating costs and uneven consumer spending put Canada’s restaurant sector – a key economic engine – under pressure

Canada’s restaurant industry is under growing financial strain in early 2026, as persistent affordability challenges, rising operating costs, and uneven consumer spending continue to erode profitability.

New data from Restaurants Canada’s Q1 Quarterly Report highlights uneven foodservice sales growth driven by ongoing affordability pressures, with lower-income Canadians especially pulling back on spending.

“The restaurant industry is typically the first to feel economic pressure when Canadians are struggling. And right now, that pressure is building,” said Kelly Higginson, President and CEO of Restaurants Canada. “Canadians visit restaurants 23 million times every day, supporting 1.2 million jobs across the country. When affordability is strained, it doesn’t just affect restaurants, it ripples through communities, supply chains, and local economies.”

Quarterly Report at a glance:

• Real commercial foodservice sales are expected to decline by 0.2% in 2026 (inflation-adjusted), following 2.3% growth in 2025.
• 49% of operators report lower sales so far in 2026; 54% report fewer guests and 71% report declining profitability.
• Quick-service restaurants are hardest hit, with 81% reporting declining profitability (vs. 70% full-service).
• 36% of operators are operating at a loss or breaking even, which is triple the levels from 2019.
• Cost pressures remain widespread: 91% cite food costs, 87% labour, and 69% report customers dining out less due to affordability constraints.

A sector central to Canada’s economic agenda

A strong restaurant sector supports workers, communities, and supply chains that underpin broader growth:

• Canadians visit restaurants 23 million times daily, generating $125 billion in annual sales, equal to 3.9% of GDP.
• The sector is the fourth-largest private sector employer, with 1.2 million workers, including 480,000 youth.
• Restaurants employ more Canadians than auto manufacturing, aerospace, banking, primary agriculture, and steel combined, and support 17.7 jobs per $1 million in output – more than double the industrial average.

• Every $1 spent in restaurants generates $2.25 in total economic output, well above the national average.
• This multiplier drives activity across agriculture, food production, transportation, wages, and local businesses.

Policy action needed to support affordability and growth

The federal government has set an ambitious economic agenda, from trade diversification to major infrastructure and defence investment. Feeding people is foundational to all of it.

Restaurants Canada is calling on the federal government to take targeted action that both improves affordability for Canadians and supports investment in a key job-creating sector.

• Permanently exempting all food from GST would provide direct relief to Canadians while addressing a fundamental issue of tax fairness. Today, similar food items can be taxed differently depending on where they are purchased. This distorts consumer behaviour and undermines affordability objectives.
• Enabling accelerated capital cost allowance for the foodservice industry would support reinvestment, modernization, and growth, helping operators expand, upgrade equipment, and improve productivity.

“Treating food consistently in the tax system and supporting investment in our sector would help Canadians today while strengthening one of the country’s most important engines for jobs and local economic activity,” said Kelly Higginson.

For a full version of the Quarterly report, please reach out to the media contact below.

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Media Contact:

Milena Stanoeva, Restaurants Canada | media@restaurantscanada.org | 647-921-1758

About Restaurants Canada

Restaurants Canada is a national, not-for-profit association advancing Canada’s diverse and dynamic foodservice industry. Restaurants are a $125 billion industry employing 1.2 million Canadians and the number one source of first-time jobs in Canada. Visit restaurantscanada.org for more information.