(Apr. 6/17) It was cold outside, but nothing could put a damper on overall restaurant sales. Canada’s foodservice industry began the year on a strong note, with sales rising 4.4% in January 2017 over January 2016. Real sales increased by a healthy 2.1%, when adjusted for menu inflation of 2.3%.
QSRs are hot, hot, hot
Quick-service restaurants picked up where they left off last year, leading the industry with an impressive 6.6% jump in spending in January. Strong demand for convenience and value are driving overall sales, but the segment is also attracting new entrants and chain expansion. In 2016, the number of quick-service restaurants rose by 2.7% – more than twice the pace of population growth.
FSRs cool down
In contrast, sales at full-service restaurants moderated to 3.4% growth, following average monthly gains of 6.2% over the previous four months. This slowdown is expected as demand was bound to cool in British Columbia, Ontario and Quebec, which all saw impressive gains in 2016.
Caterers feel the chill
Caterers continued to struggle due to the recession in Alberta and Saskatchewan, and a pullback in spending in Ontario. Caterer revenues rose by just 0.9% in January, following a 0.8% increase in December.
Drinking places are hot and cold
In 2016, drinking places posted a 5.3% rebound in sales – their strongest growth since 1999. This recovery, however, was short-lived, as sales slipped 1.3% in January. Most provinces endured lower spending, but British Columbia bucked the trend with a 10% surge in sales.
Sales growth drives employment
Overall, the restaurant industry fared well, which is good for operators and new hires. Employment grew by a healthy 3.0% this January, compared to January 2016. Although employment is up, operators are watching their labour costs as average hours worked per employee slipped by 3.2%.
A hot year ahead
Commercial foodservice sales are forecast to expand by 4.1% in 2017. This growth comes on the heels of a solid 6.3% sales increase in 2016. Growth is driven by domestic household spending, improved consumer confidence and unit expansion. Canada 150 events will also attract more international visitors in 2017, which will boost foodservice revenue.
While revenues may be growing, rising costs and price-sensitive consumers continue to put the squeeze on operators. The average profit margin in the restaurant industry is 4.3%.