Back in January 2022, on-premise dining was shut down again due to the spread of the Omicron variant. This resulted in a devastating decline in foodservice sales in Q1 2022, with 91% of foodservice operators reporting lower sales and only 21% making a profit.
Only one year later, the economy is fully reopened, and COVID-19 cases are down. Yet, despite this, just one-third of restaurant operators reported their total sales were higher in Q1 2023 compared to Q1 2019, while only 22% of respondents said that their sales were about the same as pre-pandemic levels.
A significant portion of the foodservice industry continues to report lower sales. Overall, 46% of table-service restaurants and the ‘all other foodservice’ segment (accommodation foodservice, bars and institutions) and 38% of QSRs (quick-service restaurants) reported lower sales in Q1 2023. Even those businesses experiencing higher sales noted that it was not necessarily the result of strong consumer demand but could be attributed to higher menu inflation.
The foodservice industry struggles to recover as traffic has not returned to pre-pandemic levels, due mainly to Canadians still working remotely and labour shortages, which have kept restaurants operating at just 75% to 85% of their standard capacity. As a result, 60% of survey respondents said traffic in Q1 2023 remains below Q1 2019 levels, and those reporting an improvement in guest counts are still not at 2019 levels. Only about 25% of respondents are experiencing higher traffic in Q1 2023 vs. Q1 2019.
The combination of low guest counts and soaring operating costs have also resulted in eight out of 10 foodservice companies indicating that their profitability in Q1 2023 remains below Q1 2019. By comparison, just 15% of quick-service restaurant companies and 7% of table-service restaurant companies have higher profits.
The current profitability in the foodservice industry is still behind pre-pandemic profitability, with half of foodservice companies not making a profit, 35% of restaurant companies operating at a loss, and only 17% breaking even. Pre-pandemic, approximately 7% of companies were operating at a loss while only 5% were breaking even. Meanwhile, a hefty 36% were earning a pre-tax profit of 10% or more. Sadly, just 12% of companies are currently making a profit of 10% or more.
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As the Chief Economist and Vice President, Research for Restaurants Canada, Chris Elliott manages and produces a comprehensive research program that has made Restaurants Canada a leading source of information for and about Canada’s $100-billion foodservice industry. Chris tracks and analyzes key industry and economic indicators and translates them into member reports and publications. He also provides research to support Restaurants Canada’s lobbying efforts on issues that affect foodservice operators – from payroll taxes to food costs.
Chris has worked with Restaurants Canada for over 20 years, has a Bachelor of Arts and Master Degree in Economics and specializes in economic modeling and forecasting.