According to Restaurants Canada’s operator survey conducted in July, 84% of foodservice companies reported lower profits in 2023 than 2019, and half of all foodservice companies are operating at a loss or just breaking even. Indeed, four in 10 restaurant owners expect profit margins to be worse in 2023 than in 2022. This is due to rising operating expenses – wages, energy, delivery, insurance, rent and other costs. As a result, the number of restaurant bankruptcies has jumped to 303 in the first five months of 2023 – an increase of 89% over the same period in 2022.
Profitability and debt remain a key concern for our sector despite stronger-than-expected consumer demand in the first half of the 2023. Canada’s commercial foodservice sales are projected to increase by 8.5% to $89.7 billion in 2023. After adjusting for 5.7% menu inflation, real sales are expected to grow by 2.9% in 2023. Previously, Restaurants Canada was forecasting 6.5% nominal sales growth in 2023, representing a modest 0.8% real increase. The increase is driven by a buoyant economy, as TD Economics is forecasting that real GDP will expand by 1.6% in 2023, up from their previous forecast of 0.9%.
With the upward revision to 2023 also comes a downward revision to 2024 for both the economy and the foodservice industry. As a result of higher interest rates, Canada’s economy is forecast to slow to 0.5% growth in 2024, compared to the previous forecast of 1.4%.
This means that annual commercial foodservice sales in 2024 are forecast to expand by 3.4%, downgraded from Restaurant Canada’s previous forecast of 4.5% growth. Once adjusted for menu inflation of 3.0%, real foodservice sales are projected to grow by just 0.4% in 2024.
With consumer demand expected to slow, combined with high operating costs, nearly half of foodservice companies have a negative outlook on the future of their business. In contrast, just 18% are feeling neutral about the future and 34% are hopeful.
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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.