When operating revenue and expenses rise in lockstep, how do you turn a profit?

Published May 2, 2019

If operating a restaurant was, as they say, a “license to print money,” everyone would own one. The truth is, in the current economic situation, eking out a profit can be a challenge even for most seasoned veterans of the industry.

The 2019 Restaurants Canada Operations Report reviews the latest data available as compiled by Statistics Canada on expenses and profitability in the foodservice industry. Perhaps the most intriguing figures to come from all the data were the increases in operating revenue and operating expenses between 2012 and 2017: both rose 31%.

Expenses were up, but so were profit margins

Despite the uniform increase, all sectors of foodservice saw a rise in pre-tax profit margins between 2016 and 2017 in terms of the national average (now at 4.3%), except quick-service restaurants which neither lost nor gained ground. Drinking places saw the largest growth in margin, but caterers continue to lead all segments for profitability at 7.2%.

Provincially, results varied. While most provinces reported similar results in 2017 as the previous year, Alberta struggled thanks to a flagging economy. Pre-tax profit margins fell, on average, by a full percentage point in Alberta to 4.4%. Newfoundland and Labrador, another province that faced economic challenges recently, also slumped below the national average, with a pre-tax margin of 4.1%.

It will come as no surprise that cost of sales continues to be the most significant operating expense as a percentage of operating revenue, with a national average of 34.8%. That’s down slightly from 35.2% in 2016. By employing a variety of cost-shaving strategies, restaurant operators were able to control the controllable.

What they could not control was a surge in the cost of labour nationwide. The national average rose by 5.7% from 2016 to 2017, reaching 31%. Drinking places enjoyed the lowest labour costs at 25% of operating revenue, while caterers lost 37.1% of revenue to salaries and wages, the tops among all segments.

How the Operations Report can help your foodservice business

That’s a partial look at the “what happened.” Which leaves us with the question: “what next?” As a restaurant operator, how can you use the data from the 2019 Operations Report to set yourself up for success?

Included with extensive data from all foodservice segments in each province, the Report also contains worksheets and instructions to help you analyze your operating costs. By taking your costs and comparing them with national-, provincial-, and segment-specific data you’ll be able to identify areas of opportunity and see where you’re already ahead of the curve.

The complete Restaurants Canada 2019 Operations Report is available on the member portal, and it’s free for members. Download this valuable and insightful resource today.

Not a member yet?

Learn about the many benefits of joining our 30,000+ member community, such as exclusive rates on industry services and programs plus access to extensive research data by visiting the membership benefits page for more information, or phone us at 1-800-387-5649 x 8006 to speak with one of our Member Service representatives.

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