After enduring the unexpected blow of the once-in-a-lifetime COVID-19 pandemic, the restaurant industry in Canada is still in a dire state and many businesses are at risk of collapse.

This is the main idea of a recent report issued by Restaurants Canada, which found that despite surviving the depths of the pandemic, the outlook for the industry as a whole looks bleak.

Total restaurant spending is on track to reach $110 billion this year, an increase of 10 percent over last year’s level, but costs have risen even more, pushing many to the brink of bankruptcy.

In the same context, the restaurant group said that more than half of its members are losing money this year. While this is uncommon in an industry known for its very slim profit margins, in 2019, only about 12 percent of the group’s members were at risk.

For his part, Richard Alexander, the group’s executive vice president, said in an interview with CBC News network that it is very difficult because everything that goes into running a restaurant has increased by double digits.

During the first five months of 2023, bankruptcies in the sector rose by about 50 percent compared to the same period last year, and he says more is coming. 

Rising costs...

Frederic Demanche, director of the Ted Rogers School of Hospitality and Tourism Management at Toronto Metropolitan University, said he was not surprised when he heard that more restaurants are struggling.

With higher tip amounts, many Canadians say they prefer to skip tipping – and some restaurants agree.

Government programs designed to keep people employed and pay rents helped, but those programs have now expired, and demand for eating out has not returned to pre-pandemic levels.

If anything, it is declining as data from OpenTable, a restaurant reservation system, shows that demand across Canada dropped by about three percent this month, and it is even worse in some cities. In Edmonton, demand has declined every month since April, while it has dropped in Toronto for five consecutive months.

Meanwhile, costs continue to rise.

Demanche also said many restaurants have had to raise wages not only to attract people but also to retain them. The cost of doing business is increasing.

Rent increases also hurt...

Aleida Solomon knows this well. But as an entrepreneur about to celebrate a year of running her restaurant Tutti Matti in downtown Toronto, she says that wage increases to attract and retain her staff do not come close to her biggest problems.

Most restaurants are seeing rent increases ranging from 20 to 35 percent in the heart of downtown right now, which is a significant cost we have to bear on top of everything else.

Increased costs are one thing, but the bigger problem for her is that the pandemic has changed the way people live, including the demand for restaurants in downtown locations like her area.