As labour shortages and inflation continue to rise, is the foodservice industry bouncing back? Full patios, large takeout lines, and long reservation lists seem to indicate that we are back to business as usual, but the numbers tell a slightly different story.
In a recent webinar, Chris Elliott, senior economist at Restaurants Canada, took a closer look at our recovery status for a clearer picture of the state of the industry.
Recovery may look like it’s on the horizon with 90 per cent of people comfortable eating (in or out) at a restaurant, compared to only 48 per cent of people at the same time last year. But how does inflation affect these numbers? Looking at 2022 profits alone does not paint a complete picture.
Numbers suggest that sales are on the rise, with quick-service restaurants up eight per cent and full-service restaurants up two per cent, but inflation has boosted those numbers. When adjusting for inflation, QSRs are actually down four per cent and FSRs are down nine per cent.
The good news is that progress is being made, but it is not happening quickly.
Labour shortages also play a role, with many restaurants having to turn away customers due to lack of service staff or cutting the hours they are open to maximize coverage. Fewer customers and shortened operating hours also affect sales and the current measure of success.
What do traffic numbers tell us about industry recovery? Compared to 2019, both 2020 and 2021 traffic were down around 40 per cent. In contrast, in the first half of 2022, we are only down 10 per cent. Those numbers show definite growth, but we are still not back to our pre-pandemic traffic levels, even in the busiest season.
Why are we still below 2019 numbers? It looks like it has to do with consumer work habits. 32 per cent of people are working mostly or entirely remotely and 53 per cent of those people are dining out less, with 25 per cent ordering less delivery and takeout. As well, with downtown cores seeing fewer workers during the breakfast and lunch hours, traffic during these times has hit a severe decline, down about 50 per cent.
The traffic numbers appear to be optimistic overall, but the change in consumer work habits makes it hard to compare apples to apples over previous years.
What’s to come for the foodservice industry?
While we are in a slow recovery, we’re not out of the woods yet. Canadian restaurants will continue the uphill battle as we enter into 2023, with closures increasing. April 2021 to March 2022 saw 150 to 300 permanent closures per month. Current data suggests that we have reached an average of 400 permanent closures per month during the last three months. New openings are not offsetting those closures and over half of the industry is operating at a loss or just breaking even.
The foodservice industry has not faced the last of its challenges and until financial stabilization and closure rate stability occur, it’s a bumpy road ahead to recovery.