Following a challenging first quarter, the outlook for the foodservice industry has operators remaining cautiously optimistic, according to the Restaurants Canada Q2 Quarterly Report, with a projected -0.5 to 0.5 per cent growth in 2025 and a 0.1 to 0.6 per cent decline in 2026.
The report shows that as trade wars continue and economic uncertainty persists, seven in 10 restaurant operators rate the current economic conditions as fair or worse, with only 31 per cent saying they are “good” or “very good.” Overall, 41 per cent of foodservice businesses are operating at a loss of just breaking even. While this is an improvement over 2024, it is still below 2019 levels, when only 12 per cent reported operating at a loss or just breaking even. Today, nine per cent of operators report making a profit above 10 per cent, significantly lower than the pre-pandemic 36 per cent.
Operators cite food costs (83 per cent), labour costs (80 per cent) and a weak economy (55 per cent) as the top three challenges they are facing, and even though consumer confidence has improved slightly over last quarter, 48 per cent of restaurant operators expect to be less profitable in 2025 than they were last year.
To deal with the rising operating costs, many foodservice businesses are raising menu prices (85 per cent), cutting staff or hours (60 per cent), increasing hours worked by owners or managers (54 per cent), or changing suppliers or ingredients (53 per cent).
The report states that while tariff uncertainty continues to weigh heavily on the foodservice outlook, consumer confidence, spending, and debt levels are improving, which offers some hope for an upswing in mid-2026.
In the first four months of 2025, commercial foodservice sales grew by a solid 6.6 per cent, supported in part by the GST/HST holiday in January. Restaurants Canada continues to advocate for the federal government to permanently exempt all food, including restaurant meals, from GST/HST.
“Keeping food affordable needs to be a top priority for the government. Canadians from all walks of life rely on restaurants to feed themselves, whether it’s parents grabbing dinner on the way home from soccer practice, an elderly person who needs a hot meal delivered, or a busy student getting a breakfast sandwich on the way to school,” said Kelly Higginson, President and CEO of Restaurants Canada. “Removing the GST/HST from all food is a no-nonsense way to improve the quality of life of Canadians and support the foodservice industry.”
To sign Restaurants Canada’s petition calling on the government to exempt all food from sales tax, visit foodisfood.ca.
