foodservice industry

Restaurants in real-time: today’s foodservice industry and where we’re headed

By Jessica Brill

As the foodservice industry progresses on the road to recovery, the post-pandemic landscape continues to challenge a great number of restaurateurs. Inflation, staffing shortages, and government policies threaten the livelihoods of so many hospitality businesses, as many operators work to get back on their feet. Prior to the pandemic, the average monthly restaurant closure rate was about 44 per cent, but this past January showed 121 restaurant bankruptcies, which is a 112 per cent increase over the previous January.

According to Restaurants Canada, 62 per cent of operators are barely breaking even or are operating at a loss, up over 50 per cent from pre-pandemic days. Many restaurants are still in crisis, carrying debt, and battling rising costs everywhere from food to equipment to rent and beyond. And while there has been some growth and success among operators, “The ability to operate a profitable business in this industry has become significantly more challenging in Canada,” says Kelly Higginson, president and CEO of Restaurants Canada.

Inflationary pressure

Continued inflationary pressure is affecting consumers and restaurants alike, as operators try to repay loans, recoup losses, and stay afloat. They are looking for a way forward to achieve the trickle-down effect that occurs when inflation comes down, guests have more discretionary spending and restaurants fill up, helping the industry manage the debt they are carrying and start to see some forward motion.

One of the ways that operators have found success is by focusing on transparency with their customers,  making pricing more visible to consumers so they gain a better understanding of restaurant operations and rising menu pricing. According to Restaurants Canada’s recent customer polling, consumers are starting to make the connection between grocery store costs and higher menu items, but there is still a threshold on consumer discretionary spending.

“We are hearing from a lot of operators that the frequency of their regular visitors is dropping, or their cheque totals are decreasing, and this impacts the profitability of restaurants significantly,” confirms Higginson. “The public needs to know how important they are to restaurants and while they may not have enough discretionary spending now, when they do, patrons are the heart of the foodservice industry.”

Labour

When consumers face higher costs from restaurants, the expectation for an elevated experience and excellent service is also raised. And while many of the industry challenges are centred around government policy and regulations, when it’s all said and done, restaurants need to be well-staffed. As a labour-intensive industry, re-building those numbers has been a challenge for many operators in recent years. Higginson cites immigration as a major area of concern as operators try to build up their workforces to pre-pandemic levels.

Labour is a long-term commitment, and immigration is a part of that successful system. With over 50 per cent of franchise owners and management made up of new Canadians, it’s vital that we invest in that part of our industry over the long term for sustainable staffing and success. “We aren’t looking for immigration labour from a temporary standpoint, we need to bring more people to the country and streamline permanent residency so we can invest in these employees,” says Higginson. “As an industry that’s gone through the incredible expense of having to train a whole new workforce, we want to encourage immigration as a way to bolster employment and deliver the experience that consumers are expecting, with access to the labour we need.”

So, how can the industry best battle these pressures to recover and grow in the coming years?

Advocating for change

“When COVID hit, it really emphasized the importance of having a strong industry association. Restaurants Canada is the fourth largest industry employer, and that was wiped out overnight,” says Higginson. There’s no shortage of issues for the association to focus on, but profitability is paramount, prompting the question “How do we get the top-line sales translating to bottom-line profit again?”

Starting with government policy, Restaurants Canada is involved in several endeavours to make change. When the CEBA payback deadline was looming, the association worked hard to get the deadline extended to allow operators the recovery time they needed, and while the deadline remained firm, the Canadian government allowed a rollover for operators to take a government loan (with a five per cent interest rate) as an alternative.

They also lobbied to keep the alcohol tax capped at two per cent when the federal government was considering an arbitrary hike to 4.7 per cent. In March, the cap was confirmed, allowing restaurateurs the financial relief they need, along with a certain amount of predictability in their operations. “In the last four years, there’s been so much volatility, without any ability to plan ahead, this cap was crucial to restaurant success,” confirms Higginson.

The list of governmental policies that threaten to complicate the industry’s recovery is extensive, and Restaurants Canada is focusing on addressing these (and more):

  • Payroll taxes: Fighting to deny an increase in payroll taxes that would hinder businesses of all sizes in such a labour-intensive industry.
  • Small business tax: Working on lowering the small business tax rate from nine per cent to eight per cent to help those independents that make up our communities.
  • Carbon tax: Looking at where the carbon tax is being applied, and how small and medium businesses will be able to access rebates to help manage expenses.
  • Small businesses: Increasing the small business threshold would allow benefits to more operators while keeping profitability top of mind.

It’s these issues and more, like the effects of layering taxes, regulations, and policies that Restaurants Canada is focusing on as they advocate for change for the foodservice industry.

Lessons learned

From LTOs to loyalty, operators will need to get creative to make their mark in the crowded marketplace and adjust their approach to address the current landscape. As remote work declines and employees return to the office, restaurateurs may find success tapping into higher traffic from commuting and business travel. And, with some employees continuing to work from home, operators need a strategy to get those employees to visit weekly for meetings, lunches, happy hours and more, as they look for ways to boost traffic and the bottom line.

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The tech advantage

Technology has emerged as a game-changer for restaurants to access data, assess efficiencies, and streamline operations to maximize margins. While technology and automation can require an investment, tools range in pricing and operators need to look at what is going to pay off over time and provide the results they need. Many tech tools offer insights that can be most useful for operators in helping to find efficiencies with data in foodservice:

  • Traffic, sales, and guest volume analytics for optimal scheduling
  • Menu engineering for higher profits
  • Inventory management for waste reduction
  • Historical data for business modelling and budget planning

Technology and automation can provide operators insight into cost reduction, streamlined scheduling, increased profit margin, and more. Studies show that 77 per cent of restaurateurs have reported increased efficiency and 33 per cent report higher revenues after implementing technology tools, so it is a solid strategy for operators.

While the investment into technology and automation may seem daunting, it doesn’t have to be a complete overhaul. Higginson suggests a conservative approach, investing one piece at a time, as equipment is replaced or your budget allows. As well, more and more software companies are releasing useful apps that often look for a small investment with great returns, so it’s worth taking the time to research resources that work to address each operator’s needs. And, while this all comes back to having less debt so that these investments can be made with greater ease, associations like Restaurants Canada have made relationships with industry partners to offer solid solutions to industry challenges for operators to learn and apply to better their businesses.

The future of the foodservice 

It hasn’t been all doom and gloom, the industry has seen a few bright spots in the last few years. The future is optimistic, as operators stay creative and resourceful, finding new ways to offer takeout, elevate experiences, and share restaurant space to continue to survive and thrive by increasing value, raising profitability, and lowering expenses.

Another silver lining is that labour challenges may be on the decline, as the next generation shows passion and drive for foodservice and hospitality. “We have heard from a lot of the colleges across the country that the application to hospitality programs is overflowing,” says Higginson. So, the future is encouraging, with a workforce waiting to enter the foodservice industry and make their mark.

The industry itself is evolving, helping each other on the road to recovery. “We’ve seen a really big growth in the investment of health care benefits from operators in their employees to over 40 per cent, and wages have grown nine per cent, showing operators that investing in your teams is a really powerful tool for retention and growing the industry,” says Higginson. Even in these challenging times, the industry is finding a way to re-invest in their employees, bring stability, and encourage the next generation to venture into foodservice as a career filled with passion and support. As the industry’s recovery continues, operators persist in pursuing their passion, paving the way for a brighter future for this generation and the next.