What’s on their plate? Food and drink places dish on business challenges

In the months following the lifting of gathering restrictions and other health measures put in place to combat the COVID-19 pandemic, many of us couldn’t wait to get out to our local bar or restaurant or go to an event.

A return to full capacity was welcome news for food services and drinking places, which also include businesses such as caterers, contractors and cafeterias, in addition to restaurants (full-service and take-out) and bars.

However, this anticipated return to normal was also met with new challenges and obstacles associated with higher operating costs and a labour shortage, among others. So, if your favourite local spot seems understaffed, or if you’ve noticed higher prices on the menu, or if it recently closed down—there’s probably a variety of reasons.

Let’s have a look at what the subsector’s 65,000-plus businesses have been telling us most recently, according to Canadian Survey of Business Conditions data from the fourth quarter of 2023, and other related numbers.

Most food services and drinking places affected by rising inflation, increased costs

In the fourth quarter of 2023, 3 in 4 (75.0%) food services and drinking places expected rising inflation to be an obstacle in the next three months, and about 7 in 10 (68.2%) expected the rising cost of inputs to be one.

About one in two (53.0%) food services and drinking places reported rising interest rates and debt costs, and the cost of insurance (50.8%) to be obstacles, while two in five (40.9%) expected rising costs in real estate, leasing or property taxes to be an obstacle.

Just over 2 in 5 (40.9%) food services and drinking places expected the selling price of goods and services to increase, while over 1 in 2 (54.8%) expected them to stay about the same. Still, just over 1 in 2 (51.5%) food services and drinking places expected a decrease in profitability, 2 in 5 (40.0%) expected it to stay the same, while less than 1 in 10 (8.5%) expected an increase.

In October, restaurant food prices were up 5.7% year-over-year, while prices paid for alcoholic beverages were up 6.4%.

Emergency loans coming due

Nearly 7 in 10 (69.2%) food services and drinking places in the fourth quarter of 2023 reported receiving a repayable loan from the Canada Emergency Business Account (CEBA), and about 4 in 5 (82.4%) said it has not been paid back fully. In comparison, roughly half (51.5%) of all businesses reported receiving a repayable loan from the CEBA, and just over 7 in 10 (71.8%) of these businesses said it has not been paid back fully.

More than one in five (22.3%) food services and drinking places do not anticipate having the liquidity available or the access to credit to repay their CEBA loan, while more than two in five (43.2%) said they do.

Loans had to be repaid in full by December 31, 2023, to qualify for partial loan forgiveness, although some loan holders are eligible for an extension to either January 18 or March 28, 2024, under certain conditions.

Vacancies down, but labour shortage persists

In the fourth quarter of 2023, close to one in two (48.5%) food services and drinking places expected a shortage of labour to be an obstacle over the next three months. By comparison, one in four (25.7%) of all businesses expected the same.

Two in five (39.7%) food services and drinking places expected retaining skilled employees to be an obstacle, compared with nearly one in four (23.6%) of all businesses.

An increase in vacant positions was expected by 7.1% of food services and drinking places, while 8.1% expected an increase in the number of employees.

The number of job vacancies in the subsector has declined from a record high of 145,100 (13.4% job vacancy rate) in the third quarter of 2021 to 85,295 (7.1%) in the third quarter of 2023. The number of payroll employees in the third quarter of 2023 (1.1 million) remains below the pre-pandemic high (1.2 million) recorded in the third quarter of 2019.