Challenges for the Restaurant Industry Persist into 2024 after Record Breaking Bankruptcies
The restaurant industry is preparing for a tough first half of 2024. According to the Conference Board of Canada, the economy’s lackluster performance in the second half of 2023 will spill over into the first months of 2024 with minimal growth expected. Once again, leaving restaurants to navigate uncertain times and monumental economic challenges.
New data from Restaurants Canada tells the story: 62% of restaurants are operating at a loss or barely breaking even – up 9% from July 2023 when it stood at 53%. This is compared to 10% pre-pandemic. This alarming statistic underscores the immense pressure on the industry. It also leads to a notable upsurge in closures in 2023, with bankruptcies up 44% – the highest annual figure in a decade.
One of the main factors driving this difficult environment is weak sales, which are expected to persist in winter/spring of 2024. As consumers continue to curtail their discretionary spending, the foodservice sector bears the brunt. Disposable income is a critical factor influencing foodservice sales, as customers tend to dine out more frequently when they have greater financial flexibility.
A recent survey conducted by Restaurants Canada reveals the future viability of many operators hinges on the upcoming weeks and months. The uncertainty is palpable, with one operator stating, “If we make it past January, we could possibly stay afloat.” This sentiment echoes the widespread concern among industry professionals who are closely monitoring government policies for signs of inflation relief. As restaurants hang on, governments must refrain from imposing any further costs, like the scheduled 4.7% federal alcohol excise tax that is set to take effect April 1st and is being fought against by the industry. Owners need a chance to catch up and find profitability again without getting knocked down by added costs.
Looking to the future
After 4 years of hardships, there may be light at the end of the tunnel. Overall annual full-service restaurant sales are forecast to grow by a modest 2.8% in 2024, followed by a 4.9% increase in 2025. The Conference Board of Canada is forecasting that we could see more robust economic growth into 2025. “The survival of restaurants is crucial for community prosperity. When the economy is strong, the restaurant industry is strong.” said Kelly Higginson, President & CEO. “We are looking forward to a return to normal pace of growth but need to work with governments to ensure we can bring profitability back to the industry. Topline sales are not translating to bottom line profit.”
The Quarterly Report
Restaurants Canada is thrilled to announce the launch of our newest report; The Quarterly: Canadian Restaurant Intelligence Report. This new report combines the Restaurant Outlook Survey and the Quarterly Forecast into one convenient new research tool with an updated and fresh look. The Quarterly provides a forward-looking perspective on business conditions as well as a forecast over the next two years.
