According to a CTV News report today (January 9), an estimated 11,000 restaurants in Canada will close in the next two years, with 7,000 expected to close by 2025 and another 4,000 projected to close by 2026.
Canada’s restaurant industry is facing enormous pressure as inflation and rising food prices lead to more restaurants, bars and small eateries closing. According to a recent study by Dalhousie University, 7,000 restaurants in Canada will have closed by 2025.
“The food service industry as a whole has been extremely difficult over the past few years,” said Sylvain Charlebois, director of the Agricultural and Food Analysis Laboratory at Dalhousie University. The university predicts that another 4,000 restaurants will close by 2026.
Charlebois stated that Canadian consumers are becoming increasingly frugal with their food budgets. “They will choose to dine at home to avoid paying tips, buying expensive wines, and so on,” Charlebois said. In addition to rising food prices and inflation, the Canadian Restaurant Association also attributed the increase to rising rent, insurance, and wage costs.
The association stated that 41% of restaurants are operating at a loss or barely breaking even, but they are still trying to keep prices low because they know that customers are budget conscious.
Kelly Higginson, president and CEO of the Restaurant Association of Canada, said: “Canadians are currently facing challenges in terms of spending power. Reduced disposable income means people will spend less at restaurants.” From December 14, 2024, to February 15, 2025, Ontario residents enjoyed a two-month relief from Goods and Services Tax (GST/HST) on dining out, prepared foods, snacks, and certain alcoholic beverages. The Canadian Restaurant Association is calling for the reinstatement and permanent implementation of this tax credit.
Higginson said, “We should eliminate the excise tax on food when we are facing a problem with purchasing power, especially with the high cost of living. Why tax food? It’s terrible public policy.” Charlebois agreed with this view and told CTV News that he believes all food taxes should be abolished. “I think we need to eliminate taxes on all food, regardless of where it is consumed,” said Charlebois.
Another reason for the decline in restaurant sales is that Canadians are drinking less alcohol; national retailers saw a 10.6% drop in alcohol sales in October. Charlebois added that some customers are unhappy with the tipping system, which has also hit the restaurant industry. He said that many Canadians don’t mind tipping when dining at formal restaurants; however, they get annoyed when they are asked to tip when ordering at a fast-food counter.