Canada’s restaurant industry says pressure is mounting after an uneven first financial quarter of the year.
Restaurants Canada’s quarterly report reveals an industry “under growing financial strain” in early 2026, as business owners face the brunt of the nationwide affordability crisis, rising operating costs and inconsistent spending.
President and CEO Kelly Higginson says Canadians visit eateries 23 million times every day, supporting more than 1 million jobs, but when affordability is strained, there’s a ripple effect.
“The restaurant industry is typically the first to feel economic pressure when Canadians are struggling. And right now, that pressure is building,” said Higginson.
The report says nearly 50 per cent of restaurant operators reported lower sales in Q1, more than half reported fewer guests, and 71 per cent reported declining profitability.
After 2.4 per cent growth in 2025, the report predicts a 0.2 per cent decline in real commercial foodservice sales in 2026.
The vast majority of restaurateurs report food costs, labour, and seeing fewer customers as challenges. Thirty-six per cent of Canadian restaurants are reportedly operating at a loss or only breaking even — three times the rate in 2019.
Under former Prime Minister Justin Trudeau’s Liberal Party, the federal government introduced a temporary Goods and Services Tax (GST) holiday on certain items, including restaurant meals, from December 2024 to February 2025.
Restaurants Canada is calling for a permanent exemption of GST on all food in the country.
“Permanently exempting all food from GST would provide direct relief to Canadians while addressing a fundamental issue of tax fairness. Today, similar food items can be taxed differently depending on where they are purchased. This distorts consumer behaviour and undermines affordability objectives,” it explained.
Higginson said consistency across the tax system would help Canadians and strengthen the economy.
B.C. restaurants deal with labour shortage
B.C.’s largest restaurant business group says that a GST holiday would help eateries in the province to attract more customers and alleviate high operating costs; however, most restaurants are dealing with a bigger problem: labour shortage.
“The number one priority for British Columbia is our labour shortage. And that’s hurting a lot of restaurants,” Ian Tostenson, CEO and president of the BC Restaurant & Foodservices Association, told 1130 NewsRadio.
He explains that the industry is employing around 200,000 people and is currently short of about 15,000 people, which he calls “a crisis level.”
He calls on the provincial government to include the B.C. restaurant industry in a federal program that allows provinces to fill gaps in prioritized sectors with foreign workers, such as health care.
“We would like to be on that list, at least access a couple of 100 positions for our restaurants right now.”
Tostenson also says that B.C. restaurant businesses are dealing with the higher costs compared to other provinces.
“We have a high cost of labour, we have a high cost of food, all that stuff.”
He hopes that events like the FIFA World Cup will provide some relief to the ailing industry, even if it is not a long-term solution.
“It doesn’t necessarily drive profitability, but it drives a lot of cash flow,” Tostenson explained.
According to the lobby group, a sustainable relief for the industry would be a lowering of lease time and costs.
“We haven’t had much relief on the occupancy costs side of things. Many restaurants say, ‘It was not worth it to sign another 10-year lease.’ So, I think that’s part of the issue.” The lobby group president says.
—With files from Sonia Aslam