After a slew of confinements and closures, restaurants are still not out of the woods. Far from it. Over the past year in Canada, restaurant closures outpaced openings by a whopping 43 per cent. The industry is still shrinking.
Inflation-adjusted food service sales will be around 11 per cent below 2019 levels by the time we’re done with 2022, according to the latest report from Restaurants Canada. Traffic in full-service outlets is down nine percent, and for quick service, it’s down five per cent. But sales could still surpass the $100 billion mark, according to the report, and that is an encouraging number.
The annual report is, of course, imbued with the optimism and resilience characteristic of the sector. But with both a possible recession and higher interest rates on the horizon, consumers will have to make choices and change habits. With a tighter budget, many consumers will eat in restaurants less often.
I estimate that, on average, 27 per cent of our current food budget is spent on food consumed outside the home, at some type of restaurant. Before the pandemic, the percentage was over 35 per cent, and getting back to that percentage will take time, perhaps even a few years.
 |
| Related Stories |
| Are meals in the metaverse a new frontier for restaurants?
|
| Restaurants face a great reset, thanks to COVID-19
|
| Restaurant industry struggles to find staff |
But the report is a bit surprising in many aspects. For one, there’s not a single word about the work-from-home phenomenon. We estimate that by 2025, nearly 40 per cent of the Canadian workforce will work at least one day a week or more at home. A more domestic, sedentary market does not have the same relationship with food as a consumer market that commutes daily.
The Shake Shack chain in the United States, which operates more than 6,000 restaurants worldwide, including a few in Canada, has become a model case for strategic pivoting during the pandemic. The chain’s revenue is around $500 million annually. In March 2020, its online sales were practically zero. Today, 43 per cent of their sales are online, through phone apps. In fast food, only 16.5 per cent of consumers will eat their meals on site. Before the pandemic, that percentage was 33.9 per cent. Ordering online for delivery or pick-up is almost the norm for many consumers now.
It’s not surprising, then, to see other chains, like Subway, copying Shake Shack and relying heavily on their own app. SKIP, which just laid off 350 employees, knows this all too well. This e-commerce platform, as well as UBER EATS, Doordash, and others which offer meal delivery from partner restaurants, are seeing their turnover affected by competitors that recognize the potential of a virtual market.
Even grocers are improving their service and relying on online shopping, and they are getting better at it. Before the pandemic, the food service sector had almost a monopoly on delivery and counter service. This is no longer the case.
Of course, some major headwinds affecting the sector include inflation and labour issues. As prices on the menus increase with inflation, the number of food choices decreases. Less waste, less cost. We may see more and more restaurants with service that offers only one or two dishes on any given day because this provides more predictability for the back-of-house staff. Several European restaurants are already doing this. The demand becomes more manageable, and so do the costs.
As to labour issues, Restaurants Canada estimates that the sector has had between 150,000 and 170,000 vacant positions for some time. The sector currently employs 271,000 fewer people than in 2019, before the pandemic hit. The difference is enormous. Several establishments will close earlier or will open less often. Operators will rely more and more on robotics, which we already see in several businesses, both in the kitchen and dining room.
The sector is clearly redefining itself, but the bleeding continues. As it emerges from a tumultuous period with a firm desire to adapt to a market that is difficult to predict, many establishments won’t survive. Interestingly, the report notes a few trends to watch for, including increased demand for local food, comfort food, and globally inspired foods and flavours. Talk about paradoxes.
Dr. Sylvain Charlebois is senior director of the agri-food analytics lab and a professor in food distribution and policy at Dalhousie University.
For interview requests, click here.
The opinions expressed by our columnists and contributors are theirs alone and do not inherently or expressly reflect the views of our publication.
© Troy Media
Troy Media is an editorial content provider to media outlets and its own hosted community news outlets across Canada.
