Warm summer fails to boost restaurant sales, but opportunity lies ahead

As a result of concerns over an uncertain economy, among other factors, Canadians are dining out less frequently. However, for those keeping an eye on some of the most recent trends, opportunity may await // By Kelly Higginson, President and CEO of Restaurants Canada

Traditionally, summer has been a vibrant season for Canada’s restaurant industry, with locals and tourists flocking to outdoor dining experiences. In a typical year, sales during July and August are 30 per cent higher than they are in January. However, despite some nominal increases in sales this year, Canadians are dining out less frequently, primarily due to reduced discretionary spending. This, combined with rising operational costs, continues to add strain onto restaurant operators. It suffices to say, this past summer was not the season the restaurant industry wanted or needed.

Weak economy limits recovery prospects

Restaurants Canada conducts regular industry surveys to assess its health. The most recent survey, released in September, paints a challenging picture for the industry over a summer marked by the ongoing effects of inflation.

Half of the restaurant operators that were spoken to rated the current business climate as “poor” or “very poor.” Only 15 per cent described it as “good” or “very good.” Quick-service restaurants have faced even steeper challenges, with nearly 25 per cent reporting conditions as “very poor,” compared to just 10 per cent of full-service establishments.

This past summer, despite being typically regarded as the most profitable season, saw a significant drop in visits and spending at restaurants due to the weakened consumer demand caused by rising prices. A survey revealed that 81 per cent of respondents reported lower profitability this summer compared to last year, attributing it to decreased guest counts and increasing operational costs. Consequently, more than half of restaurant operators reported either operating at a loss or just breaking even as of September. These figures align with an earlier report from April, when 32 per cent were operating at a loss and 15 per cent were breaking even.

Despite these discouraging circumstances, they are not entirely unexpected. Many Canadians across the country are cutting back on their discretionary spending due to increased living expenses. A July 2024 survey by Angus Reid revealed that 80 per cent of Canadians have reduced nonessential activities and spending since January. The most common strategies for cutting back included dining out less frequently and ordering takeout less often.

Demographic shifts present new opportunities

Looking ahead, there are opportunities for growth and innovation in the industry. Canada’s rapidly evolving demographic landscape – particularly growth among Gen Z and visible minorities—is reshaping the foodservice landscape.

Gen Z: seeking value, experience, and innovation

Younger consumers, once reliant on their allowances for cafe outings, are now driving technological advancements in the restaurant sector. Amid economic uncertainty, Canadian diners, especially younger ones, are prioritizing value, experience, and innovation, integrating dining into their lifestyles.

So, what are they looking for?

Value is essential. Gen Z diners, facing tighter budgets, seek quality dining experiences that are affordable. They actively participate in loyalty programs, with over 60 per cent enrolled in at least one, and average more than three memberships each. Notably, 29 per cent of full-service restaurants now offer loyalty initiatives.

Beyond spending habits, Gen Z is pushing for tech solutions that enhance dining experiences, emphasizing order accuracy and menu transparency—a reflection of their health-conscious tendencies.

Ethnic diversity transforming Canadian cuisine

As Canada becomes increasingly diverse, visible minority groups are significantly reshaping the restaurant landscape. For instance, 41 per cent of Chinese Canadians dine out weekly, and 46 per cent of South Asian Canadians frequently order takeout. This consumer base is eager for diverse culinary experiences and innovative options.

takeout options. Projections suggest that nearly half of Canadians will belong to a visible minority by 2041, presenting the restaurant industry with a unique opportunity to celebrate these culinary traditions.

The bottom line

As industry leaders, we must seize this moment to innovate our businesses, focusing on workforce solutions, menu development, and enhancing our customer service strategies. Restaurants that emerge from this challenging environment will be the ones that capitalize on the trends by being willing to innovate and change.

However, it’s crucial to highlight the fact that we can’t navigate this landscape alone. Strong government policies focused on improving affordability, stimulating economic growth, and encouraging innovation are essential to help the industry emerge from these challenging times and to support the success of small and medium-sized businesses, which are critical pieces of the social and economic fabric of communities.