Retail Insider the magazine Volume 3 Issue 2

As restaurants across the country continue to struggle with post-pandemic challenges, an exploration of remedies to help rejuvenate the foodservice industry is much-needed

// By Kelly Higginson, President and CEO of Restaurants Canada

Restaurants are fundamental to any thriving neighbourhood. They drive and support tourism, build community and significantly contribute to the economy. In Canada, restaurants play a crucial role beyond nourishing us; they are a cornerstone of a community’s financial wellbeing. As the fourth-largest private sector employer, restaurants contribute significantly, generating over $114 billion in sales and providing jobs for over one million Canadians, nearly 20 per cent (19.6%) of whom are youth and young adults.

However, the profitability of restaurants has been severely impacted by inflationary pressures affecting Canadians nationwide. Operating costs have dramatically risen over the past several years, exacerbated by the challenges following the COVID-19 pandemic. Many restaurants are still burdened with debt and struggling in a high-cost environment. From 2019 to 2024, bankruptcies among restaurants, accommodations, construction, and retail in the country nearly doubled. According to the Superintendent of Bankruptcy, in the first quarter of 2024, there were 804 bankruptcies amongst these industries, compared to 420 in Q1 of 2019. Given these challenges, how can Canada protect the future of our food service industry, its importance to communities, jobs and the economy?

A report by Ian Lee, PhD, titled “On the Precipice – Help is Needed” offers a solution. In it, Lee delves into the overwhelming impacts that Employment Insurance Premiums (EI) have on small businesses. The report highlights how higher EI Premiums present an additional financial challenge to an already struggling industry that is plagued by an affordability crisis. It calls on the federal government to recognize and address the escalating costs related to running a small business. The report reveals that lowering the EI premium would provide immediate and tangible relief to small businesses and their employees. As the national representative of Canada’s restaurant and foodservice industry, Restaurants Canada shares Lee’s concerns, and has publicly urged the federal government to reduce EI Premiums from 1.66 per cent to 1.58 per cent.

In Canada, consumer confidence levels are low, which suggests that Canadians are not optimistic about their future finances and job prospects. When large industries like the restaurant industry suffer, it creates a ripple effect far beyond their doors; it impacts suppliers, local economies, communities, and countless employees - especially youth and newcomers. Lower EI Premiums represent a realistic and targeted opportunity for the government to provide relief and channel more funds into the hands of young workers..

By virtue of EI premiums being paid on payroll, labour intensive small businesses such as restaurants would feel the relief immediately. In a restaurant, it takes 12 employees to generate 1 million dollars in revenue versus a retail store that requires only 3 people. It is a simple policy decision that would provide much needed cost relief for both employers and employees. Many operators have affirmed that any payroll tax relief provided by the government will be redirected back into their workforce, be it through enhanced wages or increased hiring. Not only would it put money back in the pockets of employers and employees, but it would also boost consumer confidence.

It is a move that has been made before. In 2013 and 2014, the federal government froze EI Premiums for two years to stimulate job growth. During the 2015 election, two political parties promised to reduce EI Premiums, while a third suggested freezing them. In 2020, the federal government made the decision to freeze EI Premiums at the rate of 1.58 per cent for two years to ensure that Canadian businesses and their workers would not face increases to costs and payroll deductions due to the COVID-19 pandemic.

By once again reducing EI Premiums to 1.58 per cent, the federal government would help not only businesses, but their employees and all taxpayers, too. This is not just a prudent approach, but an essential one that offers an immediate way to grow Canadians’ confidence in our economy.

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Kelly Higginson is an experienced leader with more than 25 years working within the hospitality industry, serving as President and CEO of Restaurants Canada.