Foodservice outlook improves slightly: Restaurants Canada

After a tumultuous first quarter, the outlook for the foodservice industry has moderated thanks to a cooling of tariff war rhetoric and a slight uptick in consumer confidence. However, operators remain cautious, according to Restaurants Canada’s Q2 report. It expects real commercial foodservice sales to experience -0.5 to 0.5 per cent growth in 2025 and a 0.1 to 0.6 per cent decline in 2026.

Quarterly report at a glance
Commercial foodservice sales are expected to reach between $98.5 billion and $99.5 billion in 2025, a slight improvement over last quarter’s forecast, but still below pre-tariff war expectations.

Seven in 10 restaurant operators rate the current economic conditions just fair or worse. Only 31 per cent say they are “good” or “very good.”

While consumer confidence has improved slightly over last quarter, 48 per cent of restaurant operators expect to be less profitable in 2025 than they were in 2024.

Food costs (83 per cent), labour costs (80 per cent) and a weak economy (55 per cent) were the top three challenges cited by foodservice operators.

To deal with rising operating costs, foodservice businesses are raising menu prices (85 per cent), cutting staff or hours (60 per cent), increasing hours worked by owners or managers (54 per cent), or changing suppliers or ingredients (53 per cent).

Overall, 41 per cent of foodservice businesses are operating at a loss of just breaking even. This is an improvement over 2024, but still far below 2019 levels, when only 12 per cent reported operating at a loss or just breaking even. Only 9 per cent of operators report making a profit above 10 per cent, compared to 36 per cent pre-pandemic.

While tariff uncertainty continues to weigh heavy on the foodservice outlook, consumer confidence, spending and debt levels are improving, offering a glimmer of hope for an upswing in mid-2026.

GST/HST holiday provided needed boost to the foodservice industry

In the first four months of 2025, commercial foodservice sales grew by a solid 6.6 per cent, supported in part by the GST/HST holiday in January. With headwinds picking up speed again and a majority of restaurants having to increase prices, Restaurants Canada is urging the federal government to permanently exempt all food, including restaurant meals, from GST/HST.

“Keeping food affordable needs to be a top priority for the government. Canadians from all walks of life rely on restaurants to feed themselves, whether it’s parents grabbing dinner on the way home from soccer practice, an elderly person who needs a hot meal delivered, or a busy student getting a breakfast sandwich on the way to school,” said Kelly Higginson, president and CEO of Restaurants Canada. “Removing the GST/HST from all food is a no-nonsense way to improve the quality of life of Canadians and support the foodservice industry.”