Restaurant Debt Driving Price Hikes
HALIFAX — If it feels like you are paying more for a meal at your favourite restaurant this year, your instinct is probably right. Food prices are up for everyone, including restaurants, and those costs are being passed on to the consumer.
According to a recent report from Restaurants Canada, menu prices are up 6.5 percent at full-service restaurants, while fast food joints have raised their prices by 6.7 percent. You’re even paying more to go out and have a drink; alcohol prices are up nearly 4 percent at licensed establishments.
Restaurants Canada says these inflationary pressures have brought menu prices to “an all-time high.”
The report also shows that restaurant owners are struggling with the amount of debt they had to take on to survive during the pandemic. Restaurants Canada says 85 percent of independent owners took on new debt starting in 2020. Nearly 80 percent of those owners took on at least $50,000 in debt, with many going over six figures.
It has also become harder to pay back these expensive loans given the unprecedented pressures facing the industry. That’s especially true when it comes to the labour crisis. As of June, 2022, there were nearly 172,000 job vacancies in the food-service industry, nationwide.
These shortages have led to 77 percent of restaurants raising wages for staff. Sixty-four percent of establishments have had to cut their hours of operation, which has led to reduced profits. On top of that, foot traffic continues to lag behind pre-pandemic levels.
“While nominal sales are expected to return to pre-pandemic levels before the end of the year, traffic still remains below what it was before”, said Christian Buhagiar, President and CEO of Restaurants Canada, in a press release. “Restaurant operators are struggling financially, with half of our operators operating at a loss or just breaking even.”
The new report isn’t all doom and gloom, however. The industry is showing signs of improving consumer confidence. 90 percent of customers believe they receive “good value” when they eat out, and 74 percent view foodservice workers in a positive light, which is high compared to other sectors.
Most importantly, 89 percent of Canadians now feel comfortable eating inside a full-service restaurant. Given the nature of the covid-19 pandemic, that number must be reassuring for operators.
Derek Montague is a Huddle reporter in Halifax. Send him your feedback and story ideas: [email protected].