Siva Sathasivam, owner of Uncle Tony’s restaurant in downtown Toronto, has fought hard to keep menu prices down amid skyrocketing food and rent costs — but it has come at a price.

The 60-year-old has had to cut staff over the last few years and is now down to only one server at his restaurant most days — himself.

“I’m reducing my own labour costs so that I can be in business,” Sathasivam said.

Sathasivam is not alone.

A staggering 51 per cent of restaurants in Canada are operating at a loss, compared to only 12 per cent before the pandemic, according to Restaurants Canada. And one of the main reasons may be found in a new report released Tuesday by Dalhousie University showing Canadians tightening their belts and not dining out altogether due to shrinking portions and ballooning menu prices.

The Agri-Food Analytics Lab survey of more than 5,500 Canadians found that 80 per cent said higher menu prices have influenced their dining-out choices, with eight per cent refraining from dining out altogether because of food costs. And nearly 90 per cent say they have become more budget-conscious when selecting a restaurant compared to a year ago.

“It is highly unlikely that restaurant prices will drop, because financial pressures within the supply chain are still quite significant,” said Sylvain Charlebois, who runs the lab at Dalhousie and co-authored the report.

Only 29 per cent of respondents said they were satisfied with their restaurant experiences based on the money spent.

And more than 68 per cent of Canadians noted a reduction in portion sizes at restaurants, a phenomenon known as “shrinkflation,” with 77 per cent now opting for more affordable dining establishments due to price hikes.

Kelly Higginson, CEO of Restaurants Canada, said bankruptcies in the food service industry are also up 55 per cent year-over-year. One of the biggest culprits is the difficulty in getting people back to the table.

“We’ve seen a dramatic increase in off-premise dining,” Higginson said, referring to delivery and takeout. “Before the pandemic, off-premise dining for full service restaurants was 10 per cent of their sales and now it accounts for just over 30 per cent.”

Higginson said inflation has impacted all levels of running a restaurant.

“Every single aspect of operating a restaurant has become much more expensive,” she said. “It’s everything including higher food costs, higher utility, higher rent, higher labour costs.”

The rise in grocery prices has hit restaurateurs particularly hard, with a 6.9 per cent year-over-year rise in prices in August, slightly less than July’s 8.5 per cent increase, but still running much hotter than July’s overall inflation of 3.3 per cent.

Over the last year Sathasivam said he’s had to pay three times more for basic vegetables like romaine lettuce and tomatoes on top of increasingly expensive staples like cooking oil and meat.

At the same time he says foot traffic has plummeted more than 50 per cent as many people continue to work from home at least several days a week.

“The lunch business is completely out,” Sathasivam said.

Supply chain challenges and disruptions to the workforce have also impacted the quality of the dining experience, Higginson said.

“There’s been product that hasn’t been as readily available,” she said. “Menus have had to change because of the extreme cost increases … and this is always a bit disruptive for guests.”

Also, many workers left the industry during the pandemic, Higginson says, and replacing staff has been a challenge.

“When you’re dealing with a greener workforce, there’s going to be a period of training and working to build the team up again.”

Charlebois said it’s the smaller independent business that is struggling the most with rising costs.

“The beauty of the food service industry is that it is heterogeneous,” Charlebois said. “There’s so much variety … and that is being jeopardized right now by food inflation.”

Last modified: October 7, 2024