Food-service outlook improves slightly in Q2, but remains fragile: Restaurants Canada

After a tumultuous first quarter, the outlook for the food-service industry has moderated thanks to a cooling of tariff war rhetoric and a slight uptick in consumer confidence, but operators remain cautious, according to Restaurants Canada’s Q2 Quarterly Report.

The association expects real commercial food-service sales to experience -0.5 per cent to 0.5 per cent growth in 2025 and a 0.1 per cent to 0.6 per cent decline in 2026.

The annual report contains the following insights:

• Commercial food-service 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, nearly half 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 food-service operators.
• To deal with rising operating costs, food-service 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 food-service 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 nine 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 food-service outlook, consumer confidence, spending and debt levels are improving, offering a glimmer of hope for an upswing in mid-2026.

Restaurants Canada calls on federal government to exempt all food from sales tax

In the first four months of 2025, commercial food-service sales grew by 6.6 per cent, supported in part by the GST/HST holiday in January, Restaurants Canada said. With a majority of restaurants recently having to increase prices, the association is urging the federal government to permanently exempt all food, including restaurant meals, from GST/HST.

“Removing the GST/HST from all food is a no-nonsense way to improve the quality of life of Canadians and support the food-service industry,” said Kelly Higginson, president and chief executive officer of Restaurants Canada, in the release.

To sign Restaurants Canada’s petition calling on government to exempt all food from sales tax, visit foodisfood.ca.