February 2, 2012, Toronto – Rising food and labour costs are the top two challenges facing Canada's restaurant industry, according to the latest findings from the Canadian Restaurant and Foodservices Association's (CRFA's) Restaurant Outlook Survey.
The survey also finds a growing number of restaurant operators expect sales to slow over the next six months. Despite these pressures, restaurant operators are holding the line on menu prices and staffing levels.
The results from the fourth quarter of 2011 show the top factors negatively affecting restaurants sales are:
- rising food costs, cited by 77 per cent of respondents;
- increasing labour costs, cited by 67 per cent of respondents;
- a weak economy, cited by 58 per cent of respondents; and
- a shortage of skilled labour, cited by 32 per cent of respondents.
In terms of the sales outlook over the next six months:
- 31 per cent of operators expect their sales to grow at a slower rate over the next six months, compared to 19 per cent of respondents in the third quarter of 2011.
- 22 per cent expect sales to grow at a faster rate, compared to 28 per cent of respondents in the third quarter.
Despite these pressures, operators are hesitant to pass on rising costs to customers. Fifty-three per cent of respondents expect to hold menu prices steady over the next six months, compared to 40 per cent in the second quarter of 2011. CRFA's survey also indicates three-quarters of restaurant operators will maintain employment levels or add new staff over the next six months.
"At our core, we are a service industry that invests in people," said CRFA president Garth Whyte. "As the fourth-largest employer in Canada and the number one source of first jobs in Canada, restaurants play a vital role in job creation in every community."
Food and labour are the two largest expenses for restaurants, taking nearly 70 cents of every dollar in sales. Statistics Canada reports an average pre-tax profit margin for restaurants of just 4.5 per cent of operating revenue.
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