The Rise, Fall, & Rebirth of Canada’s Foodservice Industry
To say these are unprecedented times for the Canadian foodservice industry feels like an understatement. Just a few months ago, it was expected that the foodservice industry would grow to nearly $100 billion in total annual foodservice revenues in 2020. Our industry was thriving, with nearly 30 consecutive years of commercial foodservice sales growth (in nominal terms).
This was an industry that Canadians and tourists flocked to, ultimately making foodservice the fastest-growing major industry in terms of real economic output over the last decade. While other industries made the headlines, it was foodservice that quietly outpaced the oil and gas sector, retail trade, construction, and any other major industry you can think of.
This was an industry with more than 97,500 restaurants, caterers, and drinking places, encompassing more than 1.2 million employees.
This was an industry poised to grow for years to come.
And then, in what feels like a blink of an eye, the entire foodservice industry has been flipped upside down.
According to Restaurants Canada’s latest Restaurant Outlook Survey, 96% of respondents reported lower same-store sales in the last two weeks of March compared to the same period in 2019. On average, same-store sales at full-service restaurants plummeted by 79%, while quick-service restaurant sales sank an average of 62%. Just over half: 53% of respondents said they temporarily closed. 36% said they would remain open, but just for take-out and delivery. Sadly, 9% of respondents said they have permanently closed. As a result of everything that has happened, an estimated 800,000 foodservice workers are currently laid off or are not working.
Many restaurant owners have lost their life savings and their livelihoods. Even with government support for the industry and its employees, it’s hard to know when all this will end and how many more restaurants will have to close their doors permanently.
The latest economic forecasts may look bleak in the short term, but there is optimism that Canada’s economy will quickly rebound with the much-touted ‘V-shape recovery.’
The largest decline in economic activity is expected in the second quarter of 2020, with real GDP forecast to plummet between 10 per cent and 25 per cent, depending on the forecast. By way of comparison, Canada’s economy shrank by 8.7 per cent during the trough of the last recession. Yet economic activity is expected to rebound sharply over the following three quarters due to pent-up consumer demand and fiscal stimulus measures by governments.
No doubt there will also be an immediate spike in the unemployment rate. TD Economics is forecasting that the unemployment rate will average nearly 12 per cent in the second quarter. Assuming health officials can contain and reduce the number of new cases quickly, the unemployment rate will rapidly fall to six per cent in the third quarter and return to pre-recession levels in early 2021.
Looking back at the 2008-09 recession, it took three years for per capita full-service restaurant sales to return to pre-recession levels. In contrast, per capita sales at quick-service restaurants continued to increase (albeit at a slower rate) in 2009 as consumers shifted spending away from full-service restaurants. How quickly foodservice sales recover this time will depend on the depth and the duration of this recession, two very big unknowns right now.
The coming months will be among the most difficult for the foodservice industry, chain and independent operator alike. The effects of COVID-19 will be felt for years to come, and the industry will change in ways we don’t even know yet.
These may be unprecedented times, but the foodservice industry is resilient. This is an industry that will find its footing because foodservice operators know how to adapt and evolve. This is an industry that has come together to rally around its employees, and each other. This is an industry that will rebuild—with a new and lasting legacy for future generations of restaurant owners.
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