Shanna Munro is president and CEO of Restaurants Canada (formerly CRFA).
What’s the forecast for sales for the restaurant industry for the coming year?
Munro: For years, Alberta sales growth led the nation, with many built-in advantages such as no sales tax. Over the past three years, however, Alberta trails the rest of Canada in sales growth.
Following a 1.3 per cent projected decline for 2018, real food-service sales in Alberta are forecast to grow by 1.0 per cent in 2019 – when we say real sales, we mean factoring in expected menu inflation of 3.8 per cent. By way of comparison, real sales in all of Canada are forecast to climb by 1.4 per cent next year.
While real food-service sales (sales adjusted for menu inflation) should begin to rebound in 2019, they’re still expected to remain 3.5 per cent below what the industry reported in 2014. When we look at reported and projected sales numbers, it can be misleading if we don’t adjust for menu inflation.
We’re seeing menu prices going up as restaurateurs are facing more and more operating costs and passing those on to consumers to stay profitable. So while total sales may appear to be going up, the increase is mostly coming from higher menu prices, rather than an increase in customers.
This weak growth in real sales reveals the difficulties that Alberta restaurateurs are continuing to face, not only from the recession, but higher operating costs and minimum wage hikes. They’re having to make tough choices, either increase menu prices, reduce staffing levels, or a combination of both. Many have lost staff, and in some cases their businesses, and in other cases can no longer look to expanding and providing jobs – they are out there mining for margins, just trying to survive.
How has minimum wage hikes impacted the industry in the past year?
Munro: The minimum wage increase to $15 per hour on Oct. 1, 2018, represented an escalation of nearly 50 per cent (63 per cent for liquor servers) over the past four years. This steep increase to labour costs is placing insurmountable pressure on food-service operators in the province. Offsetting these labour costs means cutting staff or raising menu prices — neither being viable solutions for most small businesses. The average restaurateur in Alberta has a profit margin of only about five per cent, so not much wiggle room.
Steady increases to the minimum wage since 2015 have already contributed to the following setbacks for Alberta’s food-service sector:
- The number of workers employed in the food-service and accommodation sector has dropped by 13,300 since a peak of 159,600 in February 2015 to 146,300 as of Oct. 1, when the minimum wage was significantly increased once again to $15.
- Food0service workers experienced a 5.1 per cent decrease in their average weekly hours between 2015 and 2018.
- The average number of workers per unit dropped from 13 to 11.7 between 2015 and 2018.
- Adjusted for menu inflation of 3.3 per cent, real food-service sales from January to July 2018 were 1.6 per cent lower than during the same period in 2017.
- Food-service operators have been struggling more and more each year; from 2015 to 2018, there was a 9.1 per cent decline in the average inflation-adjusted sales per unit.
What are the other big challenges facing the industry?
Munro: The food-service industry faces headwinds on a regular basis throughout Canada and here in Alberta, it’s no different. Looking at labour law reforms, a review of all recent changes to employment and labour legislation and regulations is needed to restore fairness.
Food-service businesses should receive carbon tax rebates. A comprehensive liquor policy review is needed to modernize Alberta’s liquor policies, as was planned in 2015. A provincial sales tax should stay off the table, in order to maintain the Alberta advantage. And the provincial government should encourage municipalities to reduce the municipal tax burden for small businesses.
What key trends are you seeing these days in the industry?
Munro: According to the results of our most recent Restaurant Outlook Survey, a majority of restaurants and other food-service businesses across Canada say environmental sustainability is important to their success.
We’re seeing an increase in culinary and technological innovations coming to kitchens and menus recognizing that the future of food service is tied to the health of the planet as much as healthy profit margins.
These are trends such as lab-grown meat and a growing number of plant-based alternatives to animal products; culinary cocktails that incorporate leftover leaves, stems and veggies from the kitchen; and root-to-stem cooking, which focuses on making use of the parts of produce that typically get thrown away.
Sustainability is the theme of the upcoming RC Show, Canada’s largest food-service and hospitality trade event, which is taking place from Feb. 24 to 26, 2019, at Toronto’s Exhibition Place. We welcome food-service operators to come join us for this event to learn how innovative products, pioneering people and transformative ideas can help them grow their bottom line in sustainable ways.
What are the key factors that lead to success for a restaurant?
Munro: There’s no magic formula, but it comes down to having a compelling offer to attract and maintain customers. Once you get them in the door, it’s all about providing a great culinary experience, which includes quality food, great service and convenience.
Given the slowdown in food-service sales in the coming years due to high household debt, it’s more important than ever to deliver this great culinary experience in-store, at an affordable price.
– Mario Toneguzzi