Restaurants are under pressure as consumers steer away from dining out

A new report finds 41 per cent of restaurants are operating at a loss or breaking even, as 3 in 4 Canadians report dining out less.

TORONTO — Restaurants are under pressure as consumers steer away from dining out, while rising operational costs squeeze profit margins, a new report shows.

Three in four Canadians are eating out less, often because of the high cost of living, a Restaurants Canada report published Monday found. That share is even higher among those aged 18 to 34 at 81 per cent.

Restaurants Canada chief executive Kelly Higginson said it’s an “alarming” trend for the foodservice industry.

She said the younger generation in particular is “who we’re really going to be targeting more and more as they start to grow into the main consumer of the demographic.”

The report found younger Canadians placed higher importance on price, value and convenience compared with older Canadians.

Restaurant spending has slowed compared with pre-pandemic levels.

Per capita, Canadians are expected to spend $1,035 at full-service restaurants and $1,135 at quick-service restaurants this year. In 2019, they were spending $1,165 and $1,150, respectively.

As fewer people dine in, sales of alcohol at restaurants have also slowed because of rising menu prices and a consumer shift toward wellness, the report found.

Forty-one per cent of Canadians surveyed said their alcohol consumption has decreased over the past year.

“With our operators seeing less drinking or no alcohol, it’s making it even more challenging to be able to focus on those value meals that Canadians need right now, and also be able have some profit at the end of the day,” Higginson said.

Sales in the foodservice industry are projected to reach $124 billion this year. However, when adjusted for inflation, the growth is going to remain relatively muted.

As consumers pull back on spending, businesses are also dealing with rising operational expenses. The cost of food, labour, insurance and utilities, among other expenses, have grown by double digits between 2023 and 2025, the report said.

The report showed 41 per cent of businesses were operating at a loss or breaking even as of June 2025.

“The last five years, our operators have really been put into a pressure cooker of how to remain viable as a profitable business in order to keep the doors open and to continue to staff and serve the communities that they’re in,” Higginson said.

As population growth slows, the industry is facing a labour shortage. Higginson said restaurants in rural and remote areas will see the worst effects.

She said key positions, such as a cook or an early morning baker, are harder to fill in rural areas, which then affects restaurant operations.

Many restaurants are trying to adapt to the difficult operating environment by changing menus to reduce waste and operating fewer hours on slow days to cut costs.

Some businesses are moving toward serving brunch instead of offering dinner services as demand for breakfast has gone up, Higginson said.

“Because of the lack of discretionary spending, Canadians are increasing their spend on breakfast segment and less on dinner segment, which tends to be a bit more expensive,” she said.

Lunch hour sales at quick-service restaurants rose 7.6 per cent in the first five months of 2025 — topping pre-pandemic levels, reflecting the return-to-office mandate and a shift toward value.

“That really does impact our operators because the dinner used to be a bit more profitable spending for our operators,” Higginson said. “Now, they’re making less profit off of those two segments, breakfast and lunch.”

There’s also a shift in the industry to capture the snacks trend, especially among quick-service restaurants.

Supper and evening snack traffic grew 3.4 per cent and four per cent, respectively.

The report found snacking as a meal replacement was most prevalent among younger generations.

Higginson said the snack segment is an opportunity for the industry to capitalize on.

“It really is time for that soft reboot and taking a look at where we can meet our consumers where they’re at,” she said.

This report by The Canadian Press was first published Sept. 22, 2025.

By Ritika Dubey