In a stark indicator of economic strain, nearly half of Canadian restaurants are grappling with severe financial challenges as of late 2025. According to the Q4 Quarterly Report from Restaurants Canada, 44% of establishments were operating at a loss or merely breaking even during this period. This figure marks a significant increase from 41% in June 2025 and a dramatic rise compared to just 12% in 2019, highlighting a troubling trend in the foodservice sector.
Escalating Costs and Profitability Concerns
The report underscores that rising operating costs, exacerbated by factors such as the U.S. tariff war, are squeezing profit margins across the industry. Kelly Higginson, president and CEO of Restaurants Canada, noted in a statement that the industry previously benefited from temporary supports like the GST/HST holiday and robust domestic tourism. However, with these cushions no longer available in 2026, operators are bracing for a difficult year ahead.
Profitability expectations are grim, with 46% of foodservice operators anticipating worse financial performance in 2026 compared to 2025. Additionally, 60% of operators reported that profitability in 2025 was worse or much worse than expected relative to 2024. This impact is particularly acute among quick-service restaurants, where 77% experienced weaker-than-expected profitability, compared to 58% of full-service operators.
Key Cost Pressures and Immigration Policy Impacts
Food and labor costs remain top concerns for restaurant owners. The report reveals that 88% of operators are worried about food costs, up from 83% in June 2025, while 89% cite labor costs as a critical issue, an increase from 80%. These escalating expenses are narrowing margins and threatening the viability of many businesses.
Immigration policy changes are also posing significant challenges. More than half of restaurant operators (55%) expect recent adjustments to have a negative impact on their operations, with 57% predicting reduced ability to hire kitchen staff. This workforce shortage compounds the financial pressures, making it harder for restaurants to maintain staffing levels and service quality.
Calls for Government Intervention
In response to these struggles, Restaurants Canada is urging the federal government to implement measures to support the industry. The association advocates for permanently exempting all food from GST, a move it argues would help Canadians with affordability while boosting sales in the restaurant sector. This could, in turn, protect and create jobs, providing a much-needed economic lift.
Additionally, Restaurants Canada recommends accelerating permanent residency for restaurant workers already in Canada and creating a specialized immigration stream for rural, remote, and tourism areas facing the most severe workforce gaps. These proposals aim to address labor shortages and stabilize the industry during this period of uncertainty.
As the foodservice sector navigates these headwinds, the report serves as a critical warning about the need for strategic support to ensure the long-term health of Canadian restaurants. With profitability declining and costs rising, the coming year will test the resilience of operators across the country.
