A new forecast paints a stark picture for Canada's restaurant industry, revealing a wave of closures that is reshaping the country's dining landscape. According to a report from Dalhousie University's Agri-Food Analytics Lab (AAL), 7,000 restaurants closed their doors in 2025, with another 4,000 net closures expected in 2026.
A Sector Under Prolonged Economic Stress
The report, authored by AAL director Sylvain Charlebois, indicates the problem is not sudden failure but a prolonged state of economic stress that began in 2021. While pandemic-era supports like wage subsidies and rent relief staved off immediate collapse, restaurants now face a harsh new reality. Rising rents, increasing labour costs, and softening consumer demand are creating an unsustainable environment for many operators.
"Business closures do not occur when conditions deteriorate; they occur when resilience is depleted," the report states. It explains that owners have been exhausting personal capital, restructuring debt, and postponing difficult decisions in hopes of a turnaround. "For many restaurants, that hope carried them through 2023 and 2024. By 2026, the arithmetic becomes unavoidable."
The Disconnect Between Official Data and Reality
Charlebois highlighted a significant gap between official statistics and the situation on the ground. Data from Statistics Canada, often cited by lobby groups, tracks registered businesses but can be misleading. "Many of these registered businesses don't even have one single employee, and they're not even operational," Charlebois noted on The Food Professor podcast. Factors like ghost kitchens and ownership changes can inflate the numbers, creating an illusion of resilience.
"According to official figures, Canada's restaurant sector appears remarkably resilient. The number of food service establishments has climbed steadily since the pandemic, surpassing pre-2020 levels and suggesting a sector that has not only recovered, but expanded," the report reads. "On paper, the industry looks stable. On the ground, it does not."
Triangulating the True Picture of Closures
To get a clearer picture, the AAL used Statistics Canada data as a baseline but triangulated it with various economic drivers, including job market data and the Canadian Food Sentiment Index. This methodology revealed the estimated net loss of 7,000 establishments across all categories in 2025, which Charlebois described as a "bloodbath."
The forecast for 2026 points to continued pressure, with closures expected to outpace openings. Key factors include Canadians dining out less frequently and spending less when they do, coupled with declining alcohol sales, a traditional profit driver for many establishments.
Charlebois frames the trend as a necessary correction. "This is more about right-sizing the industry based on our economy," he said. "I do expect the numbers to go back up again eventually, but right now, I'd say we're just looking at a normal (phenomenon)." The report suggests the industry is undergoing a painful but inevitable adjustment to new economic realities, with thousands more family-owned and independent restaurants likely to face difficult decisions in the year ahead.
