Canada’s restaurant sector faces sustained pressure as inflation, high food costs, and shifting consumer habits squeeze already thin margins. New research from Dalhousie University shows the scale of the challenge and signals deeper trouble ahead for operators across the country.
A study from Dalhousie University found 7,000 restaurants closed during the past year. The university projects another 4,000 closures during 2026. Industry leaders describe conditions as harsh and unforgiving.
“In the last couple of years, it’s been extremely difficult for restaurants in general,” said Sylvain Charlebois, director of the Dalhousie University Agri-Food Analytics Lab.
Charlebois said household budgets continue to tighten. Many diners reduce restaurant visits or change habits when spending money on food.
“If they do dine out, they’ll dine in at home to avoid the tips and an expensive bottle of wine and things like that,” said Charlebois.
Rising menu prices reflect higher operating costs rather than stronger profits. Restaurants Canada points to mounting expenses tied to rent, insurance, food inputs, and wages. According to the organization, 41 per cent of restaurants operate at a loss or hover close to break-even levels. Owners hesitate to raise prices further, knowing customers watch spending closely.
“There is an affordability challenge for Canadians right now. There is less discretionary spending, so less discretionary spending means pulling back on restaurant spending,” said Kelly Higginson, president and CEO of Restaurants Canada.
Temporary tax relief offered limited help. From December 14, 2024, to February 15, 2025, Ontario suspended GST and HST on restaurant meals, prepared foods, snacks, and some alcoholic beverages. Restaurants Canada now urges governments to restore the measure on a permanent basis.
“Let’s remove the GST off of food at a time when we are facing an issue with affordability, especially with the cost of living. Why are we taxing food? That is poor public policy,” Higginson said.
Alcohol sales trends add further strain. Retailers across Canada recorded a 10.6 per cent drop in alcohol sales during October. Lower alcohol consumption reduces one of the most profitable revenue streams for many dining rooms and pubs.
Charlebois also flagged growing frustration around tipping. Many customers accept tipping at full-service restaurants. Pushback grows when payment screens request tips at fast food counters or takeout windows. Such frustration shapes dining choices and reinforces the shift toward eating at home.
