Half of Restaurants in Canada Could Shutter Permanently Amid Lockdowns: Study

The Fifteen Group, one of North America’s leading hospitality industry experts, surveyed its clients across Canada to get a deep understanding of what the restaurant industry is going through in these challenging times due to the COVID-19 pandemic.

And the numbers aren’t pretty.

The survey found that 98 percent of the company’s clients have had their revenues negatively impacted since the start of the pandemic and over three quarters of those report more than a 50 percent decline.

The Fifteen Group survey of clients also found:

  • Collectively, those surveyed spent almost half a million dollars on pandemic-specific operational changes ($490,000) with an average individual spend of $15,000;
  • Despite a supportive customer base and valiant efforts to reduce costs, increase profit margins, add products, rethink the restaurant experience and increase safety protocols, 50 percent of those surveyed are unsure they will survive the winter;
  • 93 percent of restaurants laid off or terminated staff;
  • 56 percent increased outdoor capacity;
  • 54 percent added alcohol to their takeout menu;
  • 40 percent created their own delivery services;
  • 63 percent use food delivery apps; of those, 60 percent say food delivery apps are helping them survive; and
  • 80 percent believe their customer base has been supportive.
David Hopkins
David Hopkins

David Hopkins, President of The Fifteen Group, said most restaurant owners feel that the steps they’ve taken to protect consumers and staff are sufficient.

“They don’t understand necessarily the lockdowns or the positions governments are putting in place. There’s a disconnect there. We’ve seen that in the media to a certain degree but hearing it from our client base certainly was impactful. They think they’re doing enough, they’re protecting their guests and yet they’re not allowed to operate. I’m speaking of Ontario and some provinces,” he said.

“Forty nine percent of the respondents said they weren’t sure if they would make it through to the end of the pandemic. We knew there was a large number. We heard from Restaurants Canada that 20 to 30 percent of restaurants won’t survive but hearing it from our group was certainly substantial. Keep in mind we did this survey back in December and I would have said the outlook in December was much better than it is right now in January. Things have gone downhill fairly fast in most if not all provinces. It’s way tougher now than we thought it might be at the start of December.”

Hopkins said he was quite alarmed by the average amount that restaurant owners have spent on health and safety measures, including patio initiatives for the winter.

“The thing is that this average of $15,000 to $20,000 that restaurants have spent, well it’s not like restaurants have that money to spend in the first place. They invested those funds to try and make a solution for themselves for the six months of winter and scrape together money to make that choice and then find out that it was wasted. I think there’s a definite outcry about that,” said Hopkins. “Some people understand the indoor dining lockdown but they’re struggling with how outdoor, ventilated obviously and socially-distanced dining, is adding COVID cases.”

Hopkins said the company’s clients also believe the government needs to do more to support them during this time.

“I’ve been involved with Restaurants Canada in helping lobby governments for support. We were doing this back in April, May, June, and back then it wasn’t enough. It’s even less now,” he said.

“In restaurants, revenue is king. Revenue is what drives profitability. The sense across the board is that government is not doing enough. They’re actually doing less than they did back in the first wave even though it’s worse now.

“When we come out the other side of this, I hope that it’s almost a resetting of the industry. We’ve been encouraging restaurants that are open to put their prices up because that’s obviously a good way to combat capacity restrictions and we think the consumer will tolerate a somewhat moderate price increase. But when we went into this, margins in restaurants were razor thin to begin with so it’s not a big surprise when something like this hits they’ve got no buffers to deal with it and they’ve got no capacity to absorb it. So I hope to some degree it’s a resetting of the industry. The average profit margin in the Canadian restaurant I think is about four percent and it’s been in and around that for years.”

Hopkins said restaurant owners have been forced to run their business better, engineer their menus more smartly, to become more efficient, to take a close look at their finances to see what works and what doesn’t.

Todd Barclay
Todd Barclay

“Because of everything, they’ve had to operate their restaurants much better and it only goes to say that when the pandemic’s done if they continue to operate with that kind of mindset and be more diligent in areas where they were really sloppy before, it can only help them make more money in the good times too,” he said.

In December, Restaurants Canada said 10,000 restaurants had closed across Canada since the pandemic began in March, and almost 50 percent expect to permanently close their establishment if conditions don’t improve.

“The vast majority of Canadian consumers are concerned that restaurants in their community may not survive and feel that restaurants are an important part of their community,” said Todd Barclay, President and CEO of Restaurants Canada.

The organization said no other industry has been hit as hard as the restaurant industry during this pandemic. At the height of the crisis, an estimated 800,000 jobs were lost or had hours reduced to zero. Since then the industry has struggled to recover due to revolving restrictions across Canada, with 21 percent of the restaurant workforce not yet recovered, it said.

Article Author

Mario Toneguzzi
Mario Toneguzzi
Mario Toneguzzi, based in Calgary, has more than 40 years experience as a daily newspaper writer, columnist, and editor. He worked for 35 years at the Calgary Herald covering sports, crime, politics, health, faith, city and breaking news, and business. He now works on his own as a freelance writer and consultant in communications and media relations/training.

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