Canada’s restaurant sector is coming under increasing financial strain in early 2026 as affordability challenges, higher operating costs and uneven consumer spending continue to weigh on profitability, according to the latest report by Restaurants Canada.
The association’s Q1 Quarterly Report points to uneven foodservice sales growth, as ongoing affordability pressures are leading many lower-income Canadians, in particular, to reduce spending on dining out.
The report shows that the real commercial foodservice sales are expected to fall by 0.2% in 2026, following 2.3% growth in 2025.
So far this year, 49% of operators report lower sales, 54% say they are serving fewer guests and 71% note declining profitability.
Quick-service restaurants are reported as being most affected, with 81% of these operators indicating falling profitability. The figure stands at 70% for full-service businesses.
The report states that 36% of operators are either operating at a loss or breaking even, triple the level recorded in 2019.
Cost pressures remain widespread, with 91% citing food costs and 87% citing labour. Another 69% report that customers are dining out less due to affordability constraints.
Restaurants Canada also underlined the sector’s wider economic footprint.
Canadians visit restaurants 23 million times daily, generating C$125bn ($91bn) in annual sales, which it says is equal to 3.9% of gross domestic product (GDP).
The association notes that the sector is the fourth-largest private sector employer, with 1.2 million workers, including 480,000 youth.
It also reports that every C$1 spent in restaurants generates C$2.25 in total economic output, which it says is above the national average.
Restaurants Canada president and CEO Kelly Higginson said: “The restaurant industry is typically the first to feel economic pressure when Canadians are struggling. And right now, that pressure is building.”
The organisation is calling on the federal government to adopt targeted measures that address affordability for consumers and support investment in the sector.
It urged the government to permanently exempt all food from Goods and Services Tax, saying this would provide direct relief to Canadians and address what it describes as a fundamental tax fairness issue.
The association also wants accelerated capital cost allowance for the foodservice industry, arguing this would back reinvestment, modernisation and growth, including expansion, equipment upgrades and productivity improvements.
Last month, Restaurants Canada urged provincial governments to adopt the higher rural TFW [Temporary Foreign Worker] cap to ease acute labour shortages.
