Canada's restaurant industry is experiencing significant pressure as it navigates an uneven financial landscape in the first quarter of 2026. According to a quarterly report from Restaurants Canada, the industry is confronting challenges exacerbated by a nationwide affordability crisis, soaring operating costs, and inconsistent consumer spending.
Kelly Higginson, the President and CEO of Restaurants Canada, highlighted that Canadians dine out approximately 23 million times each day, contributing to over 1 million jobs across the country. However, as affordability wavers, the repercussions ripple throughout the entire restaurant sector. Higginson stated, “The restaurant industry is typically the first to feel economic pressure when Canadians are struggling. And right now, that pressure is building.”
The report indicates a troubling trend among restaurant operators, showing that nearly 50 percent reported lower sales for Q1, with more than half noting a decline in customer visits. Furthermore, a staggering 71 percent indicated declining profitability. Following a modest growth of 2.4 percent in 2025, the forecast for 2026 anticipates a slight decline of 0.2 percent in real commercial foodservice sales.
Many restaurant owners have cited food costs, labor expenses, and reduced customer traffic as significant challenges. Alarmingly, around 36 percent of Canadian restaurants are reportedly operating at a loss or merely breaking even—this figure is three times higher than it was in 2019.
In response to the mounting challenges faced by the industry, Restaurants Canada is advocating for a permanent exemption of the Goods and Services Tax (GST) on all food items throughout the country. This follows a temporary GST holiday implemented by the federal government under former Prime Minister Justin Trudeau's Liberal Party, which lasted from December 2024 to February 2025 and included restaurant meals.
Higginson asserts that permanently exempting all food from GST would not only provide direct financial relief to Canadians but would also rectify a fundamental issue of tax fairness within the country. Currently, similar food items can be subject to different tax rates depending on the point of purchase, leading to distorted consumer behavior and undermining affordability initiatives.
Higginson emphasized that aligning the tax system would benefit Canadians and bolster the economy, creating a more equitable marketplace for food items. The call for reform reflects a desperate need for supportive policies that can alleviate the pressures faced by the restaurant industry as it strives to recover and thrive amidst ongoing economic challenges.
