Restaurants Brace for Winter Challenges as Costs Rise

As winter approaches, restaurants across Canada face significant challenges due to rising grocery costs and diminishing customer demand. In Fredericton, owners of Yassou Souvlaki & Donair, Charbel Gerges and Elias Youssef, prepare for a difficult season ahead. Despite a loyal customer base that frequents their establishment, Gerges acknowledges the struggle that typically accompanies the winter months, especially given the soaring food prices.

According to Statistics Canada, food prices increased by 4.7 percent year over year in November, marking the highest rate of inflation in nearly two years. This surge adds pressure to restaurants already grappling with changing consumer habits and rising operational costs. Gerges notes that staple items such as fresh or frozen beef have seen price hikes of nearly 18 percent, while coffee prices spiked almost 28 percent.

“Three or four months ago we were paying $30 to $40 for a case of lettuce,” Gerges explained. “Then it went up to $130 and dropped back to $60 to $70.”

The fluctuation in produce prices complicates budgeting, as the restaurant industry enters a challenging period without the support of last year’s GST/HST holiday on restaurant meals. The absence of this financial relief further strains restaurant owners who are already burdened by debts incurred during the pandemic.

Industry Struggles Amid Economic Pressures

Many restaurants are navigating a labor shortage exacerbated by cuts to immigration numbers through the Atlantic Immigration and Provincial Nominee programs. Janick Cormier, vice-president of Atlantic at Restaurants Canada, emphasized that 41 percent of restaurants in Canada are either operating at a loss or barely breaking even. While this represents an improvement from last year’s figure of 53 percent, it remains a concerning statistic that is more than three times the pre-pandemic level.

Citing the precarious financial situation, Cormier remarked, “If you don’t have profits, the owners aren’t getting paid. It becomes a labor of love, but maybe that labor of love becomes too much to bear.” The independent restaurants, in particular, find themselves most vulnerable, as they lack the support systems that larger chains benefit from regarding logistics and procurement.

Predictions from Sylvain Charlebois, director of the Agrifood Analytics Lab at Dalhousie University, suggest that the number of restaurants in Canada could decline by five to seven percent in 2026, equating to about 4,000 establishments. Charlebois noted that rising food costs and changing consumer behaviors contribute to this grim outlook.

“People are spooked by food prices. When they see that, they say, ‘I can’t go to a restaurant; it’s going to be worse,’” he said.

Adjustments and Adaptations in the Industry

As the economic landscape shifts, many restaurant owners are adjusting their strategies to remain afloat. Cormier mentioned that consumers who continue to dine out are now more budget-conscious, often opting for the cheapest menu items and forgoing luxuries like wine or dessert. This trend creates a challenging environment for restaurateurs striving to maintain profitability.

Some establishments have responded by reducing operating hours or closing on slower days to cut expenses. Mike Babineau, president and CEO of Bella Hospitality Group, highlighted that his company has been able to navigate these challenges through a unique business model. With nine establishments in New Brunswick and Nova Scotia, Babineau can buy in bulk and share resources among his restaurants, which helps mitigate costs.

“We’re able to share staff and resources,” he explained. “Sometimes you’re spending dollars to save pennies, but that’s what it feels like.” Despite these efforts, Babineau recognizes that rising food costs are likely to continue in 2026, with meat prices leading the way.

“Customers are telling us that it’s hard for them to come out more often,” Babineau noted. “Instead of going out two or three times a month, they’re going out once a month or sometimes even less.”

Back at Yassou Souvlaki & Donair, Gerges and Youssef prepare for their lunch rush, hoping that their loyal customers can weather the economic pressures alongside them. As the winter slump sets in, the resilience of restaurant owners and the support of their communities will be crucial in navigating the road ahead.