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Wednesday, Nov 29th, 2023
HomeEntertaintmentGlobalHalf of restaurants losing money or breaking even, finds new report
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Half of restaurants losing money or breaking even, finds new report

Half of food service companies are operating at a loss or just breaking even, a new survey of restaurant owners in Canada has found.

Sales have improved in the wake of the COVID-19 pandemic but profits are down “due to soaring operating costs” and low foot traffic that never recovered from pre-pandemic levels, writes Restaurants Canada in its Foodservice Facts 2023 report.

The industry group calls the situation a “mirror version” of the pre-pandemic scenario. Before March of 2020, it says seven per cent of restaurant companies were losing money and five per cent were breaking even.

“At that time, 36 per cent of restaurant operators had a pre-tax profit of 10 per cent or more. Today, just 12 per cent are realizing double-digit profit margins,” states the report published Monday.

Click to play video: 'Calls to extend repayment deadline for pandemic business loans'

Calls to extend repayment deadline for pandemic business loans

According to the report, as of March this year, 34 per cent of restaurant companies were operating at a loss with 17 per cent breaking even.

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Nevertheless, last year, Restaurants Canada says the food service industry surpassed the $100-billion sales mark for the first time, with some 22 million Canadians buying dine-in or takeout every day. In 2023, the report projects that sales total will grow to $110.2 billion.

Adjusted for menu inflation and population, however, the report says real per capita sales are on par with 2012, while food service spending remains nine per cent below 2019 levels.

“As a result, 75 per cent of table-service restaurants and 51 per cent of quick-service restaurants surveyed were still in debt due to the pandemic,” writes Restaurants Canada.

“One in four independent table-service restaurants said they do not expect their business to recover from the debt incurred due to the pandemic unless current conditions change.”

Click to play video: 'Small businesses struggling to repay CEBA loans'

Small businesses struggling to repay CEBA loans

The findings come amid a renewed push for the federal government to once again extend the repayment deadline for the pandemic-era Canadian Emergency Business Account (CEBA) by another year. Hundreds of thousands of small businesses and non-profits, including restaurants, accessed up to $60,000 in CEBA loans during lockdown.

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Last week, premiers across the country called for a year-long extension on CEBA repayment, including B.C.’s David Eby. The deadline — already extended — for CEBA loans to qualify for partial loan forgiveness is Jan. 18.

“Canadians are feeling squeezed by the rising cost of housing, groceries and other daily essentials. It’s no different for small businesses,” said Eby said in a Friday news release.

“Just when many small businesses are starting to find their feet after the pandemic, they’re now being walloped by rising inflation and interest rates.”

According to the B.C. government, 122,890 businesses across the province were approved for CEBA loans worth more than $6.6 billion.

Click to play video: 'COVID-19: Federal government extends CEBA until 2023'

COVID-19: Federal government extends CEBA until 2023

Restaurants Canada has previously said bankruptcy filings in the food service industry have increased 116 per cent since 2022, and more restaurants are expected to shutter in the coming months. Nearly 20 per cent of restaurants that haven’t repaid CEBA yet won’t be able to — partially or at all, it said.

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The advocacy group has also called on Ottawa to provide struggling small businesses with a three-year extension on CEBA repayments with a “scale-down model” on the forgivable portion.

The federal government has extended the CEBA deadline twice — first from Dec. 31, 2022, to Dec. 31, 2023, and then from the end of this year to Jan. 18, 2024.

According to the federal government, $20,000 will be forgiven and no interest will be charged on a loan of $60,000 as long as $40,000 is repaid by Jan. 18. Similarly, $10,000 will be forgiven on a $40,000-loan if $30,000 is repaid by the deadline. Other forgiveness scenarios are outlined on its website.

Afterward, interest of five per cent per annum will take effect, with the principal due on Dec. 31, 2026 — an extension on the Dec. 31 ,2025 deadline.

The government says partial loan forgiveness may be given to those who have submitted a refinancing loan application to the financial institution that provided their CEBA loan by Jan. 18, but require a grace period in order to finalize the payout — if the outstanding principal other than the amount of potential debt forgiveness, plus any interest, is repaid by March 28.

An Oct. 17 report from the Parliamentary Budget Officer found that these extensions, already granted, will cost $52 million.

&copy 2023 Global News, a division of Corus Entertainment Inc.

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