64% of Canadian Restaurants Found the Going Tough This Year, While “Grocerants” Gained Popularity. But What’s a “Grocerant”? 

Contrary to popular belief, the restaurant industry often operates on extremely thin margins, even under favorable conditions. A modest increase in ingredients, rent, utility, or wage costs can significantly impact a restaurant’s bottom line.

Industry groups like Restaurants Canada have consistently warned that many owners remain financially fragile. Some are still burdened by debt accumulated during the pandemic, while others are facing lease renewals in a much more expensive market. In this environment, lower earnings are not merely disappointing; they have become a critical survival issue.

The headline figure is striking: 64% of Canadian restaurant owners report making less money than last year, and recovery is nowhere on the horizon. This statistic reflects a widespread sentiment within the industry rather than an isolated bad quarter. Across full-service dining, quick-service chains, cafés, bars, and independent operators, many businesses find that sales are no longer translating into healthy profits.

The primary pressure point is cost inflation, which is affecting nearly every aspect of the industry. Food input costs remain volatile, particularly for proteins, dairy, cooking oils, imported produce, and packaged goods. Even when overall inflation subsides, restaurant purchasing bills may stay high due to supply contracts, transportation, and exchange rate pressures.

Labor costs, which constitute one of the largest expenses on any restaurant’s income statement, also play a significant role. Rising minimum wages, increased competition for experienced staff, government restrictions on work permits for cheaper part-time workers, and the need to provide better scheduling or benefits have all contributed to higher payroll expenses for many operators.

Occupancy and operating costs have also climbed. Commercial rent, insurance premiums, credit card processing fees, equipment maintenance, and utility bills have all increased. Smaller restaurants typically feel these pressures first and most acutely since they often lack the scale to secure lower ingredient prices or distribute rising costs across multiple locations. As margins tighten, these businesses have fewer financial buffers and less flexibility to experiment with pricing.

Additionally, many establishments face a branding challenge. While loyal customers may appreciate a neighborhood bistro or family-run diner, there is a limit to how much they will tolerate in terms of price increases. For restaurant owners, it’s a difficult balancing act: Raise prices too slowly and watch profits disappear; raise them too quickly and watch the customers disappear.

Examples from cities across Canada demonstrate this pattern. Owners are cutting operating hours, simplifying menus, delaying renovations, and reducing staff whenever possible. While these adjustments can be practical survival strategies, they can also hinder growth and diminish the customer experience over time.

As a result, customers may turn to alternatives that better fit their budgets. This subtle shift is occurring across the country, with more people choosing to bypass restaurant patios in favor of grocery stores—specifically the prepared food sections. The term “grocerant,” a blend of “grocery” and “restaurant,” has emerged to describe these new popular spots. One of the top trends in the GTA is the “Halal Grocerant,” or Halal ready-to-eat freshly prepared food on offer at grocery chains like Adonis, Loblaw, Metro, and even organic stores like Healthy Planet (select branches).

Shoppers looking for premium quality ready-to-eat meals can now pick up their favorite dishes from a grocerant hot bar without incurring table service costs, tipping, or beverage markups. A container of roast chicken, rice, vegetables, soup, or pasta often costs significantly less than a comparable dish at a restaurant.

This shift is particularly significant for office workers, students, seniors, and parents managing tight budgets. In cities like Toronto, Vancouver, and Calgary, a quick restaurant lunch can easily exceed $25, while a meal from a grocerant often keeps the total closer to what customers deem reasonable.

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