Canadian restaurants experiencing alarming bankruptcy rates due to government-imposed pandemic restrictions and inflation.

The government imposed pandemic measures and inflation have put significant financial pressures on Canada's foodservice sector, from which it is still struggling to recover.

In response to the forced pandemic closures of food service businesses by provincial and territorial governments, the federal government hit the print button and provided interest-free Canada Emergency Business Account (CEBA) loans to support the industry. These loans were made available to help alleviate the financial burden faced by food service businesses during the closures.

CEBA provided interest-free loans of up to $60,000 to small businesses, including 83% of table service and 56% of quick-service restaurants, as well as not-for-profits. As the repayment deadline approaches, a recent survey by Restaurants Canada has revealed that nearly 20% of restaurants are unable to repay their CEBA loans, either partially or entirely, due to the current state of the Canadian foodservice industry.

The foodservice industry has witnessed a staggering 116% increase in bankruptcy filings since 2022, and RC predicts more closures unless the government intervenes and makes changes to the CEBA payback terms.

Half of all foodservice companies are struggling to make ends meet, either operating at a loss or barely breaking even. Furthermore, a staggering 80% of these companies are experiencing lower profits compared to their pre-pandemic levels in 2019.

The industry has also suffered a significant blow to its economic activity, with a 12% drop in GDP from 2019 to 2022, accounting for inflation.

Additionally, utility costs have risen by 6%, while the prices of essential protein sources such as beef, seafood, and chicken have escalated by 9%, 11%, and 13%, respectively. Cooking oil costs have witnessed an even more dramatic surge, increasing by a staggering 40%.

As if these challenges weren't enough, labour costs have also risen in the foodservice industry, further adding to the financial strain.

Restaurants Canada (RC) is urging the federal government to adopt its proposal for the repayment of Canada Emergency Business Account (CEBA) loans outlined in RC's 2023 Federal Pre-budget Submission.

RC's CEBA recommendations call for a 36-month payback extension and a scaled-down forgivable portion, effectively ensuring repayment while preventing restaurant and small business bankruptcies.