Grocery Cart | Restoration: the massacre continues

Restoration is slowly recovering, but the sector is not out of the woods.

After a series of confinements and closures, the restaurant industry is struggling to get out of the doldrums. Over the past year, the number of restaurants in Canada that have closed is 43% higher than the number of restaurants that are opening. The supply is always shrinking.

According to a recent report from Restaurants Canada, sales in the foodservice sector, adjusted for inflation, are stagnating 11% below those of 2019, the last full year before the pandemic. Sales could, however, cross the $100 billion mark as early as next year. A spectacular twist. For 2022, we expect a decrease in traffic of 9% in restaurants with service, and 5% in fast food. Again, encouraging numbers.

The annual report is of course indoctrinated by the optimism and resilience that we know of the sector. But in a possible recession with rising interest rates everywhere, people will have to make choices and even change some habits. Without a doubt, a tighter budget will reduce restaurant visits for many consumers.

We estimate that on average, 27% of the food budget currently goes to catering. Before the pandemic, this proportion exceeded 35%. To regain this percentage, it will take time, even a few years.

But the report is a bit surprising; not a single word about working from home. However, we estimate that by 2025, nearly 40% of the Canadian workforce will work at least one day a week at home. A more domestic and sedentary market does not have the same relationship with food as a market that is mobilized daily. The Shake Shack chain in the United States, which has more than 6,000 restaurants around the world, including a few in Canada, is a good illustration of the strategic pivot model during the pandemic. The channel’s revenues reach nearly $500 million. In March 2020, its online sales were practically nil. Today, 43% of sales come from the web, through the telephone application. Moreover, for fast food, only 16.5% of customers will eat their meals on site. Before the pandemic, this rate was 33.9%.

It’s hardly surprising to see other chains imitating Shake Shack, notably Subway, which relies heavily on its own application. Virtual traffic becomes mind-boggling. Skip, who just laid off 350 people, knows this very well. This e-commerce platform as well as Uber Eats, Doordash and others that offer meal delivery from partner restaurants are seeing their revenue hit by a market that recognizes the potential of a more virtual customer base.

Even grocers are improving their service and relying more on online shopping. Before the pandemic, food service had a virtual monopoly on delivery and counter service. This is no longer the case today.

Obviously, the sector will have to overcome the pitfalls posed by inflation and the workforce. For inflation, as the price on menus increases, the number of choices decreases. Less waste, less cost. Possibly, we will witness a growing number of restaurants that will offer only one dish per day. And why not ? European restaurants are already doing it. Demand becomes more predictable.

For the workforce, Restaurants Canada estimates that the sector has had between 150,000 and 170,000 vacant positions for some time. But in reality, the sector employs 271,000 fewer people than in 2019, before the pandemic. A huge gap. Establishments are reducing their opening hours and remaining closed on certain days of the week. Restaurant owners will rely more and more on robotics, and we can already see this in several businesses, both in the kitchen and in the dining room.

Catering is redefining itself and emerging from a tumultuous period with a firm desire to adapt to a market that is difficult to predict. Trends to follow in the restaurant industry will focus on local products, comfort foods and foods with international flavors. Do you want paradoxes, here you go.