Restaurant sales projected to contract in 2025 amid trade war with U.S., despite a strong start to the year thanks to the GST/HST holiday

/EIN News/ -- Toronto, May 05, 2025 (GLOBE NEWSWIRE) -- While the GST/HST holiday prevented foodservice bankruptcies and boosted sales and employment in the first two months of 2025, the tariff war has thrown the industry into uncharted waters, finds Restaurants Canada’s latest Quarterly Report. Restaurants Canada’s updated 2025 commercial foodservice sales forecast is now in negative territory.

Quarterly Report at a glance:

• Restaurants Canada expects annual commercial foodservice sales to contract between 0.4% and 1.5% in 2025 and between 0.6% and 1.4% in 2026, depending on how the tariff dispute with the U.S. evolves. Pre-trade war, the forecast for the foodservice industry was a 0.8% growth rate for 2025 and 1% growth in 2026.
• Commercial foodservice sales are expected to reach between $98 billion and $99 billion in 2025, down from the pre-trade war forecast of $100 billion.
• If the trade war lasts a year or longer, 71% of restaurant chains say they would eliminate non-essential spending, 63% would increase menu prices, and 50% would delay renovations or capital investments, actions which will have a significant negative spinoff effect on the economy.
• The GST/HST holiday provided a strong boost to the industry: based on data from Statistics Canada, commercial foodservice sales rose by a robust 7.5% in January. Even after adjusting for menu inflation, real sales rose by 4.3%, the highest real growth since April 2023.
• In the first two months of 2025, there were 121 restaurant (and accommodation) bankruptcies in Canada compared to 239 in the first two months of 2024. While this is higher than pre-pandemic levels, it represents a 50% year-over-year decline.
• Employment in the restaurant industry rose to 1,180,000 jobs in February, the highest level since the start of the pandemic. Overall, employment in the restaurant industry grew by 5.6% in the first quarter of 2025 compared to the first quarter of 2024, despite that being historically the slowest time of the year for the industry.
• Historically low consumer confidence, rising unemployment and stagnant population growth as a result of Canada’s shifting immigration policies are all factors that will hinder foodservice sales in the coming years.

Restaurants Canada calls on new federal government to permanently eliminate GST/HST on food.

“We now have definite proof that the GST/HST holiday boosted sales and created jobs in the foodservice sector, while preventing bankruptcies,” said Kelly Higginson, President and CEO of Restaurants Canada. “The new federal government can protect Canadian jobs and businesses in every community across the country and help Canadians with affordability by removing sales tax from all food permanently. Taxing a necessity like food is simply a bad approach to taxation.”

In addition to making all food and alcohol sold at restaurants tax-free, Restaurants Canada advises the new federal government to strengthen the sector by reducing interprovincial trade barriers, reducing EI payroll taxes, and exempting food and food-safe packaging from retaliatory tariffs.

“We face significant challenges, both as an industry and as a country, so government needs to use all the tools at its disposal, including tax policy. We’re eager to work with Prime Minister Mark Carney and his new government on policies that enable the foodservice industry to grow its economic impact, create stable and rewarding jobs for Canadians and feed communities across the country,” added Higginson.

About Restaurants Canada
Restaurants Canada is a national, not-for-profit association advancing Canada’s diverse and dynamic foodservice industry. Restaurants are a $120 billion industry employing nearly 1.2 million Canadians and is the number one source of first-time jobs in Canada.

Milena Stanoeva
                    Restaurants Canada
                    6479211758
                    media@restaurantscanada.org