Restaurants Canada’s latest quarterly report finds the industry and commercial foodservice sales are forecasted to decline.
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, the organization said in a news release.
The quarterly report indicates annual commercial foodservice sales to contract between 0.4 per cent and 1.5 per cent in 2025, and between 0.6 per cent and 1.4 per cent 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 per cent growth rate for 2025 and one per cent 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.
The report suggests that if the trade war lasts a year or longer, 71 per cent of restaurant chains say they would eliminate non-essential spending, 63 per cent would increase menu prices, and 50 per cent would delay renovations or capital investments, actions which will have a significant negative spin-off effect on the economy.
The report suggests that the GST/HST holiday provided a strong boost to the industry, seeing improvements in employment and bankruptcy.
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.
Employment in the restaurant industry rose to 1.18 million jobs in February, the highest level since the start of the pandemic. Overall, employment in the restaurant industry grew by 5.6 per cent in the first quarter of 2025 compared to the first quarter of 2024, despite it being the slowest time of the year for the industry.
Restaurants Canada called on the 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 chief executive officer 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.”
Restaurants Canada advises the new federal government to strengthen the sector by reducing interprovincial trade barriers, lowering 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,” said Higginson.
Read the full report here.