The past three years have had a devastating impact on Canada’s restaurant industry. COVID-19 has further exposed the need to reform certain practices of the food-and-beverage industry and improve its perception as a desirable profession. For the past two years, I’ve investigated COVID-19’s effect on fine-dining and casual-fine dining (F&CFD), the challenges operators faced responding to closures and business restrictions and the outlook for these segments. The research combined a comprehensive review of literature regarding the effects of and responses to COVID-19 with interviews with seven owners, chefs and operators who represent F&CFD businesses of various scale across Canada.
Two interviews were held. The first interviews took place in summer of 2021, well into the pandemic and examined the effects, support, and changes or additions to operators’ business model, as well as the processes and technology they employed to mitigate or overcome challenges. The second interviews held in March of 2022 were meant to shed light (post-COVID-19 restrictions, although some lingered) on how they planned to move ahead, become more resilient to shocks, and how the F&CFD industry can take the opportunity to address both crisis related and systemic issues.
Navigating the pandemic
COVID-19 shut down or constrained much of the food-and-beverage industry across Canada. Hundreds of thousands of employees across the restaurant industry were laid off and more than 12,000 foodservice establishments permanently closed their doors (as of September 2021), representing almost 15 per cent of a 2020 tally of 82,000 full- and limited-service restaurants and eating places in Canada.
According to Restaurants Canada, an estimated 800,000 foodservice jobs were either lost or job hours cut to zero, and according to the Toronto Star, 200,000 workers left the industry during the pandemic.
In April 2020, Canada’s foodservice industry experienced its lowest level of sales in more than two decades, but operators were quick to innovate, ushering in business model changes, including embracing delivery and takeout; offering grocery delivery and meal kits; converting their dining rooms to marketplaces; hosting virtual cooking classes and corporate events; and accelerating the use of ghost kitchens.
In 2021, the hope was that the vaccine would vanquish COVID-19 and there were periods of resurgence in demand in Ontario and across Canada, but there was no “back to normal” for the restaurant industry after a catastrophic 2020. Full-service restaurant revenues were forecast to remain more than 7.5 per cent below pre-COVID-19 levels in 2022. Only 39 per cent of restaurant operators were expecting to return to pre-pandemic staffing levels in 2022 and 20 per cent are expecting a return in 2023. However, inflation and a weaker-than-expected economy may slow recovery further, resulting in lower-than-expected sales in 2022, perhaps until 2023 or beyond.
As the hospitality sector recovers in 2022-2023, labour shortages, already an industry-wide problem pre-pandemic, are becoming more acute. Restaurants Canada noted that the pandemic is forcing the industry to re-evaluate how they recruit, pay and retain their employees. It will take time to re-gain pre-pandemic sales levels but ameliorating the challenges of a diminished labour pool and recruiting new professionals is something we must respond to now.
Restaurants Canada also reported that the pandemic accelerated costs for the industry, which continued to rise in 2022. According to the National Restaurant Association in the U.S., food prices are on track to post their largest annual increase since 2014. Another survey from 2021, reported that six out of 10 table-service restaurants are operating at a loss as of July 2021. Unfortunately, due to multiple factors, including the war in Ukraine and other supply-chain issues, the cost of food was up 9.7 per cent in April 2022 on a year-to-year basis, with dairy, beef, chicken, bread, pasta, cereal and coffee all up over 10 per cent.
There are other systemic industry problems to be addressed. For example, misconduct, abusive practices and toxic work cultures manifested, in part, by food-and-beverage icons and restaurateurs accused of sexual misconduct. The pandemic exposed and magnified the focus on worker treatment and fair wages.
The economic logic of urban fine dining is also at risk. When the cost of renting prime retail space makes it too difficult to cover the cost of an adjacent kitchen, a necessary non-income producing manufacturing space, there will be scant incentive to start a fine-dining operation.
Perhaps commodities, utilities and other expenses will eventually adjust downward, but we must correct the revenue side by charging a price that gives all staff a living wage, gives risk-takers an acceptable return on their investment and the ability for all operators to support environmentally-responsible practices throughout their value chain.
Now, as it re-imagines itself, the F&CFD segment and the entire foodservice industry must decide between returning to its old ways and making long overdue and necessary sustainable changes.
Responding to challenges
In both interviews, almost a year apart, the professionals I spoke with had different perspectives. There were similarities in these operators’ responses to COVID-19, but also diverse views on how well authorities managed it, provincially and locally, what it exposed and the type of opportunities, capabilities, and motivations that exist for industry improvements.
Even though most of the operators and chefs I interviewed were able to pivot to a temporary new business model that promised a safe and responsible experience for guests and staff while remaining somewhat economically viable for its stakeholders, others were not able to survive or decided to pull-the-plug. The most successful found inspirational new ways to innovate and meaningfully support their community in ways that also supported their business, but for most it was a precarious situation that may only be rectified by a majority of guests’ lifestyles and practices returning to normal.
Interviewees discussed other challenges including dealing with a whiplash of openings and closings with little notice, consultation, or transparency of process by provincial officials; the difficulty of surviving on take-out only or limited seating restrictions; increased work and debt loads; the stress of protecting staff or having to lay them off; dramatic cost increases and even tighter margins or lose; and more demanding customers. The disparity between front-of-house and back-of-house remuneration, and issues with gratuities were also noted as ongoing concerns.
An inability to increase prices proportionately to rapidly increasing costs, difficulty finding staff and bad operators whose exploits discourage prospects from entering the industry, were consistently cited by our interviewees as problems. The foodservice industry also continues to face obstacles including changes in consumer behavior, record-high equipment prices and supply-chain shortages.
COVID-19 had an enormous impact on the foodservice industry. The effects of closures and restrictions on businesses were so severe, and in some cases, they were existential. The pandemic also manifested the need for reform in income inequality, fair treatment, security for minimum wage, essential, gig-economy workers and in social welfare deficiencies. Government and individuals can help to ensure our post-pandemic world is more equitable and more just, but reform across our industry, which requires workers across a spectrum of unskilled to highly skilled positions and includes a significant percentage of independent businesses, is difficult due to fragmentation and slim margins. Resolution of these issues must be accomplished collaboratively.
To overcome these challenges, we must reform practices, increase prices and margin, provide better treatment and conditions for workers, pay living wages, and offer more opportunity for staffs’ personal and professional growth. We must improve working conditions and overall economic logic to incentivize growth, innovation and attract young talent.
Systemic changes and co-operation are required rather than cut-throat competition. Continuing an every-one-for-themselves race to the bottom will only hasten industry failure. A stakeholder network that supports a viable and attractive industry will be a critical component of achieving transformation.
In many parts of Canada, it is difficult to find staff as workers left our industry during the pandemic. Many will not return and the industry’s appeal to those choosing a career has been drastically diminished due to the recurring closures and restrictions across Canada. If students see their career prospects as dubious, the work too demanding, and themselves as potentially poorly treated and compensated, we will not flourish.
We must develop an effective strategy to convince potential recruits who may have passion for fine and casual-fine dining that our segments are excellent choices for a career. A coalition of industry organizations, businesses, professionals and academics can accomplish this. Although several of the interviewees mentioned they did not want to give their competition an edge in the struggle to find staff, they realize that attempts to widen the pool will help everyone and that they would participate in efforts to convince young adults to come into the industry.
We need a focused and well-supported effort to lead a grass-roots movement of industry stakeholders to start the indispensable process of re-building the value of a career in foodservice, especially in the fine and casual-fine dining segments, and we must start to fix systemic problems now.
BY GARY HOYER, CHEF AND PROFESSOR, GEORGE BROWN COLLEGE