The Bottom Line


Foodservice and Hospitality previews a new report outlining operating performance.

In the late fall of 2010, Foodservice and Hospitality magazine, FHG Internatonal Inc., and Ryerson University surveyed restaurant and foodservice operators from across Canada to learn more about the demographic make-up of their respective businesses and to gain a better understanding of the operating costs of running a restaurant.

The information provided by the respondents included financial data fromthe year ending at any period up to June 2010.Due to the timing of the survey, some operators may have included significant financial data from 2009, and some may have included data up to the first half of 2010. The time period captured by the survey reflects the midrecession/ early post-recession time period, which illustrates what many refer to as a “darkmoment” for the industry as a whole. As the recession took hold, it became evident restaurant purchases were impacted significantly. In fact, historically, one of the expense areas consumers tend to cut first is restaurant expenditures. Not surprisingly, however, as the economy strengthens,  consumers are more likely to go back out to restaurants to enjoy themselves with friends and family.

The financial results from 2010 therefore reflect the impact of the recession on all sectors of the industry and are illustrated in the charts.

The impact of the past recession was felt across most industry segments. Of course, the fine-dining sector was hit hardest (caution should be used when looking at this
sector as the number of fine-dining operations reporting was very low). Interestingly, while many restaurant goers across the board were most concerned with high menu prices, many consumers did not even want to be seen in high-end expensive restaurants. Even those consumers who fared well during the economic downturn tended not to want to show off.

As consumers traded down, those who could still afford to go out did, but, for the most part, they frequented casual-style operations, which had a strong operational performance during the year, due in part to their strong hold on their customer base. This segment also benefitted from consumers who typically frequented the fine-dining segment and traded down during the recession.

With the exception of a few well-placed chains, family restaurants saw a weakened market, which created abnormally high occupancy rates. The quick-service segment dominated, notwithstanding high rents due to the fact that per-store sales may have been lower than anticipated, with few exceptions. The low food and labour costs associated with the sector enabled QSRs to bring in the strongest bottom line of any of the four major sectors studied.

On an overall basis, the survey respondents reported the following for every dollar sold:
• food revenue represented 86.9 per cent of sales
• beverage revenue represented 11.4 per cent of sales
• other revenue amounted to 1.7 per cent of sales

Food and beverage costs averaged 31.4 per cent of sales, one of the lowest numbers seen in years, while at 68.6 per cent, the gross margin was stronger than usual.

Salaries and wages showed a decline as well, registering 26.1 per cent on average. While there is no stated explanation for this drop, it is believed to be a result of ‘austerity management,’ whereby service staff was reduced to maintain profit ratios. In some cases, several operators were also able to focus on counter service or partial counter service concepts. The QSR segment was the strongest of the sectors responding, and this may have skewed the total market results slightly (although QSRs make up about 63 per cent of the industry as a whole).

Occupancy costs were at the highest levels seen in years.We believe this is due to landlords extracting the same levels of rent during the recession as during the pre-recession, coupled with an overall drop in year-over-year same-store sales.With most rents considered a ‘fixed cost,’ rents increased dramatically as a proportion of sales.

The operating profit as a percentage of sales, and calculated before applicable franchise fees, was 9.2 per cent on an aggregate basis, which is rather impressive given the difficult market conditions with which the industry was forced to operate. Operating profit is defined as EBITDA (earnings before interest, taxes, depreciation and amortization).

On a national basis, when reviewing all categories of restaurants by region, the most successful region to be operating in was Quebec, while the least successful was Northern Canada (although we caution only 16 restaurants responded and therefore this may not be an accurate indicator). Below is a list of operating profit achieved by region:

Quebec 14.8 per cent
Ontario 12.1 per cent
British Columbia 9.1 per cent
Atlantic Canada 11.6 per cent
Prairies 12.5 per cent
Northern Canada -7.5 per cent

In the future, Foodservice and Hospitality, FHG International Inc., and Ryerson University plan to conduct this survey annually each spring with the results ready for publication by the fall of that same year, reflecting the previous year’s numbers. We believe this survey approach with operators is the most effective way to obtain key industry data compared to other reports, which do not ‘slice and dice’ the data so it is comparable and able to be applied in the industry.

To ensure a successful and valid sample, we depend on operator feedback and participation in the survey. If you benefit from these results, we encourage you to continue to participate, to get your competition on board and to work with us to grow this national database. The full survey results are available at for $19.95.

Previous articleBurger M:strs
Next articleToronto Taste Set to Roll
Kostuch Media covers the dynamic and ever-evolving hospitality industry by delivering a diverse array of media products for today’s sophisticated marketers. Our magazines deliver extensive signature reports and award-winning editorial, reflecting a continued commitment to provide the foodservice and hospitality industry with in-depth, quality reporting.

This site uses Akismet to reduce spam. Learn how your comment data is processed.