Restaurants head into winter slump amid high grocery costs, decreased demand

On a cold January morning, the owners of Yassou Souvlaki & Donair in Fredericton are busy heating up the kitchen, slicing vegetables and donair meat to prepare for their lunch-hour crowd. 

Charbel Gerges and Elias Youssef are grateful for this loyal customer base as they head into the winter slump, when consumers typically tighten their belts, and poor weather keeps many at home. 

“We have customers that come here at least once a week,” Gerges said. “Some customers come here every day.”

But even with that local support, Gerges knows January through March can be a tough time at the family-owned restaurant, especially with soaring food prices that climbed another 4.7 per cent year over year in November, the highest rate in nearly two years, according to Statistics Canada. 

The biggest hikes include fresh or frozen beef, up nearly 18 per cent over last year, and coffee, up almost 28 per cent. They’re staple products for the Greek restaurant, Gerges said, along with produce, a cost that bounces up and down like the price of gold. 

“Three or four months ago we were paying $30 to $40 for a case of lettuce,” he said. “And then it went up to $130 and then dropped back to $60 to $70.” The fluctations make it difficult to plan around, he said, although he can always count on beef, lamb and poultry prices to simply increase.  

Escalating food prices aren’t the only headache for restaurants heading into the first quarter of 2026. 

Many are still paying back debts accrued during the pandemic. Others are navigating a labour shortage after cuts to immigration numbers last year through the Atlantic Immigration and Provincial Nominee programs.

And the restaurants are doing this without the help of the federal two-month sales tax holiday that was implemented last winter, a temporary reprieve giving Canadians a break on more than a dozen qualifying items, including restaurant meals, catering, and food delivery.

Janick Cormier, vice-president of Atlantic at Restaurants Canada, said all of this has restaurant owners “being squeezed in every way possible.”

Cormier said 41 per cent of restaurants in Canada are operating at a loss or barely breaking even. It’s an improvement over last year, when 53 per cent of restaurants were in that situation, but still more than three times pre-pandemic levels. 

“So profit margins are slim to none,” she said. “If you don't have profits, the owners aren't getting paid. And so it becomes a labour of love. But maybe that labour of love becomes too much to bear and you need to make hard decisions.”

Sylvain Charlebois, director of the Agrifood Analytics Lab at Dalhousie University, believes many are having those tough conversations right now, and predicts thousands of Canadian restaurateurs will be forced to close down this year.  

“We're expecting the number of restaurants to decrease by about five to seven per cent across the country,” he said. The net decline would be about 4,000 establishments.