Restaurant industry will need more government support to survive

Restaurants and other food service businesses are the fourth-largest source of private sector jobs in Canada. Collectively, the industry employs about 1.2 million people.

At least this was the case before COVID-19 resulted in more than 800,000 people from the food service and hospitality sector being put out of work by April.

That’s nearly two-thirds of the restaurant workforce that was lost and double the number of jobs that Canada’s entire economy lost, across all sectors, in the year following the 2008 financial crisis.

Not only was the restaurant industry among the first and hardest hit by the pandemic, the sector will also be among the slowest to return to profitability: Six of 10 food service businesses are still operating at a loss, even as jurisdictions across the country are moving forward with reopening plans.

With the average restaurant typically needing about a third of its operating budget just to cover labour costs, restaurateurs understandably breathed a sigh of relief on May 15 when Prime Minister Justin Trudeau announced the federal government would be extending the Canada Emergency Wage Subsidy (CEWS) program to Aug. 29.

A month since the announcement, however, it’s become clear that it’s going to take more than a simple extension of this program to help restaurants bring hundreds of thousands of Canadians back to work.

When initially introduced, the CEWS program was to run for 12 weeks, retroactive to March 15, limiting employers to only being able to benefit from the subsidy until June 6.

The extension announcement gave hope to many restaurant operators who were not yet ready to reopen that this assistance might still be available once they’re able to use it. The announcement was also welcomed by establishments that have remained open since emergency restrictions were first imposed, as most restaurants that have continued to operate takeout and delivery services have done so at a loss.

After months of significantly reduced revenue, or none at all, and now facing months of operating at reduced capacity, this is only the beginning of what will be a long and difficult road to recovery for Canada’s restaurants.

Given this reality, they will need continued government support for the long term, not just until an arbitrary end date.

The wage subsidy should continue to be available to businesses as needed, to keep them from falling off cliffs where the assistance they’re receiving with payroll suddenly drops from 75 per cent to zero. Instead, a smooth ramp of support that reduces as a restaurant gets closer to manageable levels of revenue variance would be the best way to extend the program.

The requirement to demonstrate a 30 per cent decline in revenue should also be scaled to remove any concern that increasing sales could result in losing access to the subsidy. This would help restaurants hang onto their staff while they’re still working on generating enough revenue to no longer need government support.

The wage subsidy has already helped Canada’s restaurant industry recover 41,900 jobs initially lost during the pandemic. But more than half a million people previously employed in the food service sector were still out of work across the country in May.

Reforming the wage subsidy will give restaurants greater capacity to bring more of these Canadians back to work.