Reality check: Alberta restaurants struggling

Rising taxes, policy changes hurt sales and jobs, Mark von Schellwitz writes

While the rise and fall of local restaurants is a natural part of any city’s landscape, what restaurateurs across Alberta are going through right now is far from business as usual.

For years, Alberta’s food-service sales growth led the nation, contributing to jobs, tourism, investment and bringing in 2.8 million visits to restaurants every day. Now, Alberta ranks second to last of all the provinces. This is in part due to a weak provincial economy, but also because of a perfect storm of tax increases and painful policy changes that have worsened conditions for restaurants over the past four years.

Policies that were intended to boost earnings and reduce the cost of living for Albertans have instead decreased employment opportunities in the food-service sector and increased prices for diners.

While real food-service sales (sales adjusted for menu inflation) should begin to rebound in 2019, they’re still expected to remain 3.5 per cent below what the industry reported in 2014.

Some people will say restaurant sales are going up and the industry is doing great. However, they’re not factoring in menu inflation. With patrons paying higher tabs, they are in fact dining out less. Real (adjusted for menu inflation) average unit sales have declined by over nine per cent from 2015 to 2018.

The reality is average pretax profitability for restaurants in Alberta is only about five per cent. This leaves restaurants with tough choices when operational costs rise: mainly cut staff and/or raise menu prices — neither being viable solutions for most small businesses.

There are 10,000 fewer hospitality industry jobs in this province today than just a few years ago.

Staff hours and benefits are being cut and charitable contributions have been reduced.

Even still, many smart, responsible restaurateurs have had to abandon expansion plans or close down completely. You have probably noticed a number of restaurant closures in your neighbourhood.

Here’s why: The liquor server wage has been eliminated and the minimum hourly wage has increased by nearly 50 per cent over the past four years (63 per cent for liquor servers). This is also reducing the capacity for food-service businesses to continue providing the same level of first-time jobs, locking thousands of young Albertans out of valuable work experience. A minimum wage freeze, youth/training wage, and a liquor-serving wage similar to other provinces would provide much-needed relief.

Then there are the new holiday pay rules, requiring all workers to be paid five per cent of their wages earned in the immediate four weeks prior to a statutory holiday — even when a restaurant isn’t open that day.

This change, combined with other recent reforms to labour legislation, is incompatible with the needs of food-service and hospitality businesses, which operate outside the bounds of a fiveday, 9-to-5 schedule.

They need more flexible policies that account for the industry’s unique challenges.

Considerable tax increases and fees are also becoming too much to bear. Municipalities need to be encouraged to find better ways to manage operating budgets if they want their restaurants to stay open. While most food-service operators recognize that environmental sustainability is important to their success, a large portion of a restaurant’s energy use goes directly into the food preparation process.

Restaurateurs are already investing in energy-saving equipment but can do little more to reduce energy used to prepare, cook and preserve food safely. Carbon tax rebates could go a long way to mitigate the financial impacts on businesses with commercial kitchens.

With an election soon to be called, now is the time to start talking about solutions like these.

Restaurants Canada is inviting everyone who cares about Alberta’s food-service and hospitality community to join the conversation. Visit info.restaurantscanada.org/ restaurant-realities to learn more about the key issues and policy recommendations that we’ve shared with all the province’s major political parties.

Alberta’s next elected government has an opportunity to improve the realities of restaurants in Alberta. Together we can make our voice heard.