Calgary restaurants dealing with slimming profits as food prices rise
Increasing food prices and labour vacancies continue to hurt some local restaurateurs, who are netting less cash despite soaring menu prices.
A new report from national industry lobby group Restaurants Canada shows a sector still reeling from the pandemic while facing increased expenses and a diminished workforce. According to that report, 459 Alberta restaurants were permanently shuttered between April 2021 and July 2022, while only 271 new restaurants opened.
Still, the report states that Alberta's total food service sales will exceed pre-pandemic levels through 2022, hitting a total of $10.2 billion compared to 2019's $9.9 billion. But that may not be the good news it seems, as menu price inflation is also reflected on restaurants' back ends, making for incredibly slim profit margins on most items.
Restaurants Canada's report states that in the past year, menu prices at restaurants have gone up 6.6 per cent on average, and alcohol prices at licensed establishments rose by 3.8 per cent. Statistics Canada's Consumer Price Index plots the increase of food prices at 9.2 per cent between July 2021 and July 2022.
“Inflation is the biggest problem; I'm going to assume it's the biggest problem in every industry right now,” said Harry Dimitriadis, owner of the two Jamesons Pub locations in Calgary.
“I look at the cost of what someone has to pay for a plate of chicken wings and I say, `That's outrageous.' But at the same time, I'm making the smallest margins I've ever made on chicken wings while I'm charging the highest prices I've ever charged.”
Restaurants Canada's western region vice-president Mark von Schellwitz says while sales are on the rise and Albertans are dining in restaurants more frequently, it's not translating into profits for owners.
“We've still got half of our members that are just breaking even or losing money. And for those that are making money, it's in that two to three per cent range,” he said. “We need those profits in order to repay those debts from the past couple of years.”
Over the course of the pandemic, Restaurants Canada says 85 per cent of independent full-service restaurants took on new debt. Von Schellwitz says Alberta took less of a hit due to fewer pandemic restrictions, allowing businesses to operate more freely than in other provinces.
“I would say Alberta restaurants are perhaps a little bit better off than some others as far as debt levels are concerned. But I think the labour shortages are very acute in Alberta as they are across the country,” he said, adding there were almost 172,000 vacancies in the industry countrywide as of June 2022, three times the pre-pandemic average.
Von Schellwitz says the dwindling number of workers is forcing many restaurants to operate at about 80 per cent of typical capacity. The report states many owners and restaurant managers reported having to shift their business models in response, with many picking up additional hours themselves, reducing operating hours or raising wages to attract workers.
“There's definitely a labour shortage in our industry. ... Right now, the one positive that we're seeing is we're starting to see students come back who need that flexible schedule that restaurants can give them throughout the school year,” said Ernie Tsu, the president of the Alberta Hospitality Association and owner of Trolley 5.
Dimitriadis said he's been lucky to have a solid roster of long-term employees that have helped stave off labour issues, and customers who have — for the most part — been understanding of the recent challenges.
“We'll get emails in or whatever: `I can't believe you guys are charging this much.' Look at every aspect of life — I can't believe I paid $1.60 a litre last week for gas. That's just what it is,” he said.
“It's not like we're charging more than the guy next door, the guy down the block; everyone's in the same boat and it's just expensive right now.”