Restaurant business booming despite economic slowdown

Canadians may be more worried than usual about the economy, but that's not stopping them from going out for dinner more often than they have in decades.

Canadians' spending on dining out is forecast to increase for the 25th year in a row

For the 25th consecutive year, Canadians spent more money at restaurants in 2015. ( Andrew Harrer/Bloomberg News)

Too many debt-ridden Canadians are spending big in restaurants, says the head of a credit counselling group.

"It's not uncommon for people to tell us they eat out two or three times a week," says Laurie Campbell, CEO of Credit Canada Debt Solutions, a non-profit organization that helps people manage their finances.

"It's expensive enough for a couple, but for a family? That just burns through money."

Canadians' love affair with dining out has been growing for decades. According to the industry's association, Restaurants Canada, spending since the Second World War has risen at more than twice the rate of inflation, from about $2 billion a year to the most recent tally of $72 billion.

The forecast for the coming year? The group says sales will grow again, for the 25th year in a row.

"We just had the best December we've ever had," says John Dawson, who has owned F'Amelia, an Italian restaurant in downtown Toronto, for five years. "January is up from over a year ago and so is February."

Dawson was in the restaurant business during the financial crisis of 2008 as well, and knows what it's like when people cut back.

"Back then we definitely saw a big drop in wine sales. People will come in and have a glass, not a bottle. If they do order a bottle, it'll be a $60 one, not $160." But these days his customers are happy to treat themselves.

Even some restaurants in Calgary are thriving. If you want a table at Cibo on a Friday night, be prepared to go a bit early or late. The most popular times are booked in advance.

Some restaurants are struggling

But not all eateries are full. "In the last 12 months we've had more independent restaurants close than we've ever seen in the Canadian restaurant industry," says market researcher Robert Carter of The NPD Group. "When we talk to our survey participants about budget cutbacks, going to a restaurant is always No. 1 — spend less money on restaurants."

For every closure, though, it seems another restaurant opens. Carter's firm is forecasting an overall increase in sales for the industry this year — mostly due to inflation — and says millennials are a strong source of support.

"They are the largest cohort using restaurants," he says. "Regardless of economic uncertainty, they continue to be the fastest growing segment of the restaurant market." 

Restaurant dining may seem an extravagance given Canadians' record levels of debt, but some consumers may believe they're making a smart, budget-conscious decision to eat out.

"You may not be able to take a vacation trip somewhere, but you can do tourism on the cheap by visiting a restaurant," says Jeffrey Pilcher, a food historian who teaches at the University of Toronto.

He calls dining out an "affordable indulgence."

"I think that's a big part of why restaurants do well during tough times. During the Depression, for example, makeup was actually a big item because it was a smaller expense that made people feel better in hard times."

Lina and Steve Zussino of Victoria pride themselves on avoiding restaurants. "We are extremely frugal," explains Lina, "We only go out for dinner when we're on holiday or if we have a Groupon." The parents of two young daughters are intensely focused on saving money — they write a blog about how to spend less on groceries.

In addition to using coupons and loyalty programs, Lina makes meal plans and packs lunches every night. Do they ever feel they're missing out on one of life's simple pleasures? "Definitely not," says Lina, with conviction. "We vacation about four times a year. We're going to Maui at the end of the week." Turns out Steve also runs a "travel hacking" blog about how to take take trips on a dime.  

The family went on a Caribbean cruise in November and spent two months in Australia and New Zealand last year. They'll head to Nova Scotia for a holiday this summer.

"You save money when you eat at home," says Lina. "It's our lifestyle, and it's not difficult at all if you plan."

Business booming

Even so, a lot of Canadians still choose to relax and be served in a restaurant. And many have more money to indulge the habit, thanks to savings at the gas pump.

"Lower energy costs seem to be helping the business case for the food and hospitality industry," says Sylvain Charlebois in a recent report from the University of Guelph's Food Institute.

He notes that research in the U.S. shows that $3 of every $10 saved on gasoline is spent on "food consumption outside of the home," and he says market data suggests something similar is happening in Canada. 

Campbell of Credit Canada Debt Solutions says restaurants are often the last thing people consider cutting when they need to trim expenses. "They may question a new clothing purchase or going to the movies or the theatre, but people often don't think twice about going out for dinner," she says.

She believes most consumers justify the expense because food is a necessity. "People see it as a right or an entitlement in their lives," she says.

"Looking back 30 to 40 years ago, I believe going out for dinner was a big deal and a huge treat for a family. Today this is a common occurrence."

About the Author

Dianne Buckner has reported on entrepreneurs for two decades. She hosts Dragons' Den on CBC Television and is part of the business news team at CBC News Network.


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