The restaurant industry in solution mode

It is at the top of the list of challenges facing Québec restaurant operators in 2023. No, it’s not the labour shortage, but inflation. Rising food prices combined with an increase in total wages will require a great deal of agility on the part of an industry that is barely recovering from two years of COVID-19.

War in Ukraine, COVID-19, climatic events, high oil prices and a falling Canadian dollar... there are a multitude of reasons to explain how inflation - particularly food inflation - has reached levels not seen in forty years.

Sylvain Charlebois, a professor of food distribution and policy at Dalhousie University and a Canadian economist, is a keen observer of the food market (grocery and restaurant). He noted that some foods have seen increases of 30 to 40% in one year. For example, the price of flour and grains increased by 28.9%. “This is severe. Many establishments have not been able to absorb these expenses. In Canada, for every restaurant that opened, two closed. It’s a drastic situation.’’

According to the ARQ, nearly 262 restaurants went bankrupt in Québec in 2022. This represents an increase of 17.6% compared to the previous year. This figure is not very surprising given that the Consumer Price Index (CPI) rose by 6.8% that same year.

Negotiating Over And Over Again

In the field, in the kitchens and dining rooms of Québec restaurants, many people are scratching their heads and juggling with ever-changing prices. This is the case for Marilène Barale, co-owner of Les Insulaires Microbrasseurs in Laval, and Renaud Alexandre, president and general manager of Habaneros Grill Mexicain, a chain of five establishments specializing in Mexican fast food, mainly located in Abitibi. They both made the same observation: “I noticed that we have to put a lot of effort into negotiating with suppliers. You have to make several bids and put them in competition to find the best prices. Many are raising their prices, while there are shortages of numerous products. This is definitely an aspect that takes up a lot of our time,” says Marilène Barale. She has recently made some changes in her supply chain and is now a member of the ARQ’s purchasing program (PAPP). She can benefit from tight negotiated prices and also receives a quarterly rebate on her purchases from PAPP member suppliers that amounts to several hundred dollars.

RAISING MENU PRICES?

Faced with this inflation, many are choosing to review their prices. According to an ARQ survey, nearly half (48.8%) of restaurant owners had mentioned that they intended to increase their prices by 6 to 10% in 2022. This trend continues in 2023, when they must frequently adapt to increases from suppliers, interest, the minimum wage and more. However, it is out of the question to put all these increases on the shoulders of customers, says Pierre Moreau, president and CEO of Restos Plaisirs, a group with five brands, 11 outlets and nearly 750 employees in Québec City: “The new reality is that we must constantly re-evaluate our menus, portions and types of products to ensure profitability. We don’t want to have to pass the bill onto customers all the time, so we have to find ways to be creative while maintaining the quality of the dishes.’’ Adapting to new consumer habits may be a path worth exploring.

In Canada, it is important to note that just over 6% of the population is vegetarian or vegan. Trend-savvy restaurateurs have realized that they can do double duty: listen to their customers and save with plant protein, which is much less expensive than animal protein. “We follow the trends and this allows us to experiment with new recipes while being cost-effective. Meat is an item that is constantly increasing in price,” Pierre Moreau points out.

The reorganisation of the menu has also led several restaurateurs to review the size of their teams in order to double efficiency and reduce staff costs. “By simplifying the menu, it allowed us to have a tight team in the kitchen and better discipline at work,” adds the CEO of Restos Plaisirs. In addition, many have decided to cut back on opening days to give staff a break and save on operating costs. Many restaurants are operating at reduced capacity because of the labour shortage.

Buying Local And Fighting Waste

Vegetarian, vegan, but also local! For some, buying local saves money, while encouraging local producers and suppliers. The three restaurant owners interviewed by ARQ Info agree on this point: it is essential to use Québec resources. It may cost money, but it’s worth it, according to Renaud Alexandre of the Habaneros Grill Mexicain restaurants: “It’s true that some products are more expensive locally, but we have to be proud of what we produce here and stimulate our economy. At the end of the day, it saves costs on transport and processing and it is an important value for the customers.’’ Fighting food waste is both economically and environmentally sound and is also part of the arsenal to counter rising prices. In Canada, food waste results in an estimated $31 billion in losses each year, 53% of which is attributable to the bio-food industry (food processing, retail, agriculture, food service and hospitality, transportation and storage). These losses can represent a significant budgetary burden for restaurateurs who need to find techniques to avoid waste and make full use of food. “It is essential for us to make efforts to reduce our ecological footprint. By limiting what we throw away, we can save money and experiment with new recipes to use all the food,” says the co-owner of Les Insulaires Microbrasseurs.

For its part, the Restos Plaisirs group uses a shredder in four of its restaurants that transforms the leftovers into compost. This allows them to reduce their garbage bill by almost half!

LAUNCH DATE: FEB 6 2023

Increasing Payroll

Another part of the budget that has tended to rapidly swell recently is the one devoted to the remuneration of the workforce. Added to food, these two items account for 60 to 65% of an establishment’s expenses, as Pierre Moreau of the Restos Plaisirs group likes to remind us. Like the rest of the industry, he is concerned about the upcoming minimum wage increase on May 1st. The regular minimum wage rate will increase by $1/hour and the tip rate by $0.80/hour. It’s not so much the increase itself that is a worry, as there are not many people who are paid the minimum hourly rate in the restaurant business anymore, but of the effect it will have. A domino effect: employees, regardless of their hourly rate, will also want a similar increase. For a restaurant, this could mean tens of thousands of dollars more in payroll - nothing to help break the inflation cycle!

WHAT DOES 2023 HOLD IN STORE?

According to Sylvain Charlebois, the rate at which the CPI is rising should slow down, but we are far from stabilizing prices. Charlebois and his team estimate that food prices in Québec will increase by 5 to 7% this year. Like many economists, he predicts a return to normal only in 2024.

Once again this year, the restaurant industry will have to be creative and flexible to find solutions. “It’s a very dynamic market. The sector will survive, but not everyone will win. Customers’ expectations have and will change a lot. So you need to find ways to stand out,” concludes the expert.

According to the results of our survey in collaboration with HRImag, restaurateurs seem ready to take up the challenge. More than 80% of the 440 professionals questioned think that 2023 will be more favourable (32.3%) or similar to 2022 (50.2%).

3 Tips For Raising Awareness And Attracting Customers

Square, a US-based mobile and electronic payment company, offers three tips for restaurant owners in its report, The Future of Restaurants Report: 2023 Edition

1- COMBATING FOOD WASTE THROUGH TECHNOLOGY

This allows for better optimization of stocks and avoids unnecessary waste of money. Technology can also enable automation, which can help understaffed restaurants and speed up the process of many tasks.

2- UPDATING THE MENU

Instead of paying more for items that are not readily available, change the offers in order to use seasonal ingredients, which are usually cheaper.

3- BE TRANSPARENT

Customers should be made aware of the reasons for price increases. Regular customers are more likely to understand why their favourite dishes cost more.

The report also reveals that consumers are willing to tolerate up to 17% price increases before considering reducing their visits to their favourite restaurant.