Thank you very much for having me.
I'm Olivier Bourbeau, vice-president, federal and Quebec, at Restaurants Canada.
Restaurants and the many small and medium-sized businesses that make up the Canadian food service sector are a critical pillar of our culture, economy, labour market and local communities. Prior to the pandemic, Canada's food service sector was a $95 billion industry, directly employing 1.2 million people and serving 22 million customers across the country every day. We launch careers, invest in training, and are the fourth largest employer in Canada.
While we see customers coming back to our restaurants, and sales slowly returning to pre-COVID levels, profitability is simply not at the rendezvous. Not a lot of people know this, but even prior to the pandemic, restaurants operated at razor-thin margins. Indeed, pre-COVID, an average restaurant made a pre-tax profit margin of only four per cent to five per cent, and now, with skyrocketing inflation, that margin has been whittled down to two per cent to three per cent. Morever, due to labour shortages, we operate at 80% capacity. Do the math: our restaurants are barely surviving, or not making money in many cases; 50% of operators are barely breaking even, or are operating at a loss, compared with 12% pre-COVID.
With inflation driving the costs of running a business up, being able to run a profitable food service establishment has gone from tough to nearly impossible. We are not talking about just a handful of ingredient prices going up. Everything has gone up: food, utilities, amenities, insurance—when we can get it—rent, and every single material that we use.
In our industry, we cannot simply pass the cost increases down to the consumers. We try to absorb as much as possible because there's a limit to what a person is willing to pay for a meal. Unfortunately, the elastic is stretched to its maximum.
Here are four industry priority recommendations.
Extend and restructure the CEBA loans to make repayment palatable. In order to ensure that the food service continues to play a major role in a strong economic recovery, taking into consideration that 20% of the restaurants that haven't reimbursed CEBA yet will not be able to repay it in part or entirely, we are urging the government to provide additional leniency to CEBA recipients by extending it by 36 months with a scaled down model for the forgivable part.
Number two, step back on the alcohol excise tax escalator, the automatic annual increase. The 6.3% excise tax increase for 2023 would result in a $750 million hit to the food service industry, an average of $36,000 per restaurant—imagine that—while our industry is still struggling.
Number three, lower the federal small business tax rate from nine per cent to eight per cent. Currently businesses have very little capital to reinvest in their operations. Lowering the small business tax rate allows them to pay off debt and invest in their employees.
Number four, work with all players to ensure that the plastic reduction requirements are attainable. The implementation timeline for the ban of single-use plastic items should be extended, and the government must work closely with the suppliers to ensure that the alternative products will be available in the needed quantities, on time, and at a reasonable price.
I'd like to briefly summarize our four priority recommendations: We are recommending a further extension of the Canada Emergency Business Account loans for Canadian businesses, with a scaled-down model of the forgivable part; we recommend a step back on the alcohol excise tax escalator because the enormous 6.3% excise tax increase announced for this year would represent enormous costs for restaurant owners; we recommend lowering the federal small business tax rate from 9% to 8%; lastly, with respect to single use plastic products, the government should ensure that alternative products will be available in the needed quantities at reasonable prices.
To finish, I remind you that the food service industry has lost nearly 5,000 restaurants across Canada since January 2021, and more than 13,000 since the beginning of COVID.
There are 51% of food service businesses currently operating at a loss or just breaking even, compared to 12% pre-COVID, with one in four independent table-service restaurants saying their business is not expected to recover. That's one in four.
Of the private sector job vacancies, one in five are in the food service industry. Restauranteurs are operating at an average of 80% of their normal capacity due to labour shortages.
Government support is more critical than ever to ensure that our industry can realistically relaunch, continue to employ 1.2 million Canadians, keep 98,000 businesses alive and feed Canada's recovery.
Thank you very much.