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Relief for Restaurants - Government Measures Offer Respite to Struggling Sector

Lockdowns may be over as pandemic measures relax, but Canada’s restaurants face an uphill battle to recovery. Two years of restrictions, a labour shortage, and a looming recession have put enormous strain on the restaurant industry, with an estimated 13,000 foodservice businesses closing their doors since March 2020.

Recognising that restaurants can’t battle back alone, the government has introduced a series of measures to provide some much-needed relief. From delaying loan repayments to cutting taxes, these initiatives are designed to help foodservice businesses start the new year on a stronger footing and spur growth in the stalling sector.

Short-term relief measures

Summer 2022 provided a welcome boost to the hospitality industry as diners came back to patios, tourism increased, and more Canadians began to feel comfortable again eating indoors.

But many foodservice businesses are still operating with heavy debts. According to a survey from Restaurants Canada, 85% of independent full-service restaurants took on new debt due to COVID-19, with 44% taking on debt between $50,000 and $100,000. 

The government has introduced several short-term measures to give foodservice businesses some breathing room as they try to get out from under their debts while struggling with rising food prices and operating costs.

Extension of CEBA loan repayment deadline

Many businesses were forced to rely on the Canada Emergency Business Account (CEBA) when the pandemic struck - nearly 900,000 small businesses took advantage of the interest-free loans disbursed under the scheme. 

Those loans were due to be repaid on December 31, 2022 but that deadline has now been extended to December 31, 2023 for borrowers in good standing.

Restaurants that repay before or on the new deadline will qualify for partial loan forgiveness, up to a third of the value of the loan or $20,000.

Property tax reductions

In its fall economic statement, the Ontario government committed to matching property tax reductions for all municipalities that adopt the small business subclass. Designed to incentivise municipalities outside of Toronto and Ottawa to roll out the program, the move should bring some relief to foodservice businesses in more rural areas of the province.

Income tax relief

Small businesses in Ontario should see lower income tax bills over the next three years as the province expands the small business Corporate Income Tax (CIT) rate. The $185 million income tax relief program is expected to benefit around 5,500 small businesses. 

Looking long-term

Short-term measures may provide immediate relief, but the future of the industry is also at stake. 

With an aging population and declining workforce participation rates, the labour shortage isn’t going away any time soon. The foodservice and hospitality sector continues to be one of the hardest hit industries as employment drops to a record low. 

In an attempt to grow the Canadian workforce, the government is turning to immigration.  Canada’s 2023–2025 Immigration Levels Plan was released earlier this month, setting new immigration targets of 465,000 permanent residents in 2023, 485,000 in 2024 and 500,000 in 2025. Just over 60% of admissions will be in the economic class by 2025 and the federal Express Entry system will vet for in-demand skills to help ease labour shortages.

The government is also investing in the next generation of domestic workers, allocating $802.1 million over the next three years for the Youth Employment and Skills Strategy. This initiative connects young people with work placements and skills training to better prepare them for the job market.

New year, new momentum

Labour shortages, debt, inflation, and supply chain issues will continue to dampen the sector into 2023. But Canada’s restaurants are resilient. 

Recovery may be slow but it is steady and, despite the headwinds, there are signs of progress.

Visits to restaurants and other foodservice businesses rose 6% last quarter and customer spending jumped 10% - indicating that there is still pent-up demand for dining in the wake of the pandemic. 

Reviving that demand has forced the industry to get creative, exploring new ways to entice diners, retain staff, and slim down their operations.

“Throughout the past two and a half years, the foodservice industry has developed ‘operational calluses’”, says Chris Elliott, Senior Economist, Restaurants Canada. “These calluses have made us better able to withstand any future hardship or challenge that may come our way. Lessons learned from the pandemic have made foodservice operators more resilient and innovative than ever.”