Greg Johnstone wants the next owner of his Halifax restaurant to know one thing: operating a restaurant “is not for the faint of heart.”
Johnstone and his brother have been franchise owners of their family dine-in restaurant since 1977.
For most of their career, operating a restaurant was great. They liked the variety that came with serving breakfast, lunch and dinner. It established them in the community. Countless students paid for their post-secondary education by working for them.
But after more than 45 years, they are ready to retire. Johnstone is 77; his brother is 78. They have been trying to sell their business since 2019 — and up until the pandemic, it looked like they would.
But the pandemic shuttered their business and forced them to lay off staff. Johnstone described the pandemic as encountering white rapids after journeying down a fairly smooth river.
In the years since, they have struggled in the face of growing costs and fewer customers. Evenings used to be a bustling time for them; now, they do not know how busy it will be.
“We’re … trying to build the sales back up to pre-Covid sales, which is problematic.”
Johnstone’s problem is a common one in Canada’s restaurant industry. Across the country, restaurant owners are struggling to stay afloat amidst rising labour and food costs and decreased revenue.
Restaurants Canada, a national lobby group for the restaurant industry, estimates that approximately half of Canada’s 100,000 food service businesses are losing money or barely breaking even.
In June, the organization released a report asking the federal government to reduce the employment insurance premiums that small businesses and their employees pay. Currently, employees pay 1.66 per cent of their earnings in EI premiums, while employers pay 1.4 times this amount. Restaurants Canada is calling for the rate to be reduced to 1.58.
“It is a small ask of the government and something they can do to help in the short term,” said Kelly Higginson, president and CEO of Restaurants Canada, who noted that Ottawa makes the rules that govern EI but does not financially contribute to it.
Many restaurants are small businesses, which have fewer than 100 paid employees. “Not all sectors of the economy have recovered from the pandemic,” Higginson said. “Small businesses are still grappling with debt and the high-cost environment following the pandemic.”
In the first quarter of 2024, about 120 restaurants or accommodation businesses declared bankruptcy each month — up from about 20 businesses a month in the first quarter of 2021, the report notes.
A 2023 survey by the Canadian Federation of Independent Businesses, which represents small businesses, identified taxes — including payroll taxes — as the chief concern of small businesses, followed closely by labour policies and labour shortages.
While lower EI premiums would be helpful, such a change would not be enough to mitigate the increased financial burden on restaurants, industry sources told Canadian Affairs.
Peter Keith, director of the eHub Entrepreneurship Centre at the University of Alberta, says most small business owners would not single out EI premiums as their most significant cost.
If reduced EI premiums leads to “a little more money in the hands of the employee, I think most restaurateurs would be happy about that,” said Keith, who also lectures in the university’s school of business. But what business owners say is causing greater financial challenges are increases to the minimum wage.
“Since the pandemic, pay scale has gone up significantly,” said Michael Moffatt, a chef with more than 20 years’ experience in restaurants and catering who now teaches in the culinary arts program at Algonquin College.
The report says policy makers have increased minimum wages “aggressively” in recent years to alleviate poverty. For example, Ontario’s minimum wage has increased 18 per cent from $14.00 in 2019 to $16.55 today. In Manitoba, it has risen 31 per cent from $11.65 in 2019 to $15.30 today.
An increase to the minimum wage means “an increase for every employee,” said Johnstone. Employees who already made more than minimum wage before an increase will want to make sure they still earn more than minimum wage after an increase. They want their experience and expertise reflected in their pay. “We have to keep that [wage] differential.”
Higher wages also translate into higher EI contributions. “The difference between paying them $20 an hour and $30 an hour also comes back to your EI benefit contributions for each person. It scales with the increased rate of pay,” Moffatt said.
Finding workers has also been hard since the pandemic. After the pandemic shuttered restaurants, many staff who lost their jobs never returned to the industry, says Johnstone.
“Many of them had never had a break to even think about their life and what they want to do,” he said. “They might have said, ‘I don’t want to work in this business anymore.’” He has spoken to other families who run restaurants in the area and they have noticed similar trends.
Many employees who remained in the industry have experienced increased stress since the pandemic, says Keith, who, along with teaching, is a co-founder of Meuwly’s, a charcuterie business in Edmonton.
“[P]eople just have a little less to give right now,” he said. “We’ve always been resilient,” he said of his industry colleagues. “But we’re getting worn down to the point where people really start to look at it and say, ‘It’s time to close. It’s time to go bankrupt and walk away.’”
Restaurants have always operated with very low profit margins, says Moffatt. But recently, they have become “abysmally low,” according to the report. Profit margins for full-service restaurants were 2.2 per cent in 2024, down from three per cent in 2019. Profit margins are the profit per dollar of sales.
Despite the hardships, Keith — who has worked in restaurants since he was a teenager — says the love of serving his community keeps him motivated.
He does not meet many entrepreneurs interested in starting restaurants, but when he does, he encourages them to think about how they will build relationships with their customers.
“Entrepreneurs that have successfully harnessed that energy and made long-term investments into the communities around them are probably in a better position to survive these difficult times, because there’s a bit of a deeper connection there,” he said.
In Halifax, Johnstone says he is looking forward to his retirement after decades working in a family restaurant. He wants to spend more time with his family, too.
But he will miss his customers. “You get to know everybody, and you’ve got all these little relationships and conversations going on.”
And while he does not think everyone should enter the restaurant business, he is confident some people should.
“You have to know yourself well enough to know what kind of challenges you are able to manage in a way that you find rewarding and match your personal qualities. If you can find that combination, then you’re a good fit for it.”
