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Food services and drinking places, annual, 2019

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Released: 2021-02-04

In 2020, the food services and drinking places subsector was directly affected by government interventions related to the COVID-19 pandemic. All provinces restricted access to businesses and implemented business closures throughout the subsector. With many dining rooms across the country closed, the subsector transitioned to take-out and delivery as its primary means of conducting business. According to the Monthly Survey of Food Services and Drinking Places, unadjusted sales for the subsector were down 27.3% throughout the first three quarters of 2020, when compared with the same three quarters in the previous year.

With restrictions forcing many consumers to use take-out or e-commerce options, limited-service eating places were best poised to make this transition, having the largest share of sales coming from e-commerce in 2019 (6.7%). Limited-service eating places saw sales decline by 14.2% over the first three quarters of 2020. In comparison, over the same period, full-service restaurants saw a far greater decrease in sales (-35.6%), partly because of their relatively larger share of sales coming from alcoholic beverages (18.8% in 2019). However, drinking places and special food services saw the largest decreases in 2020, because of limitations on indoor gatherings and full closures. Sales at drinking places declined 44.8% and sales of special food services were down 45.3% over the first three quarters of 2020.

Food services and drinking places, annual, 2019

Operating revenue in the food services and drinking places subsector rose 4.4% in 2019 to $78.5 billion. Rising menu prices contributed to some of the increase, as the Consumer Price Index for food purchased from restaurants gained 2.7%, while prices for alcoholic beverages served in licensed establishments increased by 1.8%.

Growth in e-commerce sales, which rose 34.2% to $3.4 billion in 2019, also contributed to the increase in operating revenue. The share of firms that reported e-commerce sales increased from 22.9% in 2018 to 33.8% in 2019.

Operating expenses for the subsector rose to $75.5 billion in 2019, up 4.9% from 2018. This was the second consecutive year in which industry expenditures outpaced revenue growth. As a result of rising costs, the operating profit margin for the subsector fell from 4.2% in 2018 to 3.8% in 2019. This was the lowest operating profit margin since 2005 and the largest annual decline in the operating profit margin since 2003.

Among operating expenses, businesses' salaries, wages, commissions and benefits had the largest growth in dollar terms (+6.3%). The share of salaries, wages, commissions and benefits in total operating expenses rose from 32.7% in 2018 to 33.2% in 2019. One factor that contributed to cost pressures in 2019 was growth in the minimum wage, as each province increased its minimum wage at some point in 2018 or 2019; eight provinces had a minimum wage increase in 2019. Ontario's minimum wage rose 20.7% in 2018. British Columbia increased its minimum wage again in June 2019 (from $12.65 to $13.85, +9.5%), leading to a 22.0% rise over the two years. Similarly, Quebec further increased its minimum wage in May 2019 (from $12.00 to $12.50, +4.2%), leading to growth of 11.1% over the same period.

The largest operating expense for the food services and drinking places subsector was the cost of goods sold, which accounted for 35.9% of operating expenses in 2019. This was down slightly from 36.0% in 2018, as salaries, wages, commissions and benefits took on a larger share. Nonetheless, the cost of goods sold increased 4.6% year over year.

Among the provinces, for the third consecutive year, Prince Edward Island (+7.0%) had the strongest operating revenue growth in 2019. The province reported new records for visit and tourism revenue in 2019. Ontario (+5.0%), Quebec (+5.1%) and British Columbia (+4.9%) had the largest increases in dollar terms.

The four provinces with the largest shares of national operating revenue in 2019 were Ontario (39.5%), Quebec (19.6%), British Columbia (17.2%) and Alberta (12.7%), the four most populous provinces.

Sales of food and non-alcoholic beverages accounted for 85.1% of total sales in the subsector in 2019, followed by sales of alcoholic beverages, at 11.5%. The remainder (3.4%) included merchandise sales, cover charges, coin machine sales and other sales.

Rising costs take a bite out of the profit margins of food service operators

The food services and drinking places subsector is composed of four types of industries: full-service restaurants, limited-service eating places, special food services (food service contractors, caterers and mobile food services) and drinking places. Full-service restaurants contributed to the majority of the growth in operating revenue, as revenue in this industry increased 4.9% to $35.8 billion in 2019. All the provinces saw a rise in operating revenue, with the exception of Saskatchewan, where operating revenue fell 0.6%, following a 2.5% increase in 2018. Operating expenses in this industry grew by 5.6% to $34.7 billion. This resulted in a 3.0% operating profit margin, down from 3.6% in 2018—the lowest operating profit margin in the last five years.

Limited-service eating places saw growth of 4.3% in operating revenue to $33.4 billion in 2019. This industry's operating revenue increased across all provinces for the seventh year in a row. Operating expenses rose 4.5% to $32.0 billion, leading to an operating profit margin of 4.3%.

In the special food services industry group, the fastest-growing segment of the subsector, operating revenue increased 6.1% from the previous year to $6.6 billion in 2019. All the provinces experienced an increase in operating revenue in 2019. Operating expenses in the special food services industry group rose 6.2% to $6.2 billion, resulting in an operating profit margin of 6.2%, the highest operating profit margin in the subsector.

Drinking places, which include bars and taverns, had the only decrease in operating revenue, down 2.6% to $2.7 billion in 2019. All the provinces saw a decline in operating revenue at drinking places, except for Quebec (+3.0%) and British Columbia (+1.1%). Operating expenses decreased 2.3% to $2.6 billion, resulting in a 4.0% operating profit margin in 2019.

In 2019, full-service restaurants accounted for 45.6% of the subsector's operating revenue, followed by limited-service eating places, with 42.6%. Special food services accounted for 8.4% of operating revenue, and drinking places accounted for the remaining 3.5%.

  Note to readers

Data for 2017 and 2018 have been revised.

The data for reference year 2019 were collected during spring and summer 2020. This collection period includes the events and business disruptions around COVID-19, and, in general, response rates were lower. As a result, there may be larger-than-normal revisions to the data in future releases. For more information on data quality and revisions, please refer to 4704—Annual Survey of Service Industries: Food Services and Drinking Places.

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