Growth on the menu but insurance costs remain a challenge for restaurants
Growth on the menu but insurance costs remain a challenge for restaurants | Insurance Business Canada
Hospitality
Growth on the menu but insurance costs remain a challenge for restaurants
The issue presents an opportunity for insurers and brokers
Hospitality
By
Terry Gangcuangco
Canada’s restaurant industry is poised for transformation, with moderate growth ahead despite ongoing challenges including insurance affordability.
The 2024 Foodservice Facts research report highlights that the sector is expected to reach nearly $120 billion in sales this year – marking a 4.9% rise over 2023.
Insurance costs are among the top concerns for restaurant owners, as they grapple with rising operational expenses. Insurance solutions tailored to the needs of the food service industry will be critical in helping restaurants manage their financial pressures, presenting a significant opportunity for insurers and brokers.
Consumer spending habits are also shifting, driven by rising household debt and cost-of-living increases. The report warns that, after accounting for inflation and population increases, Canadians are spending less on dining out.
On average, consumer spending in restaurants is projected to decline by 1.8%. This decline, coupled with increased costs for food, insurance, and utilities, underscores the significant hurdles the industry continues to face.
Despite these challenges, dining out remains popular – especially among Millennials and Gen Z, 49% of whom dine out weekly.
By 2041, the visible minority population in Canada is expected to nearly double, with South Asian, Chinese, and Middle Eastern communities leading the demand for dining out. This shift will shape the future of the industry, with restaurants needing to adjust to the preferences and needs of these growing populations.
While overall sales in the food service industry will rise over the next five years, individual spending at restaurants is projected to remain flat. With disposable income increasing only modestly, restaurant operators will need to adopt strategies to maintain profitability without passing too many additional costs onto consumers.
Technology is also set to play a crucial role in addressing operational challenges. As restaurants face ongoing labour shortages, using digital tools to improve productivity and accuracy will be essential. For insurers, the growing reliance on tech could open new avenues for risk management solutions.
Meanwhile, to counter reduced consumer spending, many restaurants are turning to loyalty programs, limited-time offers, and meal kits to attract customers.
“As discretionary spending becomes more constrained, our customers’ expectations have intensified, expecting more value, experience, and innovation,” said Kelly Higginson, president and chief executive of Restaurants Canada.
“New ideas, investment, and strategies are required, and the onus is not only on us as industry leaders and entrepreneurs, but also on governments with policies that protect and support the fourth largest private employer. It is not enough to rely on what has worked in the past.”
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