TORONTO – The heat in Canada’s restaurant sector is cooling quickly. After a strong kickoff to 2025 thanks to the federal GST/HST holiday, a brewing trade war with the United States has dragged commercial foodservice sales forecasts into negative territory, according to Restaurants Canada’s latest Quarterly Report.
Tax Relief Sparked a Fast Start—But Storm Clouds Are Gathering
Canada’s foodservice industry saw a 7.5% surge in January sales—the strongest real growth since April 2023—following the federal government’s GST/HST holiday. That temporary tax relief delivered immediate impact, with bankruptcies down 50% year-over-year and employment climbing to 1.18 million jobs, the highest level since the pandemic began.
But that early momentum is being eclipsed by rising economic headwinds.
Trade Tensions Trigger Industry Retrenchment
Restaurants Canada is now projecting a contraction of 0.4% to 1.5% in annual sales for 2025, with further declines possible in 2026 depending on the duration of Canada’s tariff standoff with the U.S.
Originally, the industry was on track for modest growth of 0.8% in 2025 and 1% in 2026. Now, commercial foodservice sales are expected to land between $98 and $99 billion—below the $100 billion pre-trade war estimate.
Among surveyed restaurant chains:
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71% plan to cut non-essential spending
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63% expect to raise menu prices
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50% will delay renovations or capital investments
These defensive moves threaten to ripple across the broader economy, slowing job creation, innovation, and consumer demand.
Calls for Bold Federal Action
Restaurants Canada is urging Prime Minister Mark Carney’s government to take decisive action to support the sector, starting with the permanent elimination of GST/HST on restaurant food and alcohol.
“We now have definite proof that the GST/HST holiday boosted sales and created jobs while preventing bankruptcies,” said Kelly Higginson, President and CEO of Restaurants Canada. “Taxing a necessity like food is simply a bad approach to taxation.”
The industry association also calls for:
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Reduction of interprovincial trade barriers
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Lower EI payroll taxes
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Exemptions for food and food-safe packaging from retaliatory tariffs
Consumer & Labour Challenges Add Pressure
In addition to trade turmoil, the industry is contending with:
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Historically low consumer confidence
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Rising unemployment
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Sluggish population growth due to tighter immigration policies
These macroeconomic issues are expected to further suppress foodservice demand heading into 2026.
For many consumers, especially families with young children, the “fast food” sector is almost pricing itself out of the options. A family of five with three children ordering in fast food is getting hit with a bill that hits the budget hard. It is becoming, especially with the summer barbecue season coming, harder for families to justify a trip to a fast food restaurant.
What It Means for Thunder Bay and Beyond
For restaurant operators across Northern Ontario—including Thunder Bay’s bustling local food scene—this forecast signals a need to watch costs carefully and advocate for continued tax relief.
The success of the GST/HST holiday suggests government intervention could be a needed lifeline, but long-term stability will require structural support from Ottawa.