Canada’s restaurant industry is facing a turbulent moment as rising costs collide with shrinking consumer demand, according to a new Restaurants Canada report.

The report shows that three in four Canadians are dining out less often—a figure that jumps to 81% among 18- to 34-year-olds, who are increasingly prioritizing price, value, and convenience. With younger generations expected to become the industry’s core customer base, this shift poses long-term challenges for operators.

Spending at restaurants remains below pre-pandemic levels. On average, Canadians are projected to spend $1,035 at full-service restaurants and $1,135 at quick-service restaurants in 2025, compared to $1,165 and $1,150, respectively, in 2019. Alcohol sales have also slowed, with 41% of consumers drinking less over the past year, reflecting both cost pressures and growing wellness trends.

Meanwhile, operational expenses are soaring—with food, labour, utilities, and insurance costs climbing by double digits since 2023. By June 2025, 41% of restaurants were operating at a loss or breaking even, leaving many operators struggling to survive. Labour shortages, especially in rural and remote communities, have further strained the industry, with key roles like cooks and bakers increasingly difficult to fill.

Restaurants are responding by trimming menus, cutting hours on slow days, and shifting services. Breakfast and lunch segments are seeing more demand—quick-service lunch sales climbed 7.6% in early 2025, boosted by return-to-office mandates and consumers’ search for affordable options. At the same time, the snacking trend is rising, particularly among younger consumers, creating new opportunities for restaurants willing to adapt.

Restaurants Canada CEO Kelly Higginson called it a pivotal moment: “It really is time for that soft reboot and taking a look at where we can meet our consumers where they’re at.”