research restaurants canada quarterly forecast · reported healthy nominal gains, qsr sales slowed...

Restaurant Quarterly Forecast 1

Q2 2019

Restaurants Canada Quarterly Forecast

RESEARCH

RestaurantsCanadaResearch

Timeless Quality,Tested for Life

WELBILT PROUDLY MANUFACTURES THE FOLLOWING BRANDS IN CANADA:

®

Inspired by Chefs, Engineered by Experts

*Including US Range & Sunfire

Garland Canada, a Welbilt Company, is the leading supplier of foodservice equipment in the Canadian market. Garland Canada is committed to delivering high quality, reliable, innovative

solutions that address operator needs. A high focus is placed on delivering operational and energy efficiencies, labour savings, menu execution and service and support solutions. Garland

Canada and the portfolio of Welbilt brands deliver unmatched value and peace of mind.

MADE IN CANADA

Consistency you can Count on.

VISIT US AT WWW.GARLANDCANADA.CA

@THE_GARLAND_CANADA @GARLAND_CANADA FACEBOOK GARLAND CANADA - A WELBILT COMPANY


Highlights

� Real sales, adjusted for menu inflation of 3.0%, improved to 1.2% growth in Q1 2019, following a 1.0% increase in Q4 2018.

� Canada’s commercial foodservice industry performed as forecast with sales advancing by 4.2% in Q1 2019.

� The Conference Board of Canada upgraded its outlook for disposable income to 4.0% growth in 2019, compared to their previous forecast of 3.0% growth. As a result, annual commercial foodservice sales in Canada are now forecast to expand by 4.6% in 2019, up from the previous forecast of 4.2% growth.

� The outlook for 2020 remains relatively unchanged with commercial foodservice sales forecast to climb by 4.5% to $78.6 billion.

� A tighter labour market will make labour shortages a top challenge for foodservice operators, especially during the busy summer months.

� To attract and retain employees, restaurant owners should focus on making employees feel appreciated and listened to, provide mentorships for younger employees and offer opportunities for advancement.



Few people in Canada will look back fondly on the winter and early spring of 2019. Depending on where you live, you may have experienced bitter cold, lots of snow, and a start to spring either so wet or so dry that farmers were hard-pressed to plant their crops. However, frigid temperatures and volatile weather weren’t enough to entirely dampen Canadians’ appetites in Q1. Real foodservice sales grew by 1.2% in the first quarter of 2019, a slightly stronger growth rate than the 1.0% increase measured in Q4 2018. Overall, commercial foodservice sales advanced by 4.2% in Q1 2019, matching Restaurants Canada’s forecast for the quarter.

The Conference Board of Canada has upgraded its outlook for disposable income in 2019, one of the key factors used in our econometric model of the foodservice industry, from 3.0% growth to 4.0%. Based on this revised and encouraging prediction, Restaurants Canada is forecasting commercial foodservice sales will expand to $75.2 billion in 2019, a 4.6% increase over 2018. That’s a slight increase from the previous forecast, which called for a 4.2% rise in 2019.

Why is this happening? With tightening labour markets and a lower average national unemployment rate than we’ve seen in decades, the result is stronger wage growth. While Canadians’ debt-to-income ratio is still concerning, consumers are feeling the confidence to spend discretionary dollars on foodservice.

Resultantly, the outlook for Canada’s commercial foodservice industry in 2020 remains relatively unchanged at 4.5% growth. Based on this prediction, annual sales will climb to $78.6 billion. Taking menu inflation into account, real commercial foodservice sales are forecast to grow by 1.9% in 2019 and 2.0% in 2020 – significant improvements over the sluggish 0.8% increase in 2018.

There are still reasons to be cautious about 2019, however. Nationally, economic activity disappointed in Q1, expanding by an annualized 0.4% due to struggles in the energy and trade sectors. As a result, Canada’s real GDP is now forecast to grow by 1.4% in 2019 versus a previous forecast of 1.9%. And, it’s worth noting that, despite higher wages, retail sales are expected to take a hit, decelerating to 1.9% growth where the previous estimate was for 3.3% growth.

55%

50%

45%

40%

35%

30%

25%

20%

15%

10%

5%

0%

Q2-2011

Q3-2011

Q4-2011

Q1-2012

Q2-2012

Q3-2012

Q4-2012

Q1-2013

Q2-2013

Q3-2013

Q4-2013

Q1-2014

Q2-2014

Q3-2014

Q4-2014

Q1-2015

Q2-2015

Q3-2015

Q4-2015

Q1-2016

Q2-2016

Q3-2016

Q4-2016

Q1-2017

Q2-2017

Q3-2017

Q4-2017

Q1-2018

Q2-2018

Q3-2018

Q4-2018

Restaurant Quarterly Forecast 3RestaurantsCanadaResearch


Overall sales growth was strong in foodservice but fluctuated heavily by segment

For foodservice owners, good help may be hard to get in 2019

Breaking down the data and analyzing it by segment reveals four different, but equally important stories.

Canadian quick-service restaurants posted weaker-than-expected growth in Q1 2019. Sales rose by 3.8% in Q1 2019 against a forecasted 4.5% increase. Adjusted for menu inflation of 4.2%, real sales slipped overall by 0.4%. While most provinces reported healthy nominal gains, QSR sales slowed in Ontario (+3.8%) and actually shifted into reverse in Alberta (-0.1%).

Full-service restaurants rose by a stronger-than-expected 4.6% in Q1 2019 versus a forecast of 4.0%. After accommodating for menu inflation of 2.5%, real sales at full-service restaurants grew by 2.1%. Outliers include Prince Edward Island and British Columbia. Both provinces continue to surprise,

Though a strong economy is, of course, a positive situation for everyone, it doesn’t come without some repercussions. In May, Canada’s unemployment rate dipped to 5.4%, its lowest level since the mid-1970s. While desirable for the country and the economy, it also means continued labour shortages in the foodservice industry due to a shrinking pool of job-seekers. With a lack of options for new hires, the onus will be on owners to hang on to the employees they already have.

In the Q4 2018 Restaurant Outlook Survey, Restaurant Canada’s insider’s view of the foodservice industry, respondents identified staff recruitment and retention as the second-biggest challenge to their business in 2019. In the wake of minimum wage increases in each province, rising labour costs remained the number one challenge.

setting a vibrant pace with nominal growth rates of 13.0% and 6.3% respectively.

Caterers remain the most volatile segment in foodservice. Revenues fell short of forecast, growing by 4.0% despite an expectation of a 5.4% bump. Some of the weakness is due to a decline in the number of sole proprietorships across the country, a trend that began in early 2018, as well as inclement weather wreaking havoc on revenues.

Historically, drinking place sales in the first quarter have fluctuated dramatically. That trend has continued in 2019. After beginning the year with an 11.3% sales increase in January, year-over-year sales slumped to 1.1% growth by March. Nevertheless, drinking places led all segments with a 5.0% jump in sales in Q1 2019, though that win is tempered by the fact Q1 2018 totals represented a 0.9% drop versus the previous year.

Studies show, to attract and retain workers, it’s vital to make employees feel appreciated and listened to. Younger employees especially look to receive mentorships and want a challenge. It’s also important to provide advancement and learning opportunities for employees and an enriching work environment.

Even better would be finding a way to do some or all of these things plus increase productivity. That’s the gateway to more shifts, bonuses, and, ultimately, bigger paycheques – definitely motivating factors for many workers. Our upcoming Q2 2019 Restaurant Outlook Survey will identify and expand on some of the challenges and opportunities for restaurant operators in today’s labour market.



Quick-service restaurants

*Forecast from Restaurants Canada Quarterly Forecast Q1 2019, published in April 2019Source: Conference Board of Canada

Unemployment Rate

Full-service restaurants

Caterers Drinking Places Total Sales

Real GDP Disposable Income

Retail Sales

Comparison Between Previous & New Sales Forecast

Comparison Between Previous & New Economic Indicators Forecast



Previous* forecast for 2019

New forecast for 2019

4.5% 4.5%

4.2%

4.8%

4.6% 4.6%

0.5%

2.9%

4.6%

1.9%

1.4%

3.0%

4.0%

3.3%

1.9%

4.2%

Quick-service restaurants

Full-service restaurants

Caterers

Drinking Places

Total Sales

CPI-FAFH

Real Sales

Real GDP2

Pers. Disp. Income

Retail Sales

Unemployment Rate3

Inflation3

2018.1

$7,095.75.2%

$7,051.15.6%

$1,222.23.0%

$547.7-0.9%

$15,916.85.0%

1.5044.0%

$10,583.01.0%

1.5%

5.2%

3.1%

5.8%

2.0%

2.5%

4.6%

3.3%

5.9%

2.3%

2.1%

2.8%

4.0%

5.9%

2.6%

0.3%

2.8%

1.2%

5.7%

2.1%

0.4%

3.2%

1.9%

5.8%

1.6%

2.5%

4.0%

1.4%

5.5%

2.1%

1.7%

4.7%

1.4%

5.5%

1.8%

1.8%

4.3%

2.8%

5.5%

2.1%

2019.4

$8,496.04.6%

$8,444.54.8%

$1,604.54.6%

$655.52.4%

$19,200.54.6%

1.5792.6%

$12,157.22.0%

2018.4

$8,122.44.5%

$8,057.75.0%

$1,533.97.4%

$640.16.5%

$18,354.25.1%

1.5394.1%

$11,923.41.0%

2018.2

$8,138.84.8%

$8,057.95.4%

$1,423.96.8%

$632.62.7%

$18,253.25.1%

1.5214.5%

$12,000.80.6%

2019.1

$7,367.63.8%

$7,375.34.6%

$1,271.04.0%

$574.85.0%

$16,588.84.2%

1.5493.0%

$10,709.31.2%

2018.3

$8,632.85.1%

$8,661.95.8%

$1,465.14.5%

$655.51.7%

$19,415.35.2%

1.5314.4%

$12,681.40.8%

2019.2

$8,529.44.8%

$8,452.84.9%

$1,490.94.7%

$646.52.2%

$19,119.64.7%

1.5592.5%

$12,263.82.2%

2019.3

$9,030.04.6%

$9,077.74.8%

$1,536.84.9%

$670.52.3%

$20,315.04.6%

1.5682.4%

$12,958.12.2%

Commercial Foodservice Sales Forecast

Source: Restaurants Canada, Statistics Canada and Conference Board of Canada

NOTE:

1. Shaded areas represent forecast periods. All percentage changes are period-over-period. CPI-FAFH refers to the consumer price index for food away from home, also known as menu inflation.

2. Annualized quarter-over-quarter change.

3. Refers to actual value.

2020.3

$9,427.34.4%

$9,486.24.5%

$1,606.04.5%

$674.60.6%

$21,194.04.3%

1.6072.5%

$13,189.11.8%

2020.1

$7,758.15.3%

$7,788.35.6%

$1,337.15.2%

$588.62.4%

$17,472.15.3%

1.5882.5%

$11,004.52.8%

2020.4

$8,861.44.3%

$8,824.54.5%

$1,668.64.0%

$658.10.4%

$20,012.64.2%

1.6192.5%

$12,362.31.7%

2020.2

$8,896.24.3%

$8,833.14.5%

$1,553.54.2%

$653.61.1%

$19,936.44.3%

1.5982.5%

$12,475.91.7%

2018

$31,989.74.9%

$31,828.75.4%

$5,645.15.5%

$2,475.92.6%

$71,939.45.1%

1.5244.2%

47,209.50.8%

2019

$33,423.04.5%

$33,350.24.8%

$5,903.24.6%

$2,547.42.9%

$75,223.84.6%

1.5642.6%

48,103.81.9%

2020

$34,942.94.5%

$34,932.14.7%

$6,165.24.4%

$2,574.91.1%

$78,615.24.5%

1.6032.5%

49,046.32.0%

1.6%

4.1%

3.6%

5.5%

2.2%

1.7%

3.3%

3.7%

5.5%

2.0%

1.7%

3.5%

3.6%

5.5%

2.1%

2.1%

3.5%

3.6%

5.5%

2.0%

1.9%

3.8%

2.9%

5.8%

2.2%

1.4%

4.0%

1.9%

5.6%

1.9%

1.8%

3.6%

3.6%

5.5%

2.1%

Restaurant Quarterly Forecast 6RestaurantsCanadaResearch


About the Restaurants Canada Quarterly Forecast

Restaurants Canada uses an econometric model to forecast commercial foodservice sales by using the Conference Board of Canada’s forecasts of consumer spending, disposable income, real GDP, employment and tourism by segment.

About Restaurants Canada

Restaurants Canada (previously CRFA) is a growing community of 30,000 foodservice businesses, including restaurants, bars, caterers, institutions and suppliers. We connect our members from coast to coast, through services, research and advocacy for a strong and vibrant restaurant community. Canada’s restaurant industry is an $89 billion industry, directly employs 1.2 million Canadians, is the number one source of first jobs, and serves 22 million customers every day.

* This Offer expires on December 31, 2019 and is only available for members of Restaurants Canada. Offer is only valid for new Canadian merchants who enter into a Merchant Agreement to purchase all of their point-of sale, credit and debit card processing services from Chase Merchant Services. The Offer is not available to: (i) existing Chase Merchant Services and/or (ii) merchants who enter into a Merchant Agreement to purchase only Chase Mobile Checkout Plus; and/or (iii) Merchants who have not processed any transactions with Chase Merchant Services within 60 days of the account opening. Chase Merchant Services reserves the right to determine which merchants are eligible to receive the offer and is under no obligation to deem a merchant eligible. The $300 will only be applied to one merchant account and only once over the course of the merchant’s relationship with Chase Merchant Services. The $300 rebate will be applied to the merchant account within 12-16 weeks after processing begins. This offer is subject to withdrawal or change at any time without notice. Offer cannot be combined with other Chase offers. Merchants who wish to obtain payment processing services from Chase Merchant Services must submit an application. All applications are subject to credit approval and entering into a Merchant Agreement with Chase Merchant Services. Chase and the Octagon logo are registered trademarks of JPMorgan Chase Bank, N.A. © 2019 JPMorgan Chase & Co.

To mark 10 years of successful collaboration, we’re offering a $300 statement credit to Restaurants Canada members that open and activate a new Chase Merchant Services account by December 31, 2019

Maximize the value of your Restaurants Canada membershipchase.ca/restaurantscanada

Get $300*

by opening and activating a new Chase Merchant Services account.

Restaurant Outlook Survey30

For further informationRestaurants Canada

1155 Queen Street West, Toronto, Ontario M6J 1J4

Tel: 1-800-387-5649

Fax: (416) 923-1450

E-mail: [email protected]

Website: restaurantscanada.org

Copyright 2019. All rights reserved including the right of reproduction in whole or in part in any form.

Thank you to our corporate sponsors

Platinum

Gold

Silver

research restaurants canada quarterly forecast · reported healthy nominal gains, qsr sales slowed...

Documents