The Restaurant Franchise Industry in Canada

Where do we go from here?

Part One

May 15, 2020

Let’s face it & call a spade a spade – things were already looking pretty grim for the restaurant-franchise industry in Canada. The wonderful previous Liberal Government’s policy which brought minimum wage to $14.00 per hour, the ever-increasing sky-high rents from almost every landlord who seemingly knew, that He or She was “richer than God”, the runaway food & packaging costs asserted by the big “Distributor Annihilator” and of course, the “big blue machine” (a reference to the corporate rip-off), over-charged royalties affixed to already runaway expenses by the multi-brand franchisors…add in COVID-19 and you have the perfect storm for the restaurant franchise industry!  

Great chefs, masters of culinary etiquette and aspiring restauranteurs had indiscriminately saddled themselves with triple-A rent rates that reached between $12,000 & $25,000 per month (Landlords of the triple-A shopping malls commanding $25,000-$35,000 per month rent rates).  Couple this with the onslaught of all the new multi-cultural ethnically branded restaurants and franchises catering to over 1 million Canadians of diverse ethnic backgrounds in the GTA alone and the only bad recipe is the one without a contingency plan when the dinner starts to burn.  Everyone was so excited to dive into the restaurant and franchise industry over the last ten years.  And why not?  It appeared to be the ticket to instant celebrity thanks to folks like Gordon Ramsey and Mario Batelli.  It was every restaurant employee’s ticket to stardom, including the lonely dishwasher at the back-of-the-house.

And just look where we have arrived at today?  Empty shopping malls for over two months which only means empty food courts.  Suppliers want their past-due bills paid.   The banks want their small business loans paid.    Landlords still want their rent.  Deferrals only mean debt piled on top of debt.  All major city streets and villages once packed with bustling foot traffic are now looking like a ghost town since the circus left.  Some 200,000 restaurants and franchise employees are out of work.  “Closed Due to COVID-19” and “For Lease” signs are popping up everywhere.  Receivership and bankruptcies loom in abundance on the horizon as an owner’s life savings go down the drain.  The restaurant and franchise industry are not just on the brink of utter disaster, but in the midst of their own GREAT DEPRESSION.  Will things ever be the same again for independent restaurants and franchises?  If so, what would be the future outlook for both?

Well, as a matter of fact, things will certainly not be the same for those who believe that salvation does not come to those who follow the beaten path but only to those who break new ground and swim against the current of conformity.  And this is the key for all restaurant owners, franchisors and franchisees alike.  There is a new alignment that has forced a complete UNIVERSAL RE-SET and the time for new thinking – the time to become a pioneer and plot new strategies has not yet been executed by many restaurants or franchises.  In part two of this blog, we will discuss the strategies and pivoting that the restaurant and franchise industry needs in order to survive in a post-COVID-19 era.