Chef Renée Lavallée, left, and Doug Townsend, who co-own The Canteen in Dartmouth, N.S., stand in the restaurant's kitchen on March 11.Darren Calabrese/The Globe and Mail
On the lower end of Portland Street in Dartmouth, Doug Townsend and Renéé Lavalée are reviewing the long list of ingredients that the couple purchase weekly for The Canteen, the local neighbourhood restaurant they opened more than eight years ago.
While they aim to support Nova Scotia farmers and fisheries as much as possible, some American-grown staples that are difficult to replace, such as tomatoes and citrus, have been caught in the crosshairs of a trade war that could see food costs spike for restaurant owners across the country.
Like many of their peers, they are now being forced to make difficult decisions: erode their profitability by absorbing extra costs, risk pushing already inflation-worn consumers away with higher prices or take on the cost and time burden of seeking new suppliers. All while running a business that never fully recovered from the pandemic.
“We’re already on a very razor-thin profit margin,” Mr. Townsend said in an interview. “Then, you throw this into the mix.”
Canada’s retaliatory tariffs have placed a new burden on the country’s restaurant industry, which never fully recovered from the pandemic. Facing higher costs for food, supplies and insurance, as well as a feared drawback in consumer spending, restaurateurs like Mr. Townsend are considering how best to defend their businesses.
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In the notoriously competitive sector, which contributes $120-billion to the national economy annually and employs 1.2 million Canadians, according to industry figures, turning a profit is challenging even in good times. Many restaurants fail to stay in business past a few years. The tariffs and ensuing economic fallout is another crack in the fragile industry’s shell.
“These things that we rely on are already expensive,” said Richard Alexander, executive vice-president of government relations and public affairs for Restaurants Canada, a trade association. “These tariffs are going to drive up food costs and put people out of jobs.”
After the imposition of U.S. President Donald Trump’s sweeping 25-per-cent tariffs on Canadian goods, Canada retaliated with its own set of duties, which have been applied to $30-billion worth of U.S. goods including food, equipment and other items used by restaurants. That figure is soon expected to rise to $155-billion worth of U.S. goods.
Mr. Townsend said he will continue to work with his current suppliers to push more of his inventory to locally sourced ingredients.
The list of affected products includes meat and poultry, dairy products, various grains, certain produce and condiments, spices and baking ingredients. Tea and coffee, juices, wine, beer and spirits will also be affected. So will cutlery and other tableware, linens, drinking glasses, plastic and paper takeout containers and bathroom products.
These extra costs will add up quickly, said Tony Siwicki, owner of Silver Heights restaurant and lounge, a family-run business that first opened in Winnipeg almost 70 years ago.
In order to counteract the rise in costs, Mr. Siwicki has had to cut certain menu items, look at his labour costs and delay renovation plans on his parking lot and main dining room – two areas that he had originally booked to re-do in 2020. Furniture, lighting, building materials and appliances such as stoves, refrigerators and barbecues are on the tariff list, too.
“It has just been one thing after another. It just keeps on hitting us. I don’t think anyone in the industry has really reached a good place since COVID,” Mr. Siwicki said in an interview.
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Normally, price fluctuations are something buyers or sellers can absorb, said Anthony Di Ioia, co-owner and chief financial officer at BeaverTails, the fried-pastry franchise. But these tariffs are different.
“It’s the scale. Twenty-five per cent is just obscene. Many businesses in Canada operate on profits that are under 10 per cent,” he said.
Mr. Di Ioia said he plans to sit down with suppliers to determine how the added cost can be spread among the supply chain. Everyone will need to add “a bit of water in their wine,” he said.
Where absorbing costs isn’t possible, restaurants may be forced to find new suppliers. For Booster Juice, citrus is a staple. Dale Wishewan, the smoothie company’s president and chief executive officer, said the company has begun research into alternative sources, such as Brazil for oranges.
“We’re being proactive to do everything we can to not increase prices because we know consumer spending has tightened up over the past couple of years, and we recognize that you just can’t keep passing on prices,” he said.
But the increased cost of goods is not the only issue. Rent and labour costs are also on the rise for the industry, especially in regions such as the Greater Toronto Area, said Ryan Earl, broker and founder of Carve Real Estate, which focuses on selling restaurants.
While restauranteurs’ expenses soar, Canadian banks are cautioning that the tariffs could hamper discretionary spending by consumers, especially if they lead to higher unemployment levels.
“People seem to be very worried right now,” said John Sinopoli, co-owner and executive chef at the Ascari Hospitality Group, which runs two restaurants and a catering company in Toronto.
Both of his restaurants are located in the downtown core, which has seen lower foot traffic since workers were reluctant to come downtown during the pandemic.
“Our biggest worry is people’s disposition, the uncertainty it creates, and then people decide to stay home and save their money – and we’re seeing it,” Mr. Sinopli said.