As U.S. President Donald Trump’s threat of 100 per cent tariffs against Canada looms, a new report has found that the ongoing trade war resulted in restaurant operators spending an average of 37 per cent more on food.
Facing the continuing effects of tariffs, rising food and staff costs, and labour shortages, restaurants are under pressure. But as the 2026 Canadian State of Restaurants Report shows, there are bright spots in their uneven recovery.
Toronto-based restaurant software company TouchBistro surveyed 600 full-service restaurants across Canada for its inaugural report. “We believe the Canadian market is different from the one in the U.S. It has its own dynamics, its own opportunities and challenges, and Canada is diverse itself. Restaurants’ opportunities in Ontario are different from British Columbia,” says chairman and CEO Samir Zabaneh of the launch.
Coming out of the pandemic, restaurants faced higher inflation and labour shortages. Today, “they’re dealing with a different type of inflation that’s coming from the tariffs,” says Zabaneh.
At 79 per cent, most operators reported that tariffs and trade restrictions contributed to inventory challenges in 2025. Roughly one-half (51 per cent) spent 21-50 per cent more on food costs than the previous year.
As the president and CEO of a fine-dining restaurant in Calgary said in the report, “The biggest money problem for my restaurant in the last year has been the rising cost of food, mostly because of tariffs. Some dishes on our menu have been changed or taken off because the key ingredients became too expensive.”
To help offset rising costs, 71 per cent of operators increased menu prices by an average of 13 per cent in 2025. At 78 per cent, this approach was most common at fine-dining restaurants. Bars and grills (75 per cent), family-style establishments (71 per cent), and brasseries, bistros and cafés (60 per cent) followed.
Other menu-related tactics include planning to use more local ingredients (43 per cent), adding more vegetarian options (30 per cent), reducing the number of items (27 per cent) and limiting the number of specials (27 per cent) in the next six months.
Symon of The Grizzly Paw Brewing Company in Canmore, Alta., said in the report, “Rising food costs, especially for proteins like beef, have forced us to rethink menu pricing — adjusting cuts, modifying ingredients and selectively absorbing costs to protect the guest experience.”
Despite rising costs, the report found that profit margins are strong at 10.4 per cent. Over three-quarters (79 per cent) of operators experienced an increase in visits — with traffic growing by 34 per cent on average — which the report credits to return-to-office mandates. Nearly three-quarters (74 per cent) saw an uptick in takeout/delivery sales compared to last year.
One Toronto operator, Trevor of DaiLo, said in the report, “Rising food, inventory and labour costs have put pressure on our bottom line, even as customer visits increased over the past year. We’ll get creative with our suppliers and the products we source to help maintain food prices and take a more intentional approach to premium offerings for special days and events. We will also continue to invest in our team amid an uncertain economy.”
As the report shows, economic recovery varies by geography and type of restaurant.
Overall, 73 per cent of operators carry debt, and nearly half (45 per cent) took out loans or sought financing in 2025, but “geography is a major dividing line.” For example, operators in Vancouver are 80 per cent more likely to apply for financing than those in Calgary, which Zabaneh says reflects higher operating costs and capital needs.
The report found that brasseries, bistros and cafés had an average profit margin of 11.2 per cent and, at 40 per cent, the highest increase in customer visits. At the other end of the spectrum, bars and grills struggled, which the report attributes to tariff-related price hikes on imported wines and spirits.
Food costs were the top financial concern for restaurant operators, but labour costs “skyrocketed” in 2025. Nearly all (94 per cent) of restaurant operators spent more on labour costs compared to the previous year. Instead of cutting staff to curb costs, the report found that they’ve adapted by training staff to handle multiple roles and introducing technology for efficiency.
Some operators have retained pandemic-era tools, such as QR code menus (39 per cent) and QR payments (33 per cent), but one-third are taking technology further, using it for scheduling, tracking overtime and forecasting staffing needs.
Restaurant operators are increasingly applying AI tools to back- and front-of-house operations, predicting food usage, reducing food waste and understanding their guests better so they can provide a more personalized experience.
The report found that 79 per cent of independent operators feel positive about the use of AI in restaurants. Though AI is still in the early stages of adoption, Zabaneh says the importance of technology in the restaurant industry is only becoming more apparent.
“They need to adopt technology,” adds Zabaneh. “In the past, even before the pandemic, I think they weren’t the fastest in terms of adopting modern technology, because things worked. And now they realize without technology, it’s very hard to compete.”
Restaurants have faced challenges over the past five years. Many closed permanently during COVID, and others haven’t recovered their pre-pandemic volume. According to a recent Agri-Food Analytics Lab forecast, 7,000 restaurants closed in 2025, with another 4,000 expected to shutter in 2026.
Even as they continue to contend with tariffs and rising food and labour costs, 82 per cent of operators said they’re optimistic about their restaurant’s future. “It’s a testament to their resiliency and optimism about the future of what they do,” says Zabaneh. “They wouldn’t be in the business if they weren’t always optimistic about where things are heading. That’s the nature of restaurant operators.”
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