Canada’s restaurant industry on the brink? 4,000 closures predicted in 2026 amid soaring costs and shrinking consumer spending

Canada’s restaurant industry is on the brink of another wave of closures, with analysts projecting that 4,000 eateries could go out of business in 2026. The forecast follows a devastating year in 2025, when 7,000 restaurants shuttered their doors amid soaring food prices, inflation, and rising operational costs, according to a study by Dalhousie University.

Experts warn that Canadians’ shrinking discretionary spending, shifting dining habits, and frustrations over tipping practices are compounding pressures on a sector already struggling to survive.

Sylvain Charlebois, director of the Dalhousie University Agri-Food Analytics Lab, said, “In the last couple of years, it’s been extremely difficult for restaurants in general.” Charlebois noted that consumers are tightening their food budgets.


“If they do dine out, they’ll dine in at home to avoid the tips and an expensive bottle of wine and things like that,” Charlebois added

According to CTV News website, rising costs for rent, insurance, and wages, combined with inflation, have left 41 per cent of restaurants operating at a loss, yet many keep prices low to accommodate budget-conscious customers.

“There is an affordability challenge for Canadians right now. There is less discretionary spending, so less discretionary spending means pulling back on restaurant spending,” said Kelly Higginson, president and CEO of Restaurants Canada according to CTV News website.

Ontarians benefited from a two-month GST/HST tax break on meals, snacks, and some alcohol last winter, and Restaurants Canada is now pushing to make it permanent.

“Let’s remove the GST off of food at a time when we are facing an issue with affordability, especially with the cost of living. Why are we taxing food? That is poor public policy,” Higginson added.

Restaurant sales are also down as Canadians drink less alcohol, with a 10.6 per cent drop in October, and some diners express frustration over tipping, particularly at fast-food outlets.