Walk down any main street in Ontario and you will find businesses that have boarded up their windows. These closed businesses are often located right next to businesses that continue to operate during the pandemic. In several cases, businesses have been able to remain open because they have responded to the pandemic situation with creativity and flexibility. Creative responses could be anything from a change in product offerings to altering their entire business model. For example, pizzerias such as Chef Bondi Pizzeria in St. Thomas, Ontario have created make-your-own-pizza kits with dough, cheese, tomato sauce and other toppings as a fun product for customers to make on their own time at home. Additionally, a restaurant owner in Vancouver decided to add a European-style market section to his tapas restaurant. He has continued to sell grocery items such as olives, cheese, almonds, rice, tinned fish and liquor even after the restaurant was allowed to reopen, as it has become an additional revenue stream to his main business. Throughout the pandemic, business owners have been coming up with creative ideas that they are putting into action with great success.
“At the beginning of the pandemic, we created a grocery-style delivery service where we delivered fresh fruits and vegetables, dairy products, meats like chicken and pork and premade food every Saturday. We are basically running four different business models and seeing which one is the best to go with.” – Restaurant Owner, July 21st 2020
The role of technology in the restaurant industry has become ever more apparent in recent months. Restaurant owners have placed increased attention on adopting new technologies to meet customer needs, cut costs, and increase efficiency (6). However, as the pandemic continues to impact this industry, restaurant owners are turning to more innovative technologies that can help to keep their businesses open.
“There have been some positives to come out of the pandemic. It pushed us to move into the digital space, which we weren’t doing before.” – Restaurant Owner, November 25th
One of the ways that restaurants in Ontario are embracing new technologies is through ‘virtual/ghost kitchens’. These refer to food preparation spaces that only serve take-out and delivery products. These kitchens are changing the game in the restaurant industry because they allow restaurants to eliminate rental costs associated with operating a highly visible storefront and dining room (6). The virtual/ghost kitchen concept relies on online ordering and third-party delivery services (4). With the increased interest in food delivery and the concerns that consumers have with dining in restaurants, ghost kitchens are rising in popularity all over Ontario.
“There was a restaurant space we had in mind on the west side of Toronto, the location wasn’t great, it wasn’t on a Main Street. We just completed a ghost kitchen deal there like two weeks ago. That particular group partners with a bunch of different restaurants across the city to produce food that goes out for delivery. This is a trend that absolutely makes sense and we’re going to see a lot more of it.” – Restaurant Industry Professional, September 1st
“At the beginning of the pandemic, it was just takeout and delivery. Even now most of our sales come from takeout and delivery.” – Restaurant Owner, November 23rd
Another technological change that is being quickly adopted by restaurants in Ontario is digital payment. A 2020 survey by Travis Credit Union found that 50% of those surveyed have less cash on them than prior to the pandemic (3). Also, three in five people, don’t believe that they will go back to using cash regularly when the pandemic is over (3). It is believed that paper currency may increase the chances for the virus to be spread from one person to another. Therefore, many restaurants have introduced ‘no cash’ policies to lessen the risk of infection for customers and employees (2). Due the COVID-19 pandemic, digital payment options such as smartphone-based payments and Tap n’ Go are being adopted by restaurants in Ontario at a rate much higher than in the past.
Virtual menus have also been on the rise as physical menus can pass through many hands at a restaurant, increasing the chances for the virus to be spread. Although many restaurants have strict policies in place to clean menus, in most cases this is not enough to make customers feel comfortable (2). This is why many restaurants have made the switch to using digital menus that can be viewed on any mobile device when a QR code is scanned with their phone’s camera (1). This option not only meets customer needs but also cuts the costs of having to print physical menus.
Screens within the kitchen and dining area is also a trend that is rising in popularity. Kitchen screens can speed up the time it takes to prepare orders and limit the passing of paper from one hand to the next. Table/reservation management systems also increase efficiency by freeing up employee time, reducing customer wait times and limiting employee and customer contact (5). Self-ordering kiosks, such as the ones used at many fast-food outlets over the last few years, are also being quickly adopted by more traditional restaurants.
Restaurant operators need to make sure that they are meeting consumer preferences now more than ever. The attention that is currently being placed on health and safety could push the industry into a new era (5). Within the current climate, restaurant operators need to not only make speed and convenience a focal point, but also health and safety. Technology solutions that allow operators to meet the needs of their customers by serving them remotely and offering touchless ordering options are key to the survival of the industry during the pandemic.
“It doesn’t matter what type of business you have you just have to pivot. You know, this ain’t basketball we are playing. We’re playing with grenades and live ammo – it is warfare. It’s unfortunate but that’s the reality.” – Café Owner, November 23rd
The COVID-19 pandemic has created a constantly shifting landscape of rules and regulations for the food retail and hospitality industry in Ontario. Given the need to rapidly respond to the virus, the Province of Ontario has adopted a flexible model to enable the resumption of most economic activity.
Early in the pandemic, the province established a three-stage system of restrictions that were implemented in consultation with local public health units. Stage 1 rules were the strictest with restaurants, bars, and other hospitality only being able to operate in a takeout and delivery model. Grocery stores and other food and beverage retail were limited in their capacity. Stage 2 rules relaxed restrictions on retail capacity, and allowed many restaurants and cafes to reopen with patio-only service. Stage 3 finally allowed many establishments reopen for indoor service.
Owner: “I’ve got an emergency plan and a pandemic plan. Got everything in place. Different plans, actually, for one I open as well, and it’s quite detailed.”
Interviewer: “And is that the one provided by the province?”
Owner: “No… there was a [provincial] guideline that was pretty flimsy… I work in emergency management, that’s my background… they’re taking all our business away” – Restaurant Owner, June 18th
Amendments to the Reopening Ontario Act in October 2020 introduced a new colour-coded response framework to provide a visual cue of the active rules and restrictions (Figure 1). There are five levels to the response system, assigned at a regional level by the local public health unit: • Prevent (Green): Minimal restrictions • Protect (Yellow): Limits on operating hours, limits on serving alcohol, 6 maximum to a table, and contact tracing for all visitors • Restrict (Orange): Further limits on operating hours and serving alcohol, 4 maximum to a table, and contact tracing for all visitors • Control (Red): Outdoor dining permitted, maximum of 10 seated indoors, no live performances or dancing • Lockdown (Grey): Takeout and delivery service only
Currently, Toronto and Peel remain in lockdown (grey), with much of the Greater Toronto Area in control (red), and the rest of the province in either restrict (orange) or protect (yellow) levels of restrictions. The only prevent (green) zones are: Algoma, Cochrane, Lanark, Leeds and Grenville, Nipissing, Parry Sound, Renfrew, and Timiskaming.
These varying operating conditions have forced many restaurants and other food-based hospitality entities to pivot to alternative business models such as offering new products, digitizing their business, adding a retail component to their operations, or operating only on takeout and delivery regardless of the pandemic condition. Some even are establishing their own “circuit breakers” to preemptively shutdown or scale back their operations based on the restrictions. For example, a popular Kitchener pub in November chose to close their doors preemptively when Waterloo Region was designated a red zone (source).
“At full seating capacity, we had an occupancy of 28 café tables spread throughout… when this all hit we closed our storefront. We were only through pre-order, so can either order it for pickups or let us know you were here so we would run it out to a table we had waiting that was right on the sidewalk… We are seeing the same spend pre-COVID versus post-COVID, it is just an increase in foot traffic because we worked as hard as we did to become accessible, even in a time where nobody wanted to be out and about.” – Pastry Shop, August 5th
The new pandemic restrictions may provide clarity for businesses on their operating conditions. However, without projections of the timeline to return to orange, yellow, or green conditions, many operators report frustration in planning for their business. In addition, the overhead costs associated with contact tracing leave many in the hospitality industry frustrated given the same standards are not applied to food retailers (Figure 2). Moreover, cyclical lockdowns and red zone designations often renders many investments in personal protective equipment and infrastructure to enable indoor dining as ineffective in supporting business success. Given the pandemic situation will likely still be of serious concern in 2021, improvement of Ontario’s reopening framework should be a priority for supporting the Ontario food retail and hospitality industry.
One of the hardest hit industries by the COVID-19 pandemic has been the retail food and hospitality industry. Many business owners within this industry have been forced to adapt their operating models to stay open. These adaptations include asking staff to learn new skills and cross-train between different front of house and back of house roles, adopting new technologies, increasing online presence, introducing contactless payment options, adding new revenue streams (i.e. selling pre-packaged products), offering takeout and delivery, instituting new safety measures, and altering menu offerings. It is important to keep in mind that once emergency measures are lifted across Ontario, it will not be back to business as usual. Thus, in most cases, the businesses that are going to survive this pandemic are the ones that are willing to continually adapt to shifting consumer preferences and changing government restrictions.
“I’ll give you an example, scones were my biggest seller, everyone would come in for a coffee and a scone between 8:00 – 9:00 a.m. I completely took scones off my menu list about a month ago because I kept making them and just throwing them out as no one was buying them. It’s just because the demographic has changed.” – Café Owner, November 12th
Winter is coming, and in some cities of the Great White North, it is already here! For many Canadians, the cold weather signals a time to put away the outdoor furniture, get the snow shovels out of storage, and stay indoors as much as possible. This year, the continuing waves of COVID-19 will make staying-in even more favourable. For restaurateurs however, this is just more bad news in a year that seems to keep bringing mounting challenges. When initial lockdown measures were loosened in May and June of 2020, patio and outdoor dining became the lifeline for many establishments that were teetering on financial failure.
A pub in London, Ontario described how regulatory changes allowed their patio to be expanded into their parking lot and utilize space that usually sat empty. The increased patio size allowed for employees to be hired back and service to continue at sustainable levels. “It was huge for us, customers finally felt safe to come eat and have a drink outside.”
Indeed, many cities raced to cut the red tape it took to open or expand a patio, knowing that they were a safe and easy measure to keep the industry alive (1). In late spring and early autumn many patrons were willing to dress for the weather so they could enjoy their favourite pint and meal outside; however, asking people to dine outside when it is twenty below may bring mostly cold stares, even from the most seasoned wintery Canadians. Many cities have extended patio seasons to cover the winter months (2), and many businesses have responded by buying up patio heaters and propane fireplaces in the attempt to get a few more weeks out of their patios. These, however, are short-term solutions.
One individual in the restaurant industry stated that she is grateful that the City of Waterloo has allowed them to extend their outdoor patio until the end of the year. Along with the purchase of heaters, she is hoping this will attract people to the restaurant in the cooler months.
To survive as an industry, it will take more than heaters, tarps, and blankets. Both businesses and communities need to be creative. Luckily, Canadians are not novices when it comes to adapting to winter. Organizing activities around the colder months is a fact of life for many Canadians. Ironically, many people flock to ‘winter cities’ such as Ottawa, Edmonton, Montreal, and Quebec City to take part in outdoor winter festivals and markets. Runny noses and red cheeks are small prices to pay for a warm Beaver Tail after a cold skate on the Rideau Canal, or the sticky sweet goodness of tire d’érable during winter carnival in Québec City. These Canadian traditions raise the question, why can’t we capitalize on Winter instead of trying to fight it?
Out in the frozen west, cities like Edmonton, Winnipeg and Calgary have led the charge in creative ways to winterize outdoor dining. Edmonton specifically, has been working on ‘embracing the chill’ since 2017. Many establishments have installed heaters, outdoor grills, wood fires, and changed menus to better suit the weather (3). The city has provided detailed guides on how to design four season patios, focusing on solar access, awnings, providing blankets, heating sources, and using insulated furniture (4). Additionally, some businesses around the country are installing bubble structures or ‘dining igloos’ that segregate private dining groups and protect patrons from the elements, but some have raised the concern that the difference between these and indoor dining is negligible in terms of limiting the spread of COVID and in some cases, have even been shut down by health officials (5).
A restaurant in Collingwood, Ontario described when they were allowed to open their patio in early summer of 2020, they had initial success, “we were beating our monthly sales from the year before with just our patio when we opened.” However, they were worried about continuing this into the colder months. “We have patio heaters, we have had them for a long time, and they were definitely helpful in November, but the concern is when temperatures really drop.”
However, if cases are locally stabilized and health protocols are followed, COVID-safe winter festivals or open markets may be a perfect way for communities to gather safely over the winter months. By utilizing empty parking lots, city parks, or fair grounds, cities can organize safe outdoor food and drink festivals, skate-up markets, and travelling food truck meetups that get people outside and allow businesses to continue to operate. Cities that are fortunate to already have winter recreation facilities like outdoor rinks, ski hills, and winter trails can further capitalize by integrating food and drink options where it is safe to do so.
The potential success for all these ideas hinges on our ability to keep cases down, and follow the rules of local health authorities. The recent move back into a lockdown scenario for some large cities, makes the idea of investing in costly components to winterize patios unfeasible for many locations (6). One restaurant in Toronto purchased 10 mini greenhouses for $1000/each back in October, but now with in-person dining banned again, this $10,000 investment does not seem to be paying off (7). However, if cases stabilize and outdoor dining is deemed safe to continue, some businesses will be able to slow down the financial hemorrhaging during a time they usually counted on in the past with holiday parties and family outings. Further, the investment into winterized patios is not a COVID-only investment. Even when things return to ‘normal,’ whatever that turns out to be, local governments and community organizations should continue to push for winterizing their cities. Improving outdoor spaces and integrating them with the food retail sector will reap rewards in all four seasons of the year.
Bicknell, B. (2020, June 12). Restaurant patios back in business in London. CTV News. Retrieved from https://london.ctvnews.ca
City of Toronto News Release (2020, October 27). City Council approves extended winter patio program for curbside cafes and expanded private patios. City of Toronto. Retrieved from https://www.toronto.ca/news
With constantly changing COVID-19 rules, it is increasingly important for the retail food and hospitality industry, particularly restaurants, to get online. Digitalizing your business can help to increase awareness of your services, streamline the ordering process, build your brand, increase sales and more. Some ways to increase your online presence include creating a website, getting on social media, offering digital gift cards, and joining a local, app-based delivery service or pooling resources to create your own delivery service. The food retail and hospitality industry is constantly changing and the investment into digitalizing your business is one that can reap benefits even after the pandemic.
The owner of a café in downtown London stated that back in March they made the decision to create an online delivery service and that they were grateful for this because they were able to tap into this service when they reopened their business.
Restaurants have been one of the hardest hit sectors of Ontario’s economy by the COVID-19 pandemic. Uncertainty around public health directives, restrictions on indoor dining, and changing consumer perceptions and spending behaviours have caused many restaurant owners to pivot their entire business models to stay open. One of the most common pivots is to focus attention and resources on offering delivery.
An employee in the restaurant industry in London stated that he knows of many restaurants that were not as reliant on food delivery in the past but started taking advantage of it once the pandemic hit.
Common third-party food delivery services in Canada include Uber Eats, DoorDash and Skip the Dishes. These delivery services take around a 30% commission on each order, decreasing already tight profit margins for many restaurants (4). The province has requested third-party delivery services to eliminate commission rates for cities in Ontario that have been forced into a red or gray designation, but so far there has been no formal response (3).
The owner of an artisanal bakery in London noted that switching from making deliveries himself to using a third-party delivery service was a hard decision. He stated that he wanted to reach a wider audience, especially young people, but Uber Eats takes a big chunk of his sales – 20-30%.
Many of the third-party delivery platforms have offered restaurants some form of ‘financial break’ during the pandemic (2). Uber Eats has announced that they have lowered their delivery-only fee to 7.5% until the end of the year for restaurants that are able to process the order themselves and only need the delivery service (4). Additionally, DoorDash waived delivery fees in Toronto, Mississauga and Ottawa from October 10th until November 6th and Skip the Dishes announced that they will be offering a 25% rebate program to help local businesses (4). However, these offers of ‘financial breaks’ to restaurants are of marginal help in the overall landscape of pandemic-based delivery services.
Thus, it is no surprise that the industry is slowly shifting away from being ‘third-party dependent’ to being more self-sufficient (6). There is a clear shift in consumer attitudes towards third-party delivery services as many people would prefer to order directly from restaurants so that the restaurant receives 100% of the profits (6). Additionally, several new local delivery alternatives have been popping up all over Canada. Ambassador, known as the ‘Shopify for restaurants’, was an app recently developed to empower restaurants to accept online orders for pick-up and delivery with zero commissions or fees (1). Instead of taking a commission on every order, Ambassador charges a flat rate fee of $99.00 per month (4). The service has been successful so far with more than 150 restaurants signing up in Toronto, Montreal, Calgary and Winnipeg (4).
Radish is another example of a local delivery app that was created in Montreal with the intention of eventually replacing the third-party model controlled by the existing food delivery giants (6). The cooperative model of Radish seeks to develop more equitable relationships between local restaurants, drivers, and consumers. Additionally, the Ontario Restaurant Hotel and Motel Association and a partner are in the process of creating a delivery service that takes only 9.5% commission fees and pays drivers as employees rather than independently contracting out drivers, who make marginal wages without benefits (7). This service was another one that was created out of the frustration with the third-party delivery model.
A London-based restaurant manager explained that they created their own app for pick-up and delivery. She noted that although it is experimental, it has been working well with employees delivering the orders instead of contracting it out.
Restaurant owners in Ontario have enough on their plate right now without the added pressure of food delivery services eating away at their profits. Although unhappy with the third-party delivery model, many owners feel as if they have no other options. However, the introduction of small-scale local delivery services could be the challengers needed to upend the perceived dominance of the third-party delivery giants, in serving customers during the pandemic.
The call to ‘buy local’ has become more prevalent in recent years due to the important role small and medium-size businesses play in strengthening the local economy, reducing emissions from transportation, and building community bonds (1). However, since the start of the COVID-19 pandemic this call has become louder than ever before.
The Conference Board of Canada’s Centre for Food in Canada defines local food as food that is consumed as close as possible to where it is produced, taking into account regional differences in seasonality and availability (8). Buying this type of food has advantages for the economy, the environment and society. Economic benefits include keeping money within the community, supporting local farmers and creating jobs. Buying local is also good for the environment as it reduces the number of miles that the food has to travel to before it is bought (2). Additionally, it promotes accountability, as the consumer is more aware of where their food is coming from and how it is being produced, which can encourage farmers to use more sustainable agricultural practices (2). The way local food can bring communities together and foster a sense of belonging and togetherness also has social and cultural benefits (2).
Although consumers have been made more aware of the benefits of buying local food in recent years, the number of ‘buy local’ campaigns, government initiatives, chamber of commerce programs and signs placed throughout communities has drastically increased with the onset of COVID-19 (3). The pandemic has definitely had an adverse effect on small and medium-size business owners and their employees in Ontario (7).
An owner of a coffee, tea and candy supply chain explained that the first 4-5 weeks of the pandemic were very stressful because their customer volume drastically decreased and therefore had to decrease employee hours by about 50%.
Any support that consumers can provide small businesses during these challenging times could allow them to stay open and keep their staff employed. Many of the ‘buy local’ campaigns aim to motivate people to support local small businesses by placing online orders, purchasing gift cards to use at a later date, ordering delivery or takeout from restaurants and leaving positive reviews on business’ social media pages (4).
The owner of an artisanal bakery in London stated that the pandemic led them to introduce a local delivery business that caters to people in the surrounding neighbourhood.
It would seem that the effort to get Canadians to spend their money locally has had a degree of success. A key finding from a survey created by Leger in April was that Canadians are buying local products more often or for the first time (5). Additionally, a poll from American Express Canada indicated that in June, 83% of participants agreed that it was time to support the small business community and 76% stated that they were determined to shop more locally than in the past (3).
The owner of a small grocery store explained how lucky they felt that they had such a loyal and understanding customer base that has supported their business throughout the pandemic. Their newly created delivery service has been in such a demand that they hired two new staff members.
However, it is also a reality that the pandemic has caused many people to lose their jobs. This has made it more difficult for people to focus on shopping for their food locally, rather than trying to find the best deals (6). Previous senior economist with the Canadian Centre for Policy Alternatives, Armine Yalnizyan, states, “Everybody is trying to find a deal because they don’t know how long their money is going to last” (3). Therefore, although many people might have good intentions when it comes to shopping locally, they might not be able to put these intentions into action.
A restaurant owner in Elgin County, expressed that from their view, a way to make sure that small restaurants are not forced out by large food giants, partnerships between tech companies, restaurants, and delivery services should be formed locally.
Overall, small, locally owned businesses in the food retail sector are the heart and soul of communities. If popular local businesses are to survive this pandemic, Canadian consumers should refocus their efforts to ‘buy local’ from small and medium-size businesses.
It’s no secret that the COVID-19 pandemic has impacted nearly every aspect of life. On the list of these impacts is the change that it has had on consumer purchases. Early on in the pandemic, consumers tended to buy more high-sugar, high-carb, high-fat ingredients and ‘comfort foods’ like pastries and cakes . However, as the pandemic drags on, many consumers are pivoting back to healthier options.
In one of our research interviews, an owner of Freshii, a ‘healthy fast food’ chain, states, “At the start of the pandemic, salad sales went down considerably and people opted for more carb-heavy menu items such as bowls.”
A report from the International Food Information Council indicated the COVID-19 pandemic has resulted in more than 20% of consumers making healthier choices when it comes to the food that they consume . Moreover, the federal government has recommended Canadians make healthy choices during the pandemic and purchase foods such as apples, carrots, oranges, cabbage, rice, oats, quinoa, lean meats, fish, nuts, pulses and seeds. .
Consumers have been more inclined to increase the amount of immune boosting foods in their diets due to fears about the pandemic situation. The World Health Organization has stated that even though eating certain types of food cannot cure or prevent COVID-19, people should still maintain a healthy diet throughout the pandemic to support overall good health and wellbeing (8).
Studies have shown that processed foods containing a large amount of simple carbohydrates, increase blood sugar in the body, which can increase anxiety and other mental health illnesses . Therefore, it makes sense that during these times of uncertainty and isolation, people have been turning their backs on unhealthy food.
The owner of a brewing company in London mentioned: “We certainly saw a trend in customers wanting comfort food and it stayed that way until the weather got warmer.” They noted that there was a clear yo-yoing effect happening with people’s diets as they transitioned away from consuming ‘soul foods’ that contained a lot of starch.
The National Restaurant Association has noted in their culinary forecast for 2020 that those in the retail food industry should consider offering healthier food options, such as healthy bowls and plant-based proteins, to meet customer needs (5). It is vital to think about those moves that can be made now that will better serve customers for the longer term .
A café owner in downtown London, described that the pandemic has shed light on the fact that the restaurant industry should pause and make use of the opportunity to think about changing its structure.
Shelley Balanko, a senior vice president at the Hartman Group, a consumer research company, recently stated in an interview in The New York Times that consumers are very health-conscious . Balanko believes this trend will stick beyond the pandemic as people recognize the economic and social benefits of maintaining good health and wellbeing .
The same café owner mentioned that at the beginning of summer, their team decided to make a ‘COVID-19 pivot’ with the business. She stated that they started a delivery service where they sourced dairy products, chicken and pork from a local farmer and delivered it to customers along with healthy prepared food.
During these times, grocery stores, restaurants, bars, cafes, farmer’s markets and other food retailers could incorporate these ‘healthy eating’ trends into their business strategies. For example, some restaurants have adopted local healthy ingredients into their menus supporting not only good health and wellbeing but also delivering benefits to hard-hit local economies. By leveraging these trends, the food retail industry will likely ride a wave of consumer interest in local healthy foods and beverages.
The COVID-19 pandemic has brought unprecedented change in the retail food industry in Canada. The Food Retail Environment Study for Health & Economic Resiliency (FRESHER) study aims to understand the impacts of COVID-19 on restaurants, bars, cafes, grocery stores, farmer’s markets, variety stores, alcohol retailers, and other specialty food stores in Ontario. In our Deep Dish series, the research team behind FRESHER aims to share short summaries from our research in combination with analysis of news and reports from across the industry. COVID-19 has revealed immense opportunities and challenges for food retailers, while also uncovering and amplifying structural inequalities in our food systems.
The restaurant industry typically brings in $33 billion CAD revenue annually, but profit margins have been historically slim at around 3-4% . The food service industry is also especially fragmented, so food retailers feel the impacts of COVID-19 very differently. While the industry had seen consistent growth due to rising incomes, 2020 certainly dampened industry growth. Full-service restaurants and drinking establishments such as bars and lounges were the worst hit in the early months, suffering a drop of nearly 50% in revenue from March 2020 compared to March 2019. Restaurants Canada, a non-for-profit association representing the Canadian food-service industry, estimates that 1 in 10 independent restaurants permanently closed as of June 2020, and 4 in 5 restaurants laid off majority of their employees.
Among our research interviews, a Toronto restaurateur noted that when the pandemic began, they “voluntarily shut down all of [their] businesses, let go of 97 employees, and went completely dark for a period of around 2.5 weeks.” A quick-service restaurant chain described that in the initial weeks of the pandemic, their sales drastically declined by nearly 95% and they absorbed large inventory losses.
Restaurants and food-service establishments, especially independent operators, are important contributors to the vibrancy in communities in Ontario, but COVID-19 may alter the way we dine and eat out for the foreseeable future.
Collectively, the food service industry employs about 1.2M people, representing the 4th largest source of private sector jobs in Canada. While the industry is starting to see some growth again, Restaurants Canada reports that at least 400,000 people are estimated to be still out of work as of July 2020 . Employment is still well below pre-COVID-19 levels, at only 67% of the February level of employment, according to the July Labour Force Report .
Some restaurant operators also described challenges in re-hiring staff who were collecting government pandemic relief benefits through employment insurance (EI) or the Canada Emergency Response Benefit (CERB).
Businesses have noted that while CERB provided much-needed emergency relief, it has created difficulties in the economic recovery process . As Ontario businesses transition and reopen, some may be revisiting their business models and pay scales.
Nielsen has identified two types of general customers emerging from the pandemic – “insulated” consumers and “constrained” consumers . Insulated consumers are those who have seen minimal to no employment impact and may be experiencing a rise in discretionary income as their expenses decrease. These consumers tend to upgrade products in their groceries or seek new product offerings such as meal kits. Constrained consumers are those who have been experiencing more severe employment impact such as furlough or unemployment, or other COVID-19 challenges. High-end restaurants and grocers may be competing for the wallet share of insulated consumers who look for alternatives to replace the out-of-home experience, while wholesale or value grocery chains may see greater demand or anxieties from constrained consumers. Ultimately, both consumers are fearful of the economic impact of COVID-19, perhaps even more so than their health .
Consumers also adopted new behaviours and routines when it came to eating and dining patterns. The “forced trial” of using online ordering services and apps led to a growth from 1% to 12% in the share of Canadian households who adopted online grocery services during the early months . Statistics Canada noted an “exceptional surge” in grocery store sales, especially in shelf-stable products, personal hygiene, and baking products . Trends such as baking sourdough bread and banana bread may be responsible for a 200% year-over-year increase in grocery store sales for baking goods such as flour and butter. Grocery stores also saw a shift in consumer loyalties, with 16% of consumers surveyed reporting a shift in their primary grocery store . Big box stores, such as Costco and Walmart, surged in popularity as consumers valued the convenience of a one-stop shop to minimize risk of running multiple errands. Many consumers were reaching for comfort foods, spurring rising demand for processed and frozen foods .
One quick-service operator that we interviewed noted that while salads were popular orders pre-pandemic, they saw a large shift in consumption pattern to higher-caloric bowls that included more grains and proteins.
With regards to dining out, an Angus Reid survey conducted in June 2020 found that 55% of Ontario residents surveyed intend to avoid restaurants due to public health concerns, but many are still supporting local restaurants through delivery and takeout, with 29% of Canadians surveyed ordering from restaurants at least once a week . As the province moves out of Stage 2 and into Stage 3, many food retailers have been adapting by implementing more protective barriers and PPE practices among staff, in line with consumer expectations that prioritize their health and safety.
Adapting to the New Normal
Restaurants and food-service establishments have been quick to adapt to the challenges and opportunities posed by COVID-19. Based on our interviews and industry discussions, here are just a few strategies that food-service establishments have implemented in their survival and recovery:
Menu engineering: Food-service operators have streamlined their menus for greater cost and operational efficiencies. Examples of this include items that can be made with more cost-conscious ingredients, stocking inventory that has a longer shelf-life, or items that can be executed with minimal staff. With the large shifts to delivery and takeout orders, restaurants have had to test and experiment with their food to ensure that they maintain their quality over the delivery period, which can range up to 30-40 minutes.
New product offerings: In line with finding menu efficiencies, some food retailers have modified their product and service offerings by offering innovative products such as meal kits, picnic baskets, or prepared meals bundled with entertainment options.
A Toronto restaurateur described how one of his restaurants has started offering “virtual dinners”, where the restaurant delivers dinner in partnership with a local theater which provides a live online performance. A quick-service chain operator described how they moved into offering new items such as family meal specials and groceries, where they saw large success and growth.
These new offerings may become revenue sources in the long-term, demonstrating one of the ways that the pandemic has allowed creative businesses to find new opportunities.
Modifying physical space: With Ontario moving into Stage 3, food-service establishments can start to operate indoors, albeit at a reduced capacity. Operators have modified their physical space to ensure that they are maintaining physical distancing measures and protective barriers between customers and staff. Additionally, some operators have created single-direction paths with directional wayfinding signs to streamline movement and minimize risk.
Leverage social media: It is no secret that COVID-19 has increased daily media consumption. The average Canadian spends nearly 10.5 hours per day with media, with majority (5.3 hours) on digital media, and this is expected to rise further with COVID-19 . With the rising popularity of video, food-service establishments have engaged with customers through platforms such as TikTok and Instagram to show behind-the-scenes clips of preparing popular dishes. As trust and compassion have become key drivers in making it through the pandemic, many food retail businesses have responded accordingly by demonstrating their brand values through videos that provide a look at how the industry operates behind the scenes.
Delivery and online ordering: Restaurants Canada estimates that over 50% of restaurants are providing contactless payment and pickup . While some establishments were already well equipped for delivery, such as pizza joints and fast food restaurants, other operators encountered difficulties in their transition to offering contactless pickup and delivery.
For businesses who opted to create in-house delivery capabilities, one restaurant operator in Kitchener noted that there was certainly “a learning curve with regards to setting up our online website”. Other operators had to rely on third party aggregator delivery companies, such as UberEats and Skip the Dishes. A fast-casual restaurant chain operator interviewed in the FRESHER study described how third-party delivery companies moved from being incremental sources of revenue to the main source of revenue, making up as much as 40-50% of their business. However, the chain operator noted how the delivery companies’ high commission rates make it difficult to operate on reduced margins.
These third-party delivery companies have recently come under further fire as restaurateurs find out about their high commission fees, which are as much as 30%, finding it unsustainable to remain profitable . These high fees prompted Toronto Mayor John Tory to call on delivery companies to lower commission fees, and some companies have responded to the pandemic by reducing commissions accordingly .
A local restaurateur in London, Ontario criticized third party delivery companies for their high commission fees and their independent contracting practices, which limits the ability of their workers to collect employment insurance. Thus, this restaurateur has preferred to deliver in-house, allowing them to build stronger connections with their customers.
While many of these strategies may help with mitigating the financial impact of COVID-19 on food-service establishments, a key step in moving forward during the pandemic is to maintain leadership and trust with employees, customers, and the community. Food retailers, like many organizations today, are expected to lead with their passion and values. COVID-19 has highlighted structural inequalities in the societies we live in, including our food systems. Across the FRESHER team’s industry discussions and interviews, a recurring theme among food retail operators is the importance of having open, candid conversations with their employees and customers to maintain trust in creating safety in the workplace. Additionally, sharing information with customers, such as the safety measures put in place, a behind-the-scenes look at how their food is prepared, or the story behind the restaurant can be critical steps in helping customers regain confidence to return to dine-in experiences at food-service establishments.
COVID-19 has brought about immense opportunities and challenges to the world, and food retailers have not been spared. If you currently work in food retail, whether at a grocery store, restaurant, café, or fast-food joint, we want to hear from you! If you were laid off or lost a job opportunity in the industry due to the pandemic, we also want to hear from you!