‘Playing the long game’: Ottawa restaurants adjust business models to grapple with labour shortage, inflation

Union Local 613
Union Local 613, a stylish eatery on Somerset St. W, is cutting out certain meals and adjusting its menu in response to the labour shortage and hostile food prices.

Restaurants in Canada are raising prices, shrinking menus and reducing hours in a bid to survive inflation and labour shortages, a new report says, and Ottawa restaurants are no exception.

Union Local 613 on Somerset Street is navigating these challenges by “playing the long game,” says owner Ivan Gedz.

By ensuring his staff are well-paid, Gedz says he is investing long-term and avoiding the possibility of further labour shortages in the future. He’s in debt, though, and he says that since the pandemic, Union Local 613’s revenues are down about 30 per cent. 

“Labour costs are astronomical,” Gedz told OBJ. “I’m dedicated to paying people properly, and I’m in lots of debt to maintain that.”

“I’m privileged enough that I can borrow at very reasonable rates,” he added. “An awful lot of people can’t afford to do that, and I’m gambling that it may pay off.”

The Restaurants Canada report said the industry is continuing to struggle financially, with half the country's eateries operating at a loss or just breaking even.

The report, entitled Foodservice Facts, said foot traffic to restaurants is still below pre-pandemic levels with real sales adjusted for inflation 11 per cent under 2019 results.

Hiring in the restaurant sector is also lagging Canada's overall job recovery, with the workforce 171,300 jobs short of pre-pandemic levels as of May.

Gedz says he struggles to fill back-of-house positions, such as cooks and other kitchen jobs; his experience isn’t unique, with most restaurants operating at 80 per cent of their normal capacity due to the worker shortage, according to the report.

The East India Company Restaurants, which has locations in Nepean and on Somerset Street, is grappling with the labour shortage on a daily basis, according to owner and general manager Anish Mehra.

Mehra said his restaurants stayed open throughout the pandemic and did not lay off any full-time staff, adding they emerged in a “decent position.” The current labour shortage is proving to be a “daily challenge,” though, he added.

Although Mehra has some long-term employees, the restaurant industry has always seen a lot of turnover in staff, and this hiring round has proved tricky for him.

“You used to be able to run an ad and you’d get 10 applicants, and you could select the best candidate,” explained Mehra. “Now you might get one, and you can’t afford to be picky.”

“I’m filling gaps myself from dishwashing to serving tables,” he said. “I always did, but it’s much more necessary now.”

Menu prices at full-service restaurants are expected to rise 7.8 per cent by the end of 2022 compared with the year before, the report said, with about a third expecting prices to climb by as much as 15 per cent.

Fast-food restaurant prices are expected to increase 7.1 per cent by the end of the year.

Still, higher prices are just one way restaurants are responding to inflation, the report said.

Some restaurants are also reducing the number of items on the menu, shrinking portions, changing suppliers and absorbing cost increases, according to the report.

One of Mehra’s biggest costs right now is base ingredients, like cooking oil, he explained. While a case of 16 bottles used to cost about $16.99, the price has nearly quadrupled, Mehra said. 

“We raise our prices a dollar here and there, when we can, but it’s not a four-times increase,” he added. “We haven’t been able to match the jumps we’ve had to face. We’re having trouble making the math work.”

“The low-hanging fruit for addressing rising food costs is to simply cut back on portion sizes,” Philman George, corporate chef of High Liner Foods, said in the report.

“The catch-22 is the compounding effect of labour shortages,” he said. “It leaves the customer not only getting less food for their dollar, but also a potential decrease in the service levels they were accustomed to receiving pre-pandemic.”

Instead, George said successful restaurants will address rising food costs with a “multi-prong approach,” including creative sourcing of lower-cost ingredients and making menus simpler and shorter to reduce food waste.

At the Grounded Kitchen Coffee and Bar on Gloucester Street, owner Amir Rahim is exploring multiple solutions with his restaurants, including ditching “happy hour” discounts and introducing a new concept that will incorporate automation for taking orders and processing payments. 

“Menu architecture is also vital,” Rahim added.

“Rethink menu offerings to focus on easy-to-execute items and ingredient cross-utilization, which allow you to reduce labour and food costs and streamline inventory ... (and) keep guest-facing prices more stable,” said the report.

Meanwhile, although dinner traffic has seen the biggest improvement in recent months, lunch at full-service restaurants remains 22 per cent below 2019 levels, the report said.

The slow recovery is largely due to many Canadians continuing to work remotely.

While about a third of Canadians overall worked either mostly or entirely remotely as of May 2022, the share of people working from home nearly doubled in some major cities.

“This has had a negative impact on the morning and lunch dayparts in particular,” the report said.

At Local 613, Gedz said he hasn’t shortened the menu, but he says there are redundancies to minimize food waste. The restaurant has also stopped offering brunch – though Gedz says it was never a huge source of income – and is no longer open for lunch.

Meanwhile, Canadians feeling squeezed by inflation are expected to rein in their spending by skipping lower-priced meals and saving restaurant outings for special occasions, according to the report.

Others will reduce restaurant spending by downsizing meals, cutting back on extras or searching for a deal, it said.

Mehra says he takes pride in the food he serves and truly loves his business, adding he hopes to see a path forward through what has been “a crazy ride.”

“When you’re constantly trying to put out fires, every time you put one out, there’s a larger one next to it,” said Gedz. “The act of putting out one fire tends to spark the next. Even with my 20 years of experience, it is impossible to predict.”

– With additional reporting from from the Canadian Press