Ontario budget delivers $765 million bill to restaurant owners

TORONTO – The 28% increase to the minimum wage in today’s provincial budget will cost Ontario’s restaurant operators an estimated $765 million in higher wages and payroll taxes over the next three years, according to calculations by the Canadian Restaurant and Foodservices Association (CRFA).
 
“A wage increase of this magnitude will threaten the viability of many Ontario restaurants,” says CRFA’s Vice President, Ontario, Stephanie Jones. “This is a labour-intensive business where nearly 31 cents of every dollar spent at a restaurant goes directly to payroll costs.  These small businesses don’t have the financial flexibility to absorb a large minimum wage hike, and in such a competitive environment, they can’t pass it along to their customers.”
 
Between 2000 and 2005, real foodservice revenues in Ontario fell by 4.3%, compared to a 5.5% increase in the rest of Canada, according to Statistics Canada.  This equals an industry-wide loss of $707 million due to the drop in international tourists, slow disposable income growth, and lost manufacturing jobs in the province.
 
The number of international tourists to Ontario is at a record low, down 38% since 2000.
 
Profit margins for foodservice operators in Ontario have shrunk to less than 3% of operating revenues – the lowest in the country – which translates into annual earnings of $21,000 for the average establishment. 
 
“Today’s government-mandated wage increase will leave restaurants with little choice but to cut hours and jobs.  The effect will be to reduce entry-level employment opportunities, removing valuable stepping stones for young people entering the labour force,” says Jones. 
 
The vast majority of minimum-wage earners in the restaurant industry — 77% — are under the age of 25.   
 
CRFA is one of the largest business associations in Canada with 34,000 members, including 10,000 in Ontario.  Members include restaurants, bars, caterers and other foodservice providers.