The Numbers Are Not Pretty...

Jay Ashton, Canada's Restaurant Guy

With 23 days left before the potential implementation of a 25% tariff on U.S. imports, Canadian restaurant owners must prepare for the financial consequences. To illustrate the impact, let's break down how these tariffs would affect a typical Canadian restaurant with $750,000 in annual food sales, 30% food costs, 30% labor costs, and a 5% pre-tax profit margin.

Current Financial Breakdown (Before Tariffs)

• Annual Sales: $750,000
• Food Costs (30%): $225,000
• Labour Costs (30%): $225,000
• Other Operating Expenses (35%): $262,500
• Pre-Tax Profit (5%): $37,500

Impact of a 25% Tariff

1. Additional Costs from Tariffs

• Percentage of food costs affected by tariffs: 40%
• Total affected food costs: 40% of $225,000 = $90,000
• Additional costs due to 25% tariff: 25% of $90,000 = $22,500

2. Adjusted Cost Structure After Tariffs

• New Total Food Costs: $225,000 + $22,500 = $247,500
• Labour Costs (unchanged): $225,000
• Other Operating Expenses (unchanged): $262,500
• Total Expenses (before profit): $735,000
• New Pre-Tax Profit: $15,000 (down from $37,500, a 60% decrease)

3. The Effect of Consumer Spending Decline

• If consumer confidence drops and spending on dining out decreases by 5%, annual sales will shrink to.
• Adjusting profit for lower revenue:

Impact Summary

1. Profit drops from $37,500 to $15,000 due to tariff-related costs (-60%).
2. If sales decline by 5%, the restaurant moves into a net loss of -$22,500.
3. Restaurants will face tough decisions: raising menu prices, cutting staff hours to mitigate losses.

With profit margins already razor-thin in Canada’s restaurant industry, these tariffs will place immense pressure on independent operators. The coming weeks are critical for business owners to plan accordingly.

What Can You Do TODAY?

This is not the time to sit back and wait. With potential tariffs around the corner, the most successful restaurant owners will take proactive steps. Here are five things you can do today to prepare:

1. Get Loud on Social Media

• Tell your story. Let people know what's happening and how tariffs will impact local restaurants.
• Run a campaign. Encourage customers to support local restaurants now before prices go up.
• Leverage video. A quick Instagram or TikTok post explaining the situation will get attention.

2. Email Your Friends, Family & Loyal Customers

• Ask for support NOW. If people want to help, tell them how—come in for dinner, buy gift cards, spread the word.
• Make it personal. A heartfelt email from the owner can drive more engagement than a generic marketing message.

3. Shrink Your Menu

• Cut underperforming items. Focus on high-margin, best-selling dishes.
• Adjust portion sizes. Find ways to keep quality high while reducing waste.

4. Audit Your Operations

• Find inefficiencies. Is labour being scheduled properly?
• Look at rent & utilities. Are there savings opportunities in your fixed costs?
• Trim excess. Every dollar matters when margins are being squeezed.

5. Look at New Revenue Streams Beyond Just Food

• CPG products. Can you bottle your sauce? Sell frozen meals? Offer take-home kits?
• Catering & meal subscriptions. Build a recurring revenue model.