Revenues are up and profits are down.
That’s the thumbnail description of life in the hospitality sector these days. If you’re a fan of things like the Food Channel, you probably harbour a feeling that you could run a restaurant or a bar. But when you look at the numbers in this business, you might ask why you’d want to do that. It’s a tough business that has produced more than its fair share of casualties.
StatsCan prepared a comparison of the performance of players in the food and beverage sector over five years, ending in 2016. The picture it paints is a landscape of shrinking margins in the face of rising revenues. Basically, costs are outpacing sales even though sales are rising sharply. This may be a reflection of the push back we’re seeing in some sectors towards significantly higher minimum wages.
In Saskatchewan, for example, revenues from 2012-16 rose by 29 per cent, so customers are paying more but operating profit – that is the margin before taxes are paid – fell from seven per cent to five, so owners take home less.