How Can Canadian Restaurants Deal With Rising Costs and the Impact of Food Inflation?

An inevitability of restaurant ownership is that eventually food costs will increase, it’s just a matter of when. Once the cost of ingredients goes up, restaurant owners have tough decisions to make to ensure their already razor-thin profit margins don’t become even smaller

While rising costs can present challenges for existing restaurants and ones that are just preparing to open up, there are many ways that restaurant owners can react to deal with implications of food price inflation.

The Reasons for Rising Food Costs

Food inflation can occur for a number of reasons. Challenges with crop production, delayed shipments of food, or tariffs can all have an impact. If farmers can't produce crops due to droughts, too much rain, or natural disasters, the shortage will inevitably cause the price of those products to increase. Meanwhile, if a country is heavily reliant on receiving food imports but doesn’t receive those shipments, this can also increase food costs. 

Recently, the import tariffs that have hit the headlines worldwide are contributing towards the significant impact on current food costs. These tariffs can create unpredictability for restauranteurs as they may not be aware of what ingredients will be impacted month-to-month, or whether an ingredient may become too expensive to justify continued use. In this case, restaurant owners need to pivot, finding local sources that may provide ingredients at a more affordable cost, replacing ingredients as necessary, or increasing menu prices to meet the increased ingredient costs.

What are Import Tariffs?

Import tariffs are taxes that a country imposes on items entering another country. A particular country may impose tariffs for numerous reasons such as to entice another country to renegotiate trade deals or improve national defence, or as punishment for war or issues with human rights. Whatever the reason, import tariffs can have major impacts on the restaurant industry as a whole, as they can affect the food supply chain and increase costs for farmers. 

The Tariff War Between the United States and Canada

The Trump Administration in the United States has imposed tariffs on Canada as part of its global trade war. It began when President Donald Trump imposed 25% on all products from Canada and a 10% tariff on Canadian energy products on March 4, 2025. What ensued was the imposition of tariffs on other items like steel and aluminum. 

In response, Canada has also imposed tariffs on the United States, including a 25% tariff on food and beverage items imported from the United States. This has resulted in a price increase in items like wine, beer, spirits, and coffee, which are all essential components of running a restaurant.

China has also impacted food items in Canada by imposing tariffs on food items. One of these is a 100% tariff on canola oil and the other is a 25% tariff on pork and seafood. 

Tariffs can significantly affect food prices and disrupt the global supply chain, thus affecting those who grow and produce food along with how restaurants can build their menus. 

How Does Inflation Affect Restaurants?

Import tariffs can negatively affect farmers and food producers, which in turn, affects restaurant prices. Countries normally import food to countries where a particular food might not be available domestically or import food because it is cheaper than selling it in the country where it is produced. However, the imposition of tariffs may make foods too expensive for buyers in other countries and farmers will then be forced to sell goods domestically. In this case, they will likely sell their products for more money to make up for lost profits from selling to the global market.

Tariffs can also increase the cost of materials that farmers use in their businesses, which will also have an effect on the cost of the end product. If fertilizer, machinery, or gas prices go up for farmers, so too will the cost of the meat, vegetables, dairy, and fruit they produce.

If you as a restaurateur have to pay more for ingredients, these increased costs will act as restaurant tariffs and will inevitably result in you having to increase costs in your restaurant and pass them on to the consumer. Alternatively, you may decide that you need to modify your menu so you can keep it affordable for your customers.

6 Ways to Mitigate the Impact of Tariffs and Food Inflation

Despite the challenges of tariffs and inflation restaurant prices, there are ways you can mitigate their effects to ensure your restaurant can overcome difficult times. An independent restaurant may have more challenges than a franchise or QSR restaurant that may be able to absorb higher restaurant food costs more easily, but here are some measures you can take to address inflation in the restaurant industry whether you own an independent restaurant or a larger business.

1. Tweak Your Menu: Whether you serve breakfast, lunch, or dinner, fresh produce will undoubtedly play an important role on your menu. If your chef enjoys using imported items like avocados or citrus on your menu, you may have to omit them in favour of more affordable, local foods. Instead, choose ingredients when they are in season where you live like asparagus, mushrooms, and tomatoes, along with protein that are produced locally like Alberta beef or salmon from the east or west coasts.

2. Create Seasonal Menus: Rather than having one set menu for your restaurant that forces you to purchase ingredients from other countries when they are out of season where your restaurant operates, you can create seasonal menus that will allow your restaurant to purchase ingredients when they are at their best and are in season. This may mean having your kitchen staff create four menus (one for each spring, summer, fall, and winter) or changing the menu more frequently so you can take better advantage of what is available during the year. Having a menu that changes more regularly will make it easier for you to pivot and change menu items if you find that a certain ingredient is too expensive or unavailable. You could also add a disclaimer to the menu to note that ingredients may change due to seasonality, and train your front-of-house staff to inform guests of those changes when they are seated and deciding on what they would like to order.

3. Promote Local Ingredients: When there are hefty tariffs on imported wine, spirits, and other fortified beverages, it only makes sense to scrap those items and replace them with local alcoholic beverages instead. The Niagara region and Prince Edward County are growing wine regions in Ontario, while British Columbia is noteworthy for wine production as well.  In the case of products that your restaurant might not make itself like ketchup and other condiments, you can look for locally made products as well. Alternatively, you may choose to have your kitchen make those condiments with local ingredients as well if it helps mitigate the cost of purchasing an imported item.

4. Increase Restaurant Menu Prices: While increasing prices on your menu may not seem like an ideal choice, it may be essential to keep your restaurant afloat when food inflation occurs. This option may be preferable if you would like to use the same menu all year round or you can’t get around ordering imported foods for your restaurant.

5. Control Restaurant COGS to Boost Profits: Restaurant COGS, otherwise known as the cost of goods sold, refers to the cumulative cost of ingredients and labour to prepare dishes and make your restaurant run. Similar to tracking other metrics related to your restaurant, tracking COGS is essential to determining the profitability of each dish on a menu, and having that visual can give you a clear image of what menu items require modification as food costs go up.

6. Level-Up Your Restaurant Tech: Having the right restaurant technology at your disposal is key. From reliable POS hardware that can help increase turn times and revenue with faster order and payment speeds, to trackable analytics & reporting that can help you take control of your restaurant’s performance.

Restaurateurs, You've Got This

Despite the challenges that import tariffs and food inflation present to the hospitality industry, restaurants in Canada can weather the storm by staying agile. Whether you choose to increase your restaurant's menu prices or modify your menu so that it includes more local and seasonal ingredients, adaptability is the key to ensuring that your restaurant can withstand the volatility of the ongoing tariff war.