Food Service Facts 2007

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LABOUR SHORTAGE: 181,000 employees needed by 2015

FOODSERVICE FACTS 2OO7
Market Review and Forecast $30.00 WESTERN GROWTH: sales up 37% in Western Canada since 2000 DEMOGRAPHICS: 38% will be aged 50+ by 2016

TOURISM: International travel down 31% since 2000

MEALTIMES: 22% of restaurant meals eaten at breakfast

NEW FROM HIGH LINER!
Hoist your sales! High Liner Foodservice has been busy developing some great new products. And, because they are from High Liner you can be sure that they will add pizzazz to your menu and more profit to your bottom line.

BEER BATTERED RAW LOLIGO SQUID
• Tender Loligo – sweet and mild tasting • Available in tubes, and tubes and tentacles • Fully cleaned, all natural • Choose Haddock, Cod, Pollock, Shrimp or Mozzarella Sticks • Made with genuine Alexander Keith’s India Pale Ale • Light crispy coating with back-of-the-house appearance

MULTI-GRAIN TILAPIA FILLETS
• Premium quality, hand-cut fillets • Delicious, crunchy multi-grain breading • Good source of dietary fibre • Low in saturated fat, no trans fat • Easy to prepare – oven or retherm

PRIMAVERA ROLLS
• Seafood, rice and vegetables in a delicate sauce • Available in Haddock or Salmon • Healthy and delicious menu choice • Low in saturated fat, no trans fat

SEAFOOD SKEWERS
• Unseasoned for maximum menu flexibility • Cook in minutes • Four different Skewers to choose from: • Hand-cut Haddock or Salmon fillets with peppers • Premium quality IQF Shrimp • Delicious Shrimp & Scallop combo

Call your High Liner Foodservice representative today to get all the details on this delicious array of new products.

Seafood Builds Business. Ask The Experts.
KC7044

ATLANTIC QUEBEC ONTARIO WESTERN CANADA US EASTERN REGION (514) 323-6801 (416) 622-3894 (403) 278-6641 (902) 422-2883 1-800-361-3945 1-800-268-2615 1-800-667-1732

w w w. h i g h l i n e r f o o d s e r v i c e . c o m

FIVE KEY TRENDS

Western Growth
A booming economy and growing population will make Western Canada the hottest foodservice market in the country . . . . . . . . . . . . . . . . . . . . . . . .
TOP-LINE TREND

TABLE OF CONTENTS
State of the Industry . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 4

Page 9
TOP-LINE TREND

Tourism Challenges
International tourism to Canada is on the decline, but domestic tourism is taking flight . . . . . . . . . . . . .

Page 17

CRFA’s 2007 Forecast . . . . . . . . . . . . . . . . . . . . . . . . . . . . 6 CRFA’s Long Term Forecast . . . . . . . . . . . . . . . . . . . . . . . . 7

Labour Shortage
A growing labour shortage is making it difficult to recruit and retain employees . . . . . . . . . . . . . . . . .
TOP-LINE TREND

Page 19

Western Growth . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 9 Prairie Provinces . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11

Changing Mealtimes
Time-starved consumers are eating more restaurant meals off-premise and relying on restaurants for more breakfasts and snacks . . . . . . . . . . . . . . . . . . . . . . . .
TOP-LINE TREND

Page 25
TOP-LINE TREND

Ontario and Quebec . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 Atlantic Canada . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 15

Demographic Shift
Canada’s aging population is more likely to eat at full-service restaurants, and is more concerned with nutrition and food quality . . . . . . . . . . . . . . . . .

Page 28

Tourism Challenges . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 17 Employment Contribution . . . . . . . . . . . . . . . . . . . . . . . . 17 Labour Shortage . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 19 Profit Margins . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 21 Foodservice Units . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 23

Foodservice sales
Canada’s foodservice industry will reach a record $53 billion in sales in 2007. This marks an increase of 4.1% over 2006, or modest growth of 1.4% when adjusted for menu inflation. The past few years have been tumultuous ones for Canada’s 62,600 restaurants, bars and caterers. In the seven years leading up to 2000, real commerical foodservice sales growth averaged 4.4% per year. In the seven years since, real sales growth has fallen to an average of 1.2% per year. Looking ahead, real commerical foodservice sales are expected to grow by an average of just 1.3% per year through 2010.

Household Spending . . . . . . . . . . . . . . . . . . . . . . . . . . . . 24 Changing Mealtimes . . . . . . . . . . . . . . . . . . . . . . . . . . . . 25 Restaurant Visits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 26 Menu Trends . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 27 Demographic Shift . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 28

POWERPOINT SLIDES
Foodservice Facts is available in PowerPoint format for CRFA members only: Deluxe Edition – A ready-made presentation with all the charts and graphs in Foodservice Facts, plus text slides with key points in bullet form. $250.00 plus applicable taxes. Basic Edition – Includes all the charts and graphs in Foodservice Facts. $130.00 plus applicable taxes. To order the slides, visit CRFA’s online catalogue at www.crfa.ca/catalogue or call 1-800-387-5649 ext. 4215. CRFA accepts all major credit cards.

CANADIAN RESTAURANT AND FOODSERVICES ASSOCIATION
316 Bloor Street West, Toronto, Ontario M5S 1W5 Phone: (416) 923-8416 or 1-800-387-5649 Fax: (416) 923-1450 E-mail: [email protected] Website: www.crfa.ca Editor: Jeni Armstrong Economist: Chris Elliott VP, Research and Communications: Jill Holroyd Copyright 2007. All rights reserved including the right of reproduction in whole or in part in any form.

w w w.c r fa .c a — FO O D S E RV I C E FACTS 20 07

01

STATE OF THE INDUSTRY
• Rising disposable income pushed foodservice sales past the $50-billion mark in 2006 • Foodservice gains market share from retail • Limited-service restaurants and caterers dominate sales growth in 2006
Canada's foodservice industry rebounded in 2006 with a solid 5.6% increase in total sales to reach $51.4 billion – a welcome change from the lacklustre growth of 2005. Adjusted for menu inflation, real foodservice sales advanced 2.9% in 2006. This recovery was driven by increased disposable income, which grew 6.1% in 2006 as tax cuts put more money in the pockets of consumers. At the same time, Canada’s unemployment rate fell to a 32-year low. With more Canadians in the workforce, foodservice spending increased. Looking back on 2006, several themes emerge:

Real Change in Total Foodservice Sales
5% 4% 3% 2% 1% 0% -1% -1.2% -2% 0.1% -0.1% 1.0% 1.4% 2.5% 2.6% 2.9% 4.7%

Caterers remain strong
Contract and social caterer sales rose a solid 7.7% in 2006 following a 17.6% gain between 2003 and 2005. Strong mining and natural resource activity resulted in significant gains at remote foodservice camps, and bolstered caterer sales 9.2% in 2006. Among non-commercial foodservice segments, growth at remote foodservice camps and at health care facilities lifted institutional foodservice 5.2%.

1999

2000

2001

2002

2003

2004

2005 2006-p 2007-f
p - preliminary; f - forecast

Source: CRFA, Statistics Canada Note: Real refers to inflation-adjusted growth.

Rising gas prices fuel limited-service sales
After a sluggish 2005, sales at limited-service restaurants jumped 9.1% due to strong consumer demand across the country. Faced with rising gasoline prices, many consumers opted to “trade down” from full-service restaurants, which saw a 3.9% increase in sales for the second year in a row.

Healthy demand for foodservice lifted the foodservice share of total food sales in Canada from 40.4% in 2005 to 41.4% in 2006. This remains well below the 47.9% market share captured by the foodservice industry in the U.S., however, where consumers enjoy higher disposable income and no federal tax on restaurant meals.

Bar sales fizzled
Canadians’ thirst for bars and nightclubs continued to wane in 2006, as total sales in this segment fell 4.4%. Since 2000, the number of taverns, bars and nightclubs has dropped 18.0%, for a loss of 1,096 units. These losses have been felt all across Canada. An aging population, smoking bans and shrinking profit margins led some operators to convert to full-service restaurants, while others were forced to close their businesses permanently.

Foodservice Share of the Total Food Dollar — Canada
43%
42.1%

Foodservice Share of the U.S. Food Dollar: 47.9% - 2004
41.9% 41.5% 40.5% 40.6% 40.4% 41.5% 41.4% 40.8%

42%
41.3%

41%

40%

0%
1998 1999 2000 2001 2002 2003 2004 2005 2006-p 2007-f
p - preliminary; f - forecast Source: CRFA, Statistics Canada and the National Restaurant Association Note: Total food dollar includes spending by consumers, tourists, businesses, institutions and government at foodservice operations, grocery and convenience stores.

Customers savour convenience
Busy consumers have responded favourably to the convenience of foodservice establishments in retail stores, resulting in average annual growth in this segment of 8.5% since 2001.

For the impact of tourism on foodservice sales, see page 17.
04
FO O D S E RV I C E FACTS 20 07 — w w w.c r fa .c a

STATE OF THE INDUSTRY
• The average commercial foodservice unit posted annual sales of $673,404 in 2006 – up 5.9% over 2005 • Pre-tax profits average just $25,589, or 3.8% of operating revenue



Full-service restaurants had the highest average unit volume in 2006 as slow sales were partially offset by a decline in the number of establishments. Limited-service restaurants posted the strongest growth in average unit volume of all commercial segments in 2006, following weak gains in 2005.



Average unit volume for contract and social caterers, which saw exceptional growth of 16.0% in 2005, moderated to 2.9% in 2006. Taverns, bars and nightclubs had the lowest average unit volume in 2006, combined with the weakest sales growth of all commercial segments (2.8%).





Average Unit Volumes 1 - Canada 2006 Average % Change % Change ‘05/’04 Unit Volume ‘06/’05 Full-service Restaurants Limited-service Restaurants Contract and Social Caterers Taverns, Bars and Nightclubs Total Commercial Industry $750,535 $671,507 $516,979 $494,773 $673,404 5.3% 8.0% 2.9% 2.8% 5.9% 4.8% 1.5% 16.0% 4.4% 4.6%

Source: Statistics Canada 1 Average unit volumes are calculated as the total volume of sales divided by the number of units from the Survey of Restaurants, Caterers and Taverns by Statistics Canada

Market Share by Segment
2006 Market Share Commercial Foodservice Full-service Restaurants Limited-service Restaurants Contract and Social Caterers 78% 36% 31% 6% 2006 Per Capita Spending 1 $1,228 $573 $481 $95 Average Annual Sales Growth Since 2001 2 3.5% 3.5% 4.1% 3.8%
Operations whose primary business is food and beverage service. Includes licensed and unlicensed fine-dining, casual and family restaurants as well as restaurant-bars. Includes quick-service restaurants, cafeteria, food courts and take-out and delivery establishments. Includes contract caterers supplying food services to airlines, railways, institutions and recreational facilities, as well as social caterers providing food services for special events. Includes bars, taverns, pubs, cocktail lounges and nightclubs primarily engaged in serving alcoholic beverages for immediate consumption. These establishments may also provide limited food service. Self-operated foodservice in establishments whose primary business is something other than food and beverage service. Branded restaurants in any of these settings are counted in commercial restaurant sales if they are owned by the restaurant chain. Foodservice in hotels, motels and resorts. Foodservice in hospitals, residential care facilities, schools, prisons, factories, remote facilities and offices. Includes patient and inmate meals. Foodservice operated by department stores, convenience stores and other retail establishments. Includes vending, sports and private clubs, movie theatres, stadiums and other seasonal or entertainment operations. Includes commercial and non-commercial foodservice.

Taverns, Bars and Nightclubs

5%

$79

-0.2%

Non-Commercial Foodservice

22%

$348

4.8%

Accommodation Foodservice Institutional Foodservice Retail Foodservice Other Foodservice Total Foodservice
1 2

10% 6% 2% 4% 100%

$157 $95 $31 $64 $1,576

4.4% 5.8% 8.5% 3.0% 3.8%

Per capita spending is calculated by dividing foodservice sales by the total population. Growth rate is based on compounded annual sales.

w w w.c r fa .c a — FO O D S E RV I C E FACTS 20 07

05

CRFA’S 2007 FORECAST
• Canada’s foodservice industry will grow to $53.5 billion in sales in 2007 • Accommodation foodservice will lead all segments in growth • Foodservice sales will be restrained by weaker growth in disposable income
Total foodservice industry revenues in Canada will grow 4.1% to reach a record $53.5 billion in 2007, fueled by rising household income in Western Canada. Adjusted for menu inflation, total foodservice sales will grow just 1.4%.


Total Foodservice Sales
($ billions)

$60 $50
$38.7 $40 $37.1 $44.0 $44.5 $41.4 $42.7 $46.9 $48.7 $51.4

$53.5

Accommodation foodservice is set to lead the way with year-over-year sales growth of 5.1% in 2007. This is largely due to an expected increase in domestic travel, which accounts for 13.9% of total foodservice revenue. Sales at full- and limited-service restaurants, which account for two-thirds of total foodservice industry sales, will see steady growth of 4.5% and 4.3%, respectively. Robust development of natural resources – particularly in Western Canada – will boost the demand for foodservice at remote camps, lifting total caterer sales 2.9% in 2007. Sales at taverns, bars and nightclubs will remain weak in 2007, as a decline in units and sluggish consumer demand limit this segment’s recovery from a 4.4% drop in sales in 2006. The convenience of in-store foodservice – such as department store restaurants – will lift retail foodservice by 4.1% in 2007.

$30 $20 $10 $0
1998 1999 2000 2001 2002 2003 2004 2005 2006-p 2007-f
p - preliminary; f - forecast





Source: CRFA and Statistics Canada





CRFA’s 2007 foodservice forecast of 4.1% growth marks a slowdown from 2006, when foodservice sales grew by 5.6%. This slowdown will be due largely to a moderation in disposable income growth across Canada, which will grow 5.2%.

Foodservice Sales Forecast 2007
2007 Forecast
(Millions of Dollars)

% Change ‘07/'06 4.5 4.3 2.9 2.1 4.2 5.1 2.2 4.1 3.1 % % % % % % % % %

% Change ‘06/'05 3.9 % 9.1 % 7.7 % -4.4 % 5.6 % 6.5 5.2 7.1 3.8 % % % %

Full-service Restaurants Limited-service Restaurants Contract and Social Caterers Taverns, Bars and Nightclubs TOTAL COMMERCIAL Accommodation Foodservice Institutional Foodservice Retail Foodservice Other Foodservice TOTAL NON-COMMERCIAL TOTAL FOODSERVICE Menu inflation REAL GROWTH
Source: CRFA's InfoStats, Statistics Canada, fsSTRATEGY and Pannell Kerr Forster

$ 19,549.0 $ 16,359.5 $ 3,197.0 $ 2,625.7 $ 41,731.2 $ $ $ $ $ 5,398.0 3,174.1 1,055.9 2,150.4 11,778.4

3.9 % 4.1 % 2.7 % 1.4 %

5.7 % 5.6 % 2.7 % 2.9 %

$ 53,509.6

* For historical data, visit CRFA's website at www.crfa.ca ** See page 5 for definitions.

For CRFA’S foodservice forecasts by province, see pages 9 – 15.

06

FO O D S E RV I C E FACTS 20 07 — w w w.c r fa .c a

CRFA’S LONG TERM FORECAST
• Commercial foodservice will post steady growth through 2010 • Above-average growth forecast for full-service restaurants

Commercial foodservice sales in Canada will register steady, moderate sales growth between 2007 and 2010, averaging 3.9% per year, or 1.3% adjusted for inflation. By 2010, total restaurant, caterer and bar sales will surpass $46 billion annually (excluding non-commercial foodservice).

After factoring out inflation and population growth, foodservice sales will remain relatively flat, with average annual real per capita growth of just 0.5% between 2007 and 2010. This marks a sharp deceleration from the 3.5% average annual real per capita growth registered between 1997 and 2000. While income and employment will remain the dominant forces driving foodservice demand, commercial foodservice sales will continue to underperform income growth, limited by the following factors:

CRFA’s Foodservice Forecast: Change in Sales
(2007-2010)
Full-service Restaurants Total Commercial Foodservice Limited-service Restaurants Contract and Social Caterers Taverns, Bars and Nightclubs 0%
Source: CRFA’s Long Term Forecast
1.7% 4.2%

A plateau in the number of units
3.9%

3.8%

3.6%

In the past five years, the number of foodservice units fell 1.9%, compared to a 4.1% increase between 1997 and 2000. In the coming years, it is expected that the number of unit openings will offset closures, maintaining the total population of restaurants, bars and catering locations between 62,500 and 63,500 units to 2010.

Slower economic growth in Ontario
3% 4% 5%

1%

2%



Full-service restaurants will post above-average growth of 4.2% per year between 2007 and 2010 as an aging population drives sales in this segment. Caterers will benefit from increased contracting out and growth in remote foodservice. Over the next four years, limited-service restaurants will advance an average 3.8% per year, on par with the industry average. Taverns, bars and nightclubs will post the weakest growth of all commercial foodservice segments as more Canadians choose to socialize at home. Restrained consumer demand will limit average annual sales growth at bars to 1.7% through 2010.

Ontario accounts for nearly 40% of Canada’s foodservice industry, but foodservice sales growth in the province has fallen below the national average due to significant job losses in the manufacturing sector, a decline in tourists and slow disposable income growth. Between 2007 and 2010, sluggish economic growth and a further decline in tourism will continue to restrain foodservice sales.

Change in Commercial Foodservice Sales
8%
FORECAST 7.3% 6.9% 6.1% 5.6% 4.6% 4.7% 4.0% 3.6% 3.7% 2.3% 1.5% 4.2% 3.5% Foodservice Sales Disposable Income 5.2% 4.3% 4.4% 4.2% 4.2% 4.2% 3.6% 3.4%



6%


4%

2%

0%
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 Source: CRFA's Long Term Forecast

For the impact of tourism on foodservice sales, see page 17.
CRFA uses an econometric model to forecast commercial foodservice sales by using the Conference Board of Canada’s forecasts of disposable income, real GDP, employment and tourism.
w w w.c r fa .c a — FO O D S E RV I C E FACTS 20 07

07

WESTERN GROWTH
• British Columbia and Alberta take top spots for foodservice sales growth • Foodservice sales in Western Canada have grown 37.3% since 2000

TOP-LINE TREND

Western Canada will lead the country with the strongest economy and fastest employment growth in 2007. Foodservice sales in British Columbia and Alberta will mirror this trend – growing 5.1% and 5.4% respectively – making these the top two provinces in terms of foodservice growth.




Residents of B.C. and Alberta enjoy above-average disposable income and no provincial sales tax on meals, leading to the highest average household spending at restaurants and bars in Canada (see page 24). Since 2000, a growing population and healthy economic activity in B.C. and Alberta have spurred a 2.8% increase in the number of commercial foodservice establishments, compared to a 3.2% decline in units in the rest of Canada. Foodservice operators in the western provinces report an average unit volume of $728,456 per year – $55,052 more than the national average.



Foodservice sales jumped 8.6% in B.C. and Alberta in 2006, bringing total sales in the two provinces to $11.5 billion. Alberta took top spot for foodservice growth in 2006, with sales rising an impressive 10.9% compared to B.C.’s robust 6.9%. Strong provincial economies have created severe labour shortages in B.C. and Alberta. Labour shortages will continue to suppress potential foodservice sales as operators are forced to reduce hours of operation because they are chronically short-staffed.







Regional Share of Total Commercial Foodservice Sales in 2006
Atlantic Canada 5.5%

Economic Forecast - 2007
4.5% 4.0% 3.5%
3.9%
Western Canada Prairie Provinces Ontario/Quebec Atlantic Canada

Western Canada 28.9%

3.0% 2.5%

3.0% 2.8% 2.4% 2.0%

2.0% 1.5% 1.0%
Prairie Provinces 5.0% Ontario and Quebec 60.6%

1.5% 0.9% 0.5%

0.5% 0.0% Real GDP Growth

Employment Growth

Source: Statistics Canada

Source: Conference Board of Canada

Commercial Foodservice: Western Canada
Growth in '07 1 Growth in '06 1 2006 Sales (in millions) Average Unit Volume 2 Units Chain Share of Units Independent Share of Units Pre-tax Profit
(% of operating revenue)

Bankruptcy Rate

Alberta British Columbia Western Canada Canada
1

5.4% 5.1% 5.2% 4.2%

10.9% 6.9% 8.6% 5.6%

$ $

4,993 6,552

$ 747,498 $ 714,609 $ 728,456 $ 673,404

6,924 9,601 16,525 62,666

44.4% 32.2% 37.1% 37.9%

55.6% 67.8% 62.9% 62.1%

5.8% 3.2% 4.3% 3.8%

0.5% 0.5% 0.5% 1.1%

$ 11,545 $ 40,064

Growth rates are undjusted for menu inflation Data are based on unit counts from the Monthly Restaurant, Caterers and Taverns Survey Source: Statistics Canada, CRFA's Long Term Forecast and ReCount/NPD Group
2

w w w.c r fa .c a — FO O D S E RV I C E FACTS 20 07

09

PRAIRIE PROVINCES
• Foodservice sales in the Prairie provinces moderate to just below the national average • Profit margins in the Prairie provinces are the highest in the country due to below-average rental and leasing costs

2005 Operating Profit Margins
(% of operating revenue)
6% 5% 4.3% 4% 3.3% 3% 2% 1% 0% Western Canada Prairie Provinces Ontario/Quebec Atlantic Canada 3.7% 5.6%

Source: 2007 Foodservice Operations Report, Statistics Canada and CRFA

2006 was a strong year for foodservice sales in the Prairie provinces, and a welcome change from 2005, which saw sales growth dip into negative territority. After a year of recovery, growth is expected to moderate in 2007.


Regional Share of Total Commercial Foodservice Sales in 2006
Atlantic Canada 5.5% Western Canada 28.9%

Saskatchewan, which saw flat foodservice sales in 2005, recorded 9.9% growth in 2006 – second only to Alberta. Growth in 2007 will be slightly below the national average. Foodservice sales in Manitoba posted a strong recovery in 2006, with 6.2% growth compared to a 4.0% decline in 2005, driven by rising employment and pent-up consumer demand. Sales are poised to grow 3.9% in 2007. A significant milestone was achieved in 2006 as Manitoba’s and Saskatchewan’s foodservice industries surpassed $1 billion in foodservice sales. Like provinces to the west, Saskatchewan and Manitoba will increasingly feel the effects of labour shortages in foodservice.





Prairie Provinces 5.0%

Ontario and Quebec 60.6%



Source: Statistics Canada

Commercial Foodservice: Prairie Provinces
Growth in '07 1 Growth in '06 1 2006 Sales (in millions) Average Unit Volume 2 Units Chain Share of Units Independent Share of Units Pre-tax Profit
(% of operating revenue)

Bankruptcy Rate

Manitoba Saskatchewan Prairie Provinces Canada
1

3.9% 3.6% 3.8% 4.2%

6.2% 9.9% 8.0% 5.6%

$ $ $

1,012 1,003 2,014

$ 573,806 $ 625,910 $ 598,472 $ 673,404

1,817 1,723 3,540 62,666

40.7% 40.7% 40.7% 37.9%

59.3% 59.3% 59.3% 62.1%

5.3% 6.0% 5.6% 3.8%

1.5% 1.4% 1.4% 1.1%

$ 40,064

Growth rates are undjusted for menu inflation Data are based on unit counts from the Monthly Restaurant, Caterers and Taverns Survey Source: Statistics Canada, CRFA's Long Term Forecast and ReCount/NPD Group
2

w w w.c r fa .c a — FO O D S E RV I C E FACTS 20 07

11

ONTARIO AND QUEBEC
• Declines in manufacturing and tourism restrain foodservice growth in Ontario and Quebec

Collectively, Ontario and Quebec account for the largest share of Canada’s foodservice industry, generating 60.6% of national foodservice sales. As Canada’s two largest provincial economies, heavily reliant on manufacturing, Ontario and Quebec are sensitive to the high Canadian dollar, which limits exports, and economic conditions in the U.S., which are expected to be weak in 2007. As a result, job and income growth in Ontario and Quebec will remain sluggish in 2007, and foodservice sales in these provinces will underperform the national average for the sixth time in the past seven years.

Economic Impact of a High Canadian Dollar
(decline in manufacturing and tourism since 2002)
0% -5% -10% -15% -15.4% -20% -25% -30% -35% Manufacturing Jobs
Ontario and Quebec Rest of Canada

Regional Share of Total Commercial Foodservice Sales in 2006
Atlantic Canada 5.5% Western Canada 28.9%

-2.5%

-8.9%

Prairie Provinces 5.0% -29.6% International Tourists Source: Statistics Canada

Source: Statistics Canada

Ontario and Quebec 60.6%



In both Ontario and Quebec, growth at limited-service restaurants and caterers offset weaker sales at full-service restaurants and a sharp decline in bar sales in 2006. Economic growth in both provinces will be weighed down in 2007 by the struggling export industry. Wage growth, combined with a $3.2-billion pay equity ruling for 360,000 public sector workers, will boost income and consumer spending in Quebec. In Ontario, however, massive job cuts and plant closings will limit income and job growth.





In 2006, foodservice sales in Ontario bounced back 5.1%, following 3.6% growth in 2005. In 2007, foodservice sales growth will be limited to 4.0%, due to a moderation in disposable income growth and a decline in the number of international tourists. Although Quebec began 2006 on a strong note, sluggish consumer spending at bars and full-service restaurants in the second half of 2006 restrained total sales growth to 3.2%. Higher disposable incomes in 2007 are expected to lead to a recovery in restaurant sales, which will lift total sales by 3.9%.



Commercial Foodservice: Ontario and Quebec
Growth in '07 1 Growth in '06 1 2006 Sales (in millions) Average Unit Volume 2 Units Chain Share of Units Independent Share of Units Pre-tax Profit
(% of operating revenue)

Bankruptcy Rate

Quebec Ontario Central Canada Canada
1 2

3.9% 4.0% 4.0% 4.2%

3.2% 5.1% 4.5% 5.6%

$

8,241

$ 567,217 $ 734,844 $ 667,692 $ 673,404

16,141 22,083 38,224 62,666

30.8% 41.0% 37.5% 37.9%

69.2% 59.0% 62.5% 62.1%

4.0% 2.9% 3.3% 3.8%

1.4% 1.3% 1.4% 1.1%

$ 15,964 $ 24,205 $ 40,064

Growth rates are undjusted for menu inflation Data are based on unit counts from the Monthly Restaurant, Caterers and Taverns Survey Source: Statistics Canada, CRFA's Long Term Forecast and ReCount/NPD Group

w w w.c r fa .c a — FO O D S E RV I C E FACTS 20 07

13

ATLANTIC CANADA
• Sluggish employment gains stall foodservice sales in Atlantic Canada

Atlantic Canada ranked last in foodservice sales growth in 2006 as sales declines in Newfoundland and Labrador and New Brunswick combined to offset the gains in Prince Edward Island and Nova Scotia. A decline in tourism, rising gasoline prices and below-average disposable income growth are largely to blame for lacklustre regional sales that have underperformed the national average in recent years. The outlook for Atlantic Canada remains muted, as foodservice sales expand a modest 1.1% in 2007. The increase in Atlantic foodservice sales is primarily inflationary, as customer traffic will be held in check by sluggish demand and population migration to other parts of the country.




Foodservice sales in Nova Scotia rose 6.0% in 2006 following a 6.4% decline in 2005. After adjusting for menu inflation, however, real foodservice sales in Nova Scotia remain 12.0% below 2002 levels. In 2007, foodservice sales will expand a tepid 2.5%. A decline in units and weak consumer demand will reduce foodservice sales in New Brunswick by 2.5% in 2007. With the lowest per capita disposable income, households in Nova Scotia, New Brunswick and Newfoundland and Labrador spend the least at bars and restaurants compared to other Canadian households.





Since 2000, the number of commercial foodservice units in Atlantic Canada has dropped 10% – a loss of 465 establishments. Atlantic Canada has accounted for 43% of all foodservice establishments closed in Canada since 2000 – a notable figure given that the region accounts for just 6.8% of foodservice establishments in Canada. A decline in units, combined with a drop in domestic and tourist spending, reduced foodservice sales in Newfoundland and Labrador 8.0% in 2006. Hardest hit were bars and limited-service restaurants. Although Newfoundland will outperform the rest of Canada in real GDP growth, lacklustre spending will limit foodservice sales growth in 2007 to 2.8%. On the heels of a respectable 4.5% gain in foodservice sales in 2006, foodservice sales in PEI will advance 4.3% in 2007.

Regional Share of Total Commercial Foodservice Sales in 2006
Atlantic Canada 5.5%
Western Canada 28.9%





Prairie Provinces 5.0%

Ontario and Quebec 60.6%

Source: Statistics Canada

Commercial Foodservice: Atlantic Canada
Growth in '07 1 Growth in '06 1 2006 Sales (in millions) Average Unit Volume 2 Units Chain Share of Units Independent Share of Units Pre-tax Profit
(% of operating revenue)

Bankruptcy Rate

Newfoundland and Labrador Prince Edward Island Nova Scotia New Brunswick Atlantic Canada Canada
1

2.8% 4.3% 2.5% -2.5% 1.1% 4.2%

-8.0% 4.5% 6.0% -1.4% 0.7% 5.6%

$ $ $ $ $

411 155 936 680 2,182

$ 456,979 $ 541,102 $ 672,839 $ 515,477 $ 559,753 $ 673,404

996 271 1,551 1,422 4,240 62,666

42.3% 33.2% 39.7% 48.3% 42.4% 37.9%

57.7% 66.8% 60.3% 51.7% 57.6% 62.1%

3.8% 4.2% 3.4% 4.0% 3.7% 3.8%

1.2% 1.8% 1.2% 0.8% 1.1% 1.1%

$ 40,064

2

Growth rates are undjusted for menu inflation Data are based on unit counts from the Monthly Restaurant, Caterers and Taverns Survey Source: Statistics Canada, CRFA's Long Term Forecast and ReCount/NPD Group

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15

TOURISM CHALLENGES
• Tourism accounts for 19.3% of total foodservice sales in Canada • Domestic tourism increasing in importance to foodservice

TOP-LINE TREND

International travel to Canada stalls
International tourism accounts for 5.4% of spending on foodservice but has been in steady decline in recent years. The number of international travellers to Canada has fallen 31.3% since 2000 and international tourist spending on foodservice has decreased 5.9%. This decline in the number of international visitors is largely due to border delays, high gas prices and the high Canadian dollar, which have caused the number of same-day trips from the U.S. to Canada to plummet. The outlook for international travel is equally bleak. Over the next several years, a strong Canadian dollar, above-average oil prices and the Western Hemisphere Travel Initiative (WHTI) – which imposes new passport requirements on Canada/U.S. travellers – will further discourage cross-border travel, with the economic impact felt most strongly by border communities and provinces that rely on tourism originating in the U.S. Analysis by the Conference Board of Canada indicates that WHTI will cost the Canadian tourism industry $3.3 billion in lost revenue between 2007 and 2010, with the largest declines in Ontario and British Columbia.

Domestic tourism takes flight
The good news is that while international tourism declines, spending on foodservice by domestic travellers is on the upswing. Since 2000, domestic tourist spending on foodservice has increased 43.0%, and domestic travel now accounts for 13.9% of total foodservice revenue.

Tourism Share of Total Foodservice Sales
25% 20% 15% 10% 5% 0% 2000
Source: Statistics Canada and CRFA
Domestic Tourists Foreign Tourists

19.2% 12.1%

19.3%

13.9%

7.1%

5.4%
2006

EMPLOYMENT CONTRIBUTION
• Canada’s foodservice industry employs more than one million Canadians


With 1,040,300 employees, the foodservice industry accounts for 6.3% of total employment in Canada, and nearly one in five jobs for youth. More people work in the foodservice industry than in agriculture; forestry, pulp and paper; banking; and oil and gas extraction combined.



Number of Foodservice Employees in Canada
1,200 (in thousands) 1,000 870.0 800 600 • 400 200 0 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: Labour Force Survey, Statistics Canada • 1,036.9 1,009.0 1,040.3 1,006.2 1,017.5

873.4 910.6

920.8 943.5

951.0

An additional 240,000 Canadians are indirectly employed by the foodservice industry as suppliers, distributors and consultants. In total, close to 1.3 million Canadians rely on the foodservice industry for employment. Most foodservice operations are small businesses. In 2003, 55.5% of foodservice operators employed fewer than 10 people. Another 42.9% employ between 10 and 99. Only 1.6% of foodservice businesses employ 100 or more people.

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17

LABOUR SHORTAGE
• Demand for foodservice workers to outpace supply over the next nine years • Alberta’s foodservice industry currently has a labour shortage of more than 11,000 workers • Long-term decline in youth population will put pressure on many foodservice occupations
Foodservice operators across Canada are struggling to find people to fill a growing number of job vacancies. Alberta operators – who are currently contending with a shortage of more than 11,000 foodservice workers – are feeling this most acutely, but operators in every region of Canada are experiencing a labour crunch. Even in Atlantic Canada, where the unemployment rates are the highest in Canada, there is a chronic shortage of workers due to out-migration. Between July 2005 and July 2006, 13,000 people in Atlantic Canada left the region for work in Alberta. Labour shortages have profound effects for foodservice operators:

TOP-LINE TREND

Population of 15 to 24 Year Olds to 2025
(Canada)
(in thousands) 4,500

Higher wages, fewer workers
In Alberta, average weekly wages in foodservice have soared by more than 18.7% in the past two years – almost twice as fast as the province’s average industrial wage. At the same time, because the labour crisis is a “people shortage” and not just a “skills shortage,” operators are often unable to find enough workers to adequately staff their establishments, forcing them to reduce hours of operation and forgo potential sales.

4,000

3,500

Lack of people = lost opportunities
Despite a booming economy and growing incomes, sales at full-service restaurants in Alberta were flat in 2006 – due in part to decreased hours of operation for many restaurants. Similarly, even though Alberta is home to the fastest-growing foodservice industry in Canada, unit growth has not kept pace with sales growth due to the difficulty in finding skilled tradespeople to construct and renovate a new restaurant, and people to staff the restaurant.
0 '06 '07 '08 '09 '10 '11 '12 '13 '14 '15 '16 '17 '18 '19 '20 '21 '22 '23 '24 '25 Source: Statistics Canada

Young workers in short supply
The industry provides a wide range of part-time and entry level jobs with flexible hours that appeal to young workers. Nearly 45% of foodservice employees are under the age of 25. Yet, over the next four years, Canada’s population of youth will remain flat before dramatically declining over the following 11 years. By 2022, there will be 340,000 fewer young people in Canada than there are today, creating another challenge for foodservice operators.

What’s needed
Over the next nine years, Canada’s commercial foodservice industry will require an additional 181,000 workers. While the demand for foodservice employees will grow an average of 1.8% per year over the next nine years, the working-age population of 15- to 69-year-olds will grow by just 0.9%.

Demand For Labour Will Outpace Canada’s Population Growth
(Average annual growth, 2006 — 2015)
2.0% 1.8% 1.7%

1.5%

1.0%

0.9%

0.5%

0.0% Foodservice Employment Demand Total Employment Demand Population of 15 to 69 Year Olds

Source: Canadian Tourism Human Resource Council, Statistics Canada and CRFA

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19

PROFIT MARGINS
• The average pre-tax profit margin for foodservice operators in Canada has declined from 5.8% to 3.8%

The pre-tax profit margin for Canadian restaurants, bars and caterers rose to 3.8% in 2005 – a small improvement over the 3.7% recorded in 2004, but well below the 5.8% profit margin achieved in 2001. Food and labour costs – the two largest expenses for foodservice operators – consumed 67.1% of operating revenue in 2005, up from 66.5% in 2004. In contrast, rental and leasing costs fell in 2005, to 7.0% from 7.3% in 2004. A decline in the repair and maintenance and ‘all other expenses’ categories also led to a slight increase in the profit margin.

Financial Operating Ratios - 2005
(share of operating revenue)
All other expenses 11.3% Depreciation 2.8% Advertising and promotion 2.8% Utilities including telephone 2.8% Rental and leasing 7.0% Repair and maintenance 2.4% Salaries and wages 31.5% Pre-tax profit 3.8% Food and beverage costs 35.6%

Source: 2007 Foodservice Operations Report, Statistics Canada and CRFA

Limited-service stays strong


Saskatchewan fares best, Ontario falters


With lower-than-average food, beverage and labour costs, limited-service restaurants have the highest pre-tax profit margin at 4.9%. The average pre-tax profit margin at full-service restaurants rose from 2.7% in 2004 to 3.1% in 2005 due to lower food and leasing costs.



Saskatchewan was home to the highest pre-tax profit margin (6.0%) in Canada in 2005. At the other end of the spectrum, the average restaurant, bar or caterer in Ontario saw pre-tax profits of only 2.9%. Ontario’s pre-tax profits have shrunk from 5.4% since 2001, due to sluggish sales and rising expenses. B.C., Alberta and Quebec all felt the sting of rising labour costs in 2005. In the West, labour shortages boosted total payroll costs 5.8% in B.C. and 5.5% in Alberta. In Quebec, higher wages and payroll taxes meant that 33 cents of every dollar spent at restaurants in Quebec went to payroll – the highest percentage in the country.

• •

Rising food and labour costs for caterers eroded pre-tax profit margins in this segment for the third straight year. Taverns, bars and nightclubs had a pre-tax profit margin of 3.3% in 2005, down from 3.9% in 2004. Profits in this segment fell across most of the country.



Operating Profit Margins
8% 7% 6% 5% 4% 3% 2% 1% 0% Full-service Limited-service Contract and Taverns, Bars Restaurants Restaurants Social Caterers and Nightclubs Source: 2007 Foodservice Operations Report, Statistics Canada and CRFA Total Industry 3.1% 2.7% 2001 2005 5.6% 6.0% 4.9% 4.3% 3.8% 3.3% 7.0% 5.8%

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21

FOODSERVICE UNITS
• The number of commercial foodservice units in Canada stays relatively flat • Chain restaurants continue to expand their market share

Fastest-Growing Menu Themes
(QSR units, 2005 over 2000)
Subs Asian Gournet Coffee and Tea Donut Mexican Pizza Hamburger Chicken Other QSR Italian -14.5% -20% Source: ReCount/NPD Group -10% 0% 10% 20% 30% 40% 50% -5.0% 2.5% 2.0% 1.8% 8.4% 14.1% 24.2% 21.6% 41.2%

The number of restaurants, caterers and bars rose just 0.1% to 62,666 units in 2006. While there was a slight increase in the number of restaurants, these gains were partially offset by a 5.5% decline in the number of taverns, bars and nightclubs. Since 2000, the number of taverns, bars and nightclubs has declined by 18.0% – a loss of 1,096 units.

Chains and Top 50 stay strong
Since 1998, the market share of chain restaurant units has increased from 32.7% to 37.9% in 2005. The top 50 foodservice companies account for 53.5% of total commercial foodservice sales, and 36.1% of units. More than one quarter (26.1%) of all commercial foodservice sales are generated by the top five foodservice companies, which also account for 13.7% of units.

Commercial Foodservice Units
3 62,77 1 63,74 4 63,85 0 63,33 2 63,517 63,30 6 62,629

Bankruptcies tumble
6

50,000 40,000 30,000 20,000 10,000 0

42,47

0 47,87

2 51,09

60,000

1 53,124

55,85

3 58,78

70,000

The number of commercial foodservice bankruptcies1 fell from 777 in 2005 to 705 in 2006. The bankruptcy rate in the foodservice industry slipped to 1.1% in 2006, its lowest level in more than two decades.

1 60,16 2 61,224

62,66

62,66

Top 50 Foodservice Companies
Share of Commercial Foodservice Revenue Share of Commercial Foodservice Units 53.5% 1990 1991 1992 1993 1994 1995 1996 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 50% 43.3% 40% 30% 29.1% 36.1%

60%

Source: Business Register, Statistics Canada

Unit growth slows in recent years
During the 1990s, the number of foodservice units rose an average of 3.5% per year. In recent years, however, the number of units has been relatively flat, indicating a balance between supply and demand for food away from home.

20% 10% 0% 1 998 2005 Source: CRFA; Foodservice & Hospitality; and Business Register, Statistics Canada Sales and units for a small number of the top 50 companies include operations outside of Canada.

1

Note: The commercial bankruptcies reported by Industry Canada capture only those businesses that have filed for bankruptcy and exclude business closures for other reasons.
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23

HOUSEHOLD SPENDING
• Annual household spending on foodservice rose 8.7% in 2005 • Restaurants provide one in 10 meals, on average • Canadians spend 24.5% of their household food dollar at restaurants

The average Canadian household spent $1,931 on food and alcohol from restaurants and bars in 2005, $154 – or 8.7% – more than in 2004. Of that total amount, $1,677 was spent on food from restaurants and $254 on alcohol from licensed establishments. Rising disposable incomes and the busy lifestyles of many Canadians are largely responsible for this spending increase. Other notable trends in household spending include:

Regional disparity
Growth in spending in 2005 was driven primarily by British Columbia and Alberta, where residents enjoy above-average disposable incomes, a strong job market and no tax on restaurant meals. By contrast, households in Atlantic Canada have the lowest disposable income, and spend less at restaurants and bars.

Average Household Spending at Restaurants in Canada
$2,000 $1,514 $1,381 $1,538 $1,536 $1,654 $1,737 $1,737 $1,777 $1,931

Between 2000 and 2006, drink prices at licensed establishments jumped 18.5%, compared to an 11.8% increase in prices at liquor stores.

Average Household Spending at Restaurants in 2005
British Columbia Alberta $2,293 $2,252 $2,057 $1,931 $1,777 $1,664 $1,651 $1,594 $1,504 $1,486 $1,096 $500 $1,000 $1,500 $2,000 $2,500

$1,500

$1,000

Ontario Canada

$500

$0 1997 1998 1999 2000 2001 2002 2003 2004 2005 Source: 2005 Survey of Household Spending, Statistics Canada

Manitoba Prince Edward Island Quebec Saskatchewan Nova Scotia New Brunswick Newfoundland and Labrador $0

Grocery continues to dominate
Healthy growth in household spending at restaurants has been matched by increased spending at grocery stores. As a result, the foodservice share of the household food dollar has remained relatively flat at 24.5% – an increase of only 2.5 percentage points in the last decade. The vast majority of meals – seven out of 10 – are prepared at home. Restaurants provide only one in ten meal occasions.

Source: 2005 Survey of Household Spending, Statistics Canada

Where Canadians Eat Their Meals
All other away-fromhome 8% Purchased from restaurant - eaten in home 2% At a restaurant 8% Carried from home 8% Skipped 8% Ready-to-eat meal purchased from grocery - eaten in home 2%

The income connection
Household spending on foodservice is closely tied to income. For every $1,000 increase in income, foodservice spending rises by $28.90.

Bars lose out to liquor stores
In recent years, there has been a shift to household spending at liquor stores – a 26.7% increase since 2000, compared to a 6.7% increase in alcohol purchases at licensed establishments. While this trend can be partially attributed to an aging population and smoking bans in many parts of the country, rising alcohol prices at licensed establishments may be the biggest factor.
Prepared and eaten at home 66%

Source: Eating Patterns in Canada - October 2006

24

FO O D S E RV I C E FACTS 20 07 — w w w.c r fa .c a

CHANGING MEALTIMES
• Popularity of breakfast/morning snacks surges • Breakfast occasions outpace lunch at quick-service restaurants

TOP-LINE TREND

The share of breakfast/morning snack occasions has jumped to 21.7% in 2006, up from 15.5% in 1996 – making breakfast the fastest growing daypart at Canadian restaurants. For the first time, the breakfast/morning snack share of occasions at quick-service restaurants (26.1%) surpassed the lunch share of QSR meal occasions (24.3%). The introduction of new breakfast sandwiches and the growing popularity of coffee have contributed to this trend.

As Canadians try to balance busy work and home lives, fewer restaurant meals are eaten on premise. This is particularly true during the breakfast and supper dayparts, when more than 80% of meals purchased at restaurants are eaten off premise. Although breakfast is gaining in popularity, supper remains the most popular daypart, accounting for 30.7% of meal occasions at quick-service restaurants and 53.3% of meal occasions at full-service restaurants.

Meal Occasions by Daypart
Restaurant Average BREAKFAST/MORNING SNACK Average Check Size 1 Share of Meal Occasions Percentage Off-Premise $2.97 21.7% 69.0% $2.29 26.1% 82.0% $6.61 12.1% 8.0% 1. Regular coffee 58.8% 2. Hash browns/home fries 10.2% 3. Eggs (excluding omelette) 9.4% 4. Sliced bread/toast/English muffin 8.4% 5. Bagels 8.4% Fastest growing item: Iced coffee/frappes Quick-service Restaurants Full-service Restaurants Top 5 Menu Items*

LUNCH Average Check Size 1 Share of Meal Occasions Percentage Off-Premise $6.75 26.6% 46.0% $5.28 24.3% 60.0% $10.29 30.2% 18.0% 1. French fries 28.3% 2. Regular soft drinks 22.3% 3. Hamburgers 17.9% 4. Regular coffee 13.4% 5. Salads 11.8% Fastest growing item: Bacon cheeseburger

SUPPER Average Check Size 1 Share of Meal Occasions Percentage Off-Premise $10.30 35.7% 62.0% $6.59 30.7% 83.0% $15.90 53.3% 32.0% 1. French fries 30.6% 2. Pizza 21.2% 3. Chicken/turkey/poultry 20.9% 4. Regular soft drink 20.2% 5. Salads 17.5% Fastest growing item: Individual slice pizza

AFTERNOON/EVENING SNACK Average Check Size 1 Share of Meal Occasions Percentage Off-Premise $3.31 15.9% 73.0% $2.69 18.8% 77.0% $8.91 4.3% 29.0% 1. Regular coffee 30.8% 2. Ice cream/yogurt/frozen yogurt 13.9% 3. Donuts 9.2% 4. Regular soft drinks 6.7% 5. French fries 5.6% Fastest growing item: Cappuccino/latte
* Share of daypart occasions

1 Per person, includes taxes but excludes tips Source: CREST/NPD Group

CREST DEFINITIONS: Consumer Reports on Eating Share Trends
Quick-Service Restaurants (QSR): Counter service, inexpensive and usually specializes in one food. Take-out and delivery is generally strong and there may be drive-through service. Family/Midscale: Table- or self-service, moderately priced and usually specializes in one type of food. There may be take-out service. Casual Dining: Full table service, mid-priced range, and often with a themed atmosphere. There is generally little take-out. Fine Dining: Extensive table service, formal table settings, premium priced. Other: Foodservice through grocery, convenience, department and discount stores, vending machines and street vendors.

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25

RESTAURANT VISITS
• Time-starved consumers are eating more restaurant meals off-premise • Quick-service restaurants account for nearly two-thirds of restaurant visits

Average Check Per Person
2005 Quick Service Family/Midscale Casual Dining Fine Dining Other $4.26 $9.25 $13.29 $28.89 $4.20 $6.36 2006 $4.41 $9.66 $14.19 $30.20 $3.92 $6.62 Year-over-year change 3.5% 4.4% 6.8% 4.5% -6.7% 4.1%

Source: CREST/NPD Foodservice Information Group Average check includes taxes but excludes tips.

One or more members of a Canadian household visited a restaurant for a meal or snack an average of 536 times in 2006, up 1.9% over 2005 and 19.1% over 1996. The majority of visits, 64.2%, were to quick-service restaurants.

Check sizes rise
The average check size per person rose to $6.62 – a 4.1% increase over 2005. This increase marks the largest year-over-year growth since CREST began collecting data in 1995.

Annual Number of Visits per Household – 2006
400 350 300 250 200 150 100 50

Annual Number of Visits per Household by On Premise and Off Premise
205 200 163 150
On Premise Take Out Drive Through Telephone Delivery

344

209

188

113

100

73

63 8

47

50

41 27 29

0
Quick Service Family/Midscale Casual Dining Fine Dining Other

0 1997 1998 1999 2000 2001 2002 2003 2004 2005 2006 Source: CREST/NPD Group

Source: CREST/NPD Group

Off-premise dining takes off
Canadians are eating more restaurant meals off-premise, turning to drive-throughs and take-out as a way to enjoy the convenience of prepared meals or snacks on the go. In 2006, the average Canadian household ate meals or snacks obtained from drive-through, take-out or telephone delivery 328 times, compared to 233 occasions in 1997. The growth in the number of drive-through orders has nearly tripled from 41 annual visits in 1997 to 113 visits in 2006. At the same time, walk-in take-out has increased 15.3%, and telephone delivery remains relatively unchanged since 1997. On-premise eating, which accounted for only 39.0% of all meal occasions in 2006, has fallen from 45.6% in 1997.

For CREST definitions, see page 25.
26
FO O D S E RV I C E FACTS 20 07 — w w w.c r fa .c a

MENU TRENDS
• French fries drop below 20% market share for first time • Coffee and tea show strong growth

French fries remain the most popular menu item at Canadian restaurants, but their share of meal occasions has dipped below the 20% mark for the first time since the Top 10 list was created in 1994.

Regular coffee remains the most popular beverage ordered at restaurants, included in 23% of all meal occasions. Hot tea jumped from fourth place to third – switching places with diet soft drinks.

Top 10 Foods - 2006
2006 Share of Occasions
1 2 3 4 5 6 7 8 9 10 French fries Hamburgers Salads Chicken Pizza Sandwiches Chinese/Oriental/stir fry Ice cream/frozen yogurt Donuts Soup 19% 10% 10% 10% 10% 9% 5% 4% 4% 4%

Top 10 Beverages - 2006
Change Since 1998 (% points)
-5.2 -1.9 -2.0 -1.7 -2.0 -0.1 -0.7 -0.9 1.0 -1.3 1 2 3 4 5 6 7 8 9 10 Regular coffee Regular soft drinks Hot tea Diet soft drinks Juice Milk/chocolate milk Specialty coffee Beer Iced tea Decaffeinated coffee

2006 Share of Occasions
23% 14% 5% 4% 3% 3% 2% 2% 2% 2%

Change Since 1998 (% points)
1.5 -3.3 1.3 -0.5 0.1 0.1 -0.3 -0.5 0.5 0.5

Source: CREST/NPD Group and CRFA Chicken: Nuggets/strips, fried, wings, BBQ/Grill/Charbroiled/Rotisserie, Baked/Roasted

Source: CREST/NPD Group and CRFA

After slipping to fourth place in 2005, hamburgers regained second place in the top 10 foods of 2006, displacing salads and chicken. Pizza returned to its former position in fifth place, and Chinese/Oriental/stir fry moved up one spot to seventh. Donuts, which were absent from the top 10 list 2005, reappeared at number nine while soup rounded out the top 10. Since 1998, most of the top 10 foods have seen a drop in meal occasions as Canadians’ tastes shift to ordering more ethnic foods and fresh-prepared sandwiches and subs. These two categories have grown 27.7% and 47.1% respectively since 1998.

FASTEST GROWING
Iced coffee/frappes Bacon cheeseburger Side dish potato salad Cookies (loose) Tomato/vegetable juice Individual pizza slice Wrap/pita sandwich Cocktails/liquor Soft serve blend ice cream Shakes/malts/floats etc.
Source: CREST/NPD Group

WHAT'S SLOWING
Fried fish sandwich Cinnamon rolls/buns Lasagna/ravioli/stuffed veal Main dish caesar salad Hot/cold turkey sandwich Brownies Rice Frozen yogurt Soft serve ice cream sundaes

The changing popularity of various menu items is tracked by The NPD Group’s CREST survey. The “growing” list shows the menu items that made the biggest volume gains in 2006 compared to 2005, while the “slowing” list shows the menu items that saw the most significant declines.

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27

TOP-LINE TREND

DEMOGRAPHIC SHIFT

• By 2016, 38% of Canadians will be aged 50+ • Eating patterns and menu preferences will shift as the population ages

In just four years, the baby boom generation will begin to turn 65, and by 2016, the number of Canadians aged 50 or older is expected to grow by more than three million, to 38% of the population. This marks a sharp contrast from 25 years ago, when only 23% of the population was over the age of 50. Foodservice operators in all segments will need to adapt to the changing eating patterns and menu preferences of this rapidly growing age group.

2006 Share of Meal Occasions by Age Group and Segment
80%

74% 69%

71%

72%

70%

70% 59%

60%

Population Growth in Canada Between 2006 and 2016
35% 30% 25% 20% 15% 10% 5% 0% -5% 2016 Population 29.5%

40%

Quick-service restaurants Full-service restaurants 33%

48% 41%

20%

18%
0%

21%

21%

21%

21%

22%

Under 6 years old

6 - 12 years old

13-17 years old

18-24 years old

25-34 years old

35-49 years old

65 years 50-64 years old and older

Source: CREST/NPD Group

-2.8% < 25 9.8 million

-0.4% 25–49 12.1 million 50+ 13.4 million

Source: Statistics Canada

Data from CREST/NPD Group show that as Canadians age, they tend to shift their restaurant visits from quick-service to full-service restaurants. With more disposable income and more time, seniors 65 and older source nearly 41% of meal occasions at full-service restaurants, compared to less than 22% for those aged 35-49.

Health concerns drive menu choices
According to Ipsos-Reid surveys1, Canadians aged 50 and older put more emphasis on freshness and nutrition than adults aged 18 to 49. Older Canadians are also more concerned about sugar content, carbohydrates and eating enough vegetables. Concern about the sodium content of foods also increases with age, with three-quarters of Canadians aged 55 and older expressing a desire to incorporate sodium-reduced foods into their diets.
When shopping for groceries, do you look for versions of the products that have this feature: (respondents that answered yes)

Restaurants respond
Many restaurants have added more options to their menus to meet the needs of both older Canadians and younger households, offering more fresh, healthy menu items, premium ingredients and portable snacks and meals. Some of the fastest-growing quick-service menu concepts feature freshly prepared subs and sandwiches, Asian foods and gourmet coffee and tea to meet the on-the-go needs of busy consumers (see page 23).

Age
Less fat Less sugar More fibre Less calories No hydrogenated oils Less carbs Source: Ipsos-Reid, Jan. 26, 2005

18-34
65% 53% 45% 49% 38% 34%

35-54
77% 69% 65% 54% 59% 43%

55+
86% 76% 77% 66% 68% 43%

Hectic lifestyles impact eating
While younger Canadians share some of these health concerns, they are more likely to find busy lifestyles an impediment to healthy eating. More than half of Canadians aged 18-34 agree that their life is so hectic they find it hard to include healthier food options on a daily basis, compared to 42% of Canadians aged 35-54 and 30% of Canadians aged 55 and older. By contrast, as older Canadians reach retirement age, the work-life balance shifts, affording more time to eat what and where they wish. 28
FO O D S E RV I C E FACTS 20 07 — w w w.c r fa .c a

1 Canadians aware of “good” and “bad carbohydrates” but do not really understand them (Mar. 10, 2004); Canadians on healthy eating (Jan. 26, 2005); President’s Choice second annual healthy eating survey (Feb. 2, 2006)

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