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The Quebec government tabled its budget in late March, providing little relief for the beleaguered restaurant industry.

Sales tax rising to 8.5%

Beginning Jan. 1, 2011, the government will add one per cent to the Quebec sales tax, bringing it to 8.5%. Any increase in consumer taxes is bad news for the restaurant industry, where sales are driven by disposable income. The higher tax also worsens the long-standing inequity of the same or similar food products being taxed at a restaurant but sold tax-free at a grocery or convenience store.

Minimum wage up 50 cents; tipped wage rising 25 cents

Foodservice operators in Quebec are also facing higher labour costs, with the general minimum wage set to rise by 50 cents to $9.00/hour on May 1. The mandated wage increase for employees earning tips will be more reasonable, however, with a 25-cent increase to $8.00. This concession follows active lobbying by CRFA’s Council of Chain Restaurants: Quebec, which pointed out that the differential between general minimum wage and minimum wage for tip earners had shrunk from 20% in 1980 to 8%. Raising the minimum wage for tip earners by an additional 25 cents would have cost table-service restaurant operators an additional $21 million a year.

In other budget news, the government said it will eliminate the capital tax for the manufacturing sector immediately, and all other sectors – including foodservice – will see the same relief before the end of 2010.

Foodservice sales in Quebec are forecast to fall 2.9% in 2009, the second-worst performance after Ontario. At just 3.8% of operating revenue, the pre-tax profit margin in Quebec’s foodservice industry is below the Canadian average.