2013 Canadian Chain Restaurant Industry Review (partial version)

GE Capital
Franchise Finance
2013
Canadian Chain
Restaurant
Industry Review
1 Preface
2 Introduction
3 Foodservice Industry Profile
4 Top-of-Mind – What CEOs Think
5 Trends Impacting Restaurants
6 Finance
7 Cost of Doing Business
8 Notes
Research Partners

Insightful and Trustworthy Data to Help Grow our Businesses
Welcome to GE Capital’s annual review of the Canadian chain restaurant
industry. The Canadian Chain Restaurant Industry Review was launched last
year and generated quite a bit of buzz in the industry. Building on this success,
GE Capital has commissioned it again this year. I am pleased to bring you this
comprehensive analysis and overview on the state of chain foodservice in
this country, with the goal of providing insight into key factors affecting our
Canadian industry. Our focus continues to be on external influencers that have
an impact on your business, whether financial, consumer, or economic. GE
Capital wishes to thank fsSTRATEGY and The NPD Group Canada for their great
work compiling and analyzing these results.
As our economy keeps on improving, our review shows Canadians continue
to spend more and more at commercial restaurants, with a 2013 year-over-
year increase of +4%. In fact, total Canadian foodservice industry sales are
expected to increase by 3.6%, or almost $2.4 billion, rising to $67.9 billion in
2013.
I find this data very encouraging for the future of our industry. Reading through
the Canadian Chain Restaurant Industry Review will undoubtedly give you food
for thought. Our market insights also will assist you in building forward-looking
plans to help grow your business.
The Canadian chain foodservice industry has gotten stronger in the past years,
and it’s thanks to your passion and dedication. I wish you all continued success
in your endeavors.
Ed Khediguian
GE Capital, Canada
Franchise Finance
GE Capital, Franchise Finance Canada
We’re More Than Just Bankers, We’re Builders
GE Capital, Franchise Finance is a leading lender to the restaurant and hospitality industries in
Canada. We specialize in financing regional and national restaurant businesses of all sizes across
the country. In the past 11 years, we’ve financed more than 725 restaurant customers with upwards
of 1,525 property locations. That’s in excess of $1.25 billion that we’ve invested in the Canadian
restaurant space.
In addition to financing at the franchisee and franchisor levels, we lend money for new developments,
recapitalizations of existing businesses, mergers and acquisitions, and management-led buyouts.
But we offer our clients more than money.
At GE Capital, we’re not just bankers, we’re builders. On top of smart financing, we provide the know-
how of GE to help your capital go further and do more. We’re excited that you’re building something
great. It takes money, along with knowledge and expertise. That’s where we come in.
Here are some reasons to consider financing with us:
žž A vast portfolio of national and regional restaurant relationships – in a variety of quick service and
casual formats – that we’ve maintained through economic ups and downs;
žž Deep expertise in the franchise business and a special understanding of the brands that operate in
this market;
žž A cash flow-based lending model that allows us to value a business based on performance, while
taking into account seasonality and other operational issues that specifically affect restaurants;
and
žž The Access GE program, through which we bring the tools, resources, insights, and expertise of GE
to help business leaders with their most pressing challenges.
We look forward to working with you as you continue to grow and succeed.
GE Capital
Franchise Finance
GE Capital
Franchise Finance
1 | Preface
Preface1
2 3

fsSTRATEGY Inc. (“fsSTRATEGY”) and The NPD Group, Inc. (“NPD”) are pleased to
release this 2013 Canadian Chain Restaurant Industry Review as part of the
2013 Canadian Restaurant Investment Summit.
This report is the culmination of extensive primary and secondary research
conducted by fsSTRATEGY and NPD. Sources include:
žž Research and data provided by the Canadian Restaurant and Foodservices
Association (“CRFA”).
žž C-Suite Survey conducted in January and February 2013 by fsSTRATEGY
and sent to over 80 CEOs and CFOs in the Canadian chain foodservice
market with a response rate of 36%.
žž Detailed data from NPD’s panel of 100,000 Canadians including its Future
of Foodservice study as well as Consumer Report On Eating Share Trend
(CREST).
žž Interviews with selected food grower associations, foodservice distributors,
and landlords.
žž Information prepared by GE Canada on the state of money markets and
chain restaurant financing.
žž Secondary research data gleaned from other sources, such as Statistics
Canada, PKF Consulting, TD Economics, the Conference Board of Canada,
University of Guelph, Human Resources and Skills Development Canada,
Canada Ministry of Labour, Ontario Energy Board, International Monetary
Fund, and RSMeans.
For further information, please contact:
Geoff Wilson or Jeff Dover Robert Carter, Executive Director
fsSTRATEGY Inc. The NPD Group (Canada), Inc.
gwilson@fsSTRATEGY.com robert.carter@npd.com
jdover@fsSTRATEGY.com (647) 723-7767
(416) 229-2290
Now in it’s fourth year, the Canadian RestauRant
investment summit has solidly established itself as the
annual business conference that brings the industry
into focus.
Operators, chain executives, franchise operators, investors,
lenders and key suppliers from across the country agree
that this is the event that delivers what they need - insight,
information and opportunity—all with meaningful content
and a tight focus that is uniquely Canadian.
Each year, the Summit presents topical issues and noted
thought leaders who share opinions, stimulate discussion
and create new directions. The entire conference program
is designed to yield authoritative information and the latest
data from across the country. When combined with the
powerful networking opportunities it presents, the Summit
is an experience that is unequalled anywhere in Canada.
CaNadiaN
RESTauRaNT
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SummiT
maY29-30,2013
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RESTauRaNTiNvEST.Ca RESTauRaNTiNvEST.Ca RESTauRaNTiNvEST.Ca RESTauRaNTiNvEST.Ca
TOP NamE iNduSTRY SPEaKERS.
SERiOuS NETWORKiNG.
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Introduction2
5
2 | Introduction
4

3.1 Canadian Foodservice Industry Sales
Canadian foodservice industry sales represented approximately 3.6% of national gross domestic
product in 2012, and industry sales are expected to increase by 3.6% to $67.9 billion in 2013. The
Canadian foodservice industry is divided into commercial and non-commercial sectors. Commercial
foodservice includes full-service restaurants (“FSR”), quick-service restaurants (“QSR”), and drinking
places. Chain foodservice sales reside in these three categories.
Historic Nominal Foodservice Sales by Sector
2009 2010 2011 2012 2013
Final Change Final Change Final Change Preliminary Change Forecast Change
Quick-service restaurants $ 20,133.8 3.2% $ 21,219.7 5.4% $ 21,962.0 3.5% $ 23,144.6 5.4% $ 24,024.1 3.8%
Full-service restaurants 20,675.0 -0.9% 20,931.4 1.2% 21,486.0 2.6% 22,693.2 5.6% 23,487.4 3.5%
Contract and social caterers 3,732.8 -3.1% 3,997.6 7.1% 4,213.5 5.4% 4,395.8 4.3% 4,602.4 4.7%
Drinking places 2,554.8 -0.2% 2,467.7 -3.4% 2,362.4 -4.3% 2,351.3 -0.5% 2,332.5 -0.8%
Total Commercial $ 47,096.4 0.6% $ 48,616.3 3.2% $ 50,024.0 2.9% $ 52,584.8 5.1% $ 54,446.3 3.5%
Accommodation foodservice $ 4,861.0 -14.1% $ 5,206.0 7.1% $ 5,235.0 0.6% $ 5,544.0 5.9% $ 5,794.0 4.5%
Institutional foodservice1
3,251.9 -3.7% 3,392.3 4.3% 3,562.1 5.0% 3,697.9 3.8% 3,862.2 4.4%
Retail foodservice2
1,282.3 4.4% 1,285.4 0.2% 1,267.6 -1.4% 1,314.5 3.7% 1,367.1 4.0%
Other foodservice3
2,195.5 -1.0% 2,254.8 2.7% 2,304.4 2.2% 2,362.0 2.5% 2,416.3 2.3%
Total Non-Commercial $ 11,590.7 -7.1% $ 12,138.4 4.7% $ 12,369.0 1.9% $ 12,918.4 4.4% $ 13,439.6 4.0%
Total Foodservice $ 58,687.1 -1.0% $ 60,754.7 3.5% $ 62,393.0 2.7% $ 65,503.2 5.0% $ 67,886.0 3.6%
Menu inflation 3.5% 2.4% 2.9% 2.5% 2.5%
Real Growth -4.5% 1.1% -0.2% 2.5% 1.1%
Source: Canadian Restaurant and Foodservices Association’s InfoStats, Statistics Canada, fsSTRATEGY Inc., and PKF Consulting
1
Includes self-operated education, transportation, health care, correctional, remote, private & public sector dining, and military
foodservice.
2
Includes foodservice operated by department stores, convenience stores, and other retail establishments.
3
Includes vending, sports and private clubs, movie theatres, stadiums, and other seasonal or entertainment operations.
Foodservice
Industry
Profile
3.1 Canadian Foodservice Industry Sales
3.2 Chain versus Independent Operator Sales
3.3 Provincial Sales Trends
3.4 Same Store Sales Growth
3.5 C-Suite Expectations for Sales and Traffic
3
6 7
2013 Canadian Chain Restaurant Industry Review 3 | Foodservice Industry Profile

As shown, commercial foodservice sales increased by 5.1% in 2012, while non-commercial sales
increased by 4.4%. Commercial foodservice sales are projected by the CRFA to increase by 3.5% to
$54.4 billion in 2013.
Historical Foodservice Sales Total versus Commercial – 1990 through 2013 (Forecast)
Total nominal foodservice sales are expected to increase from $30.8 billion in 1990 to an estimated
$67.9 billion in 2013. This represents a compound average growth rate of 2.89%. Commercial sales
(which include chain restaurant sales) represent over 80% of total foodservice sales, compared to 75%
in 1990.
2013 Forecasted Share of Foodservice Sales by Sector
Total Foodservice Commercial Foodservice
Source: Canadian Restaurant and Foodservices Association’s InfoStats, Statistics Canada, fsSTRATEGY Inc. and PKF Consulting
3
Adjusted for menu inflation.
QSRs and FSRs generate relatively similar sales and represent 87.3% of commercial foodservice sales
and 70.0% of total foodservice sales.
$-
$10
$20
$30
$40
$50
$60
$70
$80
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012-p
2013-f
BillionsofDollars
Commercial Foodservice Total Foodservice p = preliminary
f = forecast
1990: Commercial Foodservice 75.0% of Total Foodservice
2013: Commercial Foodservice 80.2% of Total Foodservice
23
22
23
24
26
27
28
29
31
33
35
36
37 38
40
41
43
45
47 47
49
50
53
54
31
29
30
31
33 33
35
37
39
41
44
45
47 47
50
52
55
57
59 59
61
62
66
68
$54,446.3
$5,794.0
$3,862.2
$1,367.1 $2,416.3
Total Commercial
Accommodation
foodservice
Institutional foodservice
Retail foodservice
Other foodservice
$24,024.1
$23,487.4
$4,602.4
$2,332.5
Quick-service restaurants
Full-service restaurants
Contract and social
caterers
Drinking places
8 9
2013 Canadian Chain Restaurant Industry Review

80
85
90
95
100
105
110
115
2007 2008 2009 2010 2011 2012
Total Commercial Full-Service Restaurants Quick-Service Restaurants Caterers Drinking Places
Sales Index 2007 = 100
100
102.3
99.4
100.3 100.3
102.9
101.5
97.3
96.1 95.9
98.7
104.0 103.5
106.9
107.4
111.0
100.9
94.4
98.8
101.2
101.3
99.0
95.5
90.1
83.9
81.5
Growth trends vary by sector. The following table compares the real sales (adjusted for inflation)
growth indices (2007 real sales = 100) of various commercial foodservice sectors.
Sales Index by Industry Segment
As shown, caterers saw the greatest decline in sales during the 2009 recession, but have since
returned to pre-recession sales levels. FSR sales dropped by six index points in 2009 and continued to
decline until 2011. Real FSR sales increased in 2012, but they have yet to return to pre-recession levels.
QSR sales continue to grow.
Sales for drinking places continue to decline due largely to a reduction in the number of
establishments classifying themselves as drinking places. Many such operations have been
reclassified as FSRs.
3.2 Chain versus Independent Operator Sales
The chart below graphically depicts the share of chain and independent restaurant expenditures in
various regions of Canada for 2012.
Chain versus Independent Restaurant Expenditures – 2012
Source: The NPD Group/CREST®
As shown, 62.2% of the expenditures in restaurants in Canada are in branded local, regional,
national, and international chains. Quebec has the greatest percentage of independent restaurant
expenditures, with almost half of all restaurants’ sales not affiliated with chains.
0
20%
40%
60%
80%
100%
Chain Restaurants Independent Restaurants
CanadaWestOntarioQuebecAtlantic
30.6%
69.4%
48.4%
51.6%
34.6%
65.4%
38.8%
63.2%
37.8%
62.2%
10 11

The following graph demonstrates consumer spending in restaurants for quick-service restaurants,
family/midscale restaurants, casual restaurants, and fine dining. Expenditures are compared for chain
and independent operators by restaurant type.
Dollars Spent by Restaurant Type—Chain versus Independent Restaurants
2007 to 2012 (12-Month Periods Ending November)
Source: fsSTRATEGY Inc. using data from The NPD Group/CREST®
As the chart demonstrates, quick-service restaurant chains realized the greatest expenditure with
segment’s share of sales increasing from 41.6% in the 12 months ending November 2007 to 44.7%
in the 12 months ending November 2012. Expenditures in independent quick-service restaurants are
significantly lower, and growth was flat throughout the period.
In the family/midscale restaurant segment, independent restaurants have a greater share and
demonstrated better growth than that of chains. In casual restaurants, chains realized slightly lower
expenditures than independents, but they demonstrated superior growth throughout the six-year
period. Casual independent restaurants experienced declining expenditures through the recession but
appear to be enjoying a slight recovery. Finally, expenditures in fine dining restaurants are the lowest.
Fine dining restaurant expenditures declined through the recession and only just showed a slight
improvement in 2012. Clearly, opportunity exists for midscale and casual chains to gain market share
from independents.
3.3 Provincial Sales Trends
Canadian Commercial Foodservice Sales by Province – 2008 through 2012
Canada
Newfoundland
andLabrador
PrinceEdward
Island
NovaScotia
New
Brunswick
Quebec
Ontario
Manitoba
Saskatchewan
Alberta
British
Columbia
Revenues (thousands)
2008 $46,795,255 $565,006 $176,233 $1,210,275 $891,334 $9,304,854 $17,593,324 $1,290,495 $1,287,297 $6,618,399 $7,709,844
2009 $47,096,429 $588,886 $175,136 $1,209,506 $938,700 $9,385,175 $17,631,848 $1,338,637 $1,356,991 $6,526,605 $7,795,980
2010 $48,616,283 $644,086 $184,145 $1,252,019 $968,838 $9,715,759 $18,381,418 $1,369,856 $1,428,570 $6,665,414 $7,846,102
2011 $50,023,975 $679,708 $187,481 $1,275,087 $962,206 $9,906,542 $19,159,000 $1,440,093 $1,506,167 $7,082,169 $7,662,998
2012-p $52,584,794 $739,300 $194,345 $1,333,440 $980,134 $10,385,145 $20,062,403 $1,538,140 $1,628,761 $7,713,405 $7,845,187
Percent Change vs Previous Year
2008 4.8% 6.1% 3.2% 8.6% 5.3% 6.1% 5.7% 5.4% 10.2% 3.3% 1.3%
2009 0.6% 4.2% -0.6% -0.1% 5.3% 0.9% 0.2% 3.7% 5.4% -1.4% 1.1%
2010 3.2% 9.4% 5.1% 3.5% 3.2% 3.5% 4.3% 2.3% 5.3% 2.1% 0.6%
2011 2.9% 5.5% 1.8% 1.8% -0.7% 2.0% 4.2% 5.1% 5.4% 6.3% -2.3%
2012-p 5.1% 8.8% 3.7% 4.6% 1.9% 4.8% 4.7% 6.8% 8.1% 8.9% 2.4%
As shown, at 8.9% growth in 2012, Alberta continues to be the fastest-growing provincial
market, followed by Newfoundland and Labrador, which grew by 8.8% in 2012. Ontario
accounts for 38.2% of total commercial foodservice sales.
QuickService
Chains
QuickService
Independents
Family/Midscale
Chains
Family/Midscale
Independents
CasualChains
CasualIndependents
2007 2008 2009 2010 2011 2012
20,000
15,000
10,000
5,000
0
12 13

As shown, Ontario and Quebec have the greatest commercial foodservice sales. Despite having the
largest population, Ontario, with per capita commercial foodservice sales of $1,485, trails Alberta
($1,991), British Columbia ($1,697), and Saskatchewan ($1,508). Manitoba, at $1,214, has the lowest
per capita commercial foodservice sales, followed by Quebec ($1,289) and New Brunswick ($1,296). On
average, diners in Alberta spend $777 or 64.0% more in commercial foodservice establishments than
diners in Manitoba.
Source: Canadian Restaurant and Foodservices Association and Statistics Canada
The following table compares total commercial foodservice sales and commercial foodservice sales per
capita by province.
2012 Commercial Foodservice Sales and Commercial Foodservice per Capita by Province
$0
$200
$400
$600
$800
$1,000
$1,200
$1,400
$1,600
$1,800
$2,000
$0
$5,000
$10,000
$15,000
$20,000
$25,000
NL PE NS NB QC ON MB SK AB BC
$1,330.17 $1,296.56
$1,289.32
10,385.1
20,062.4
$1,485.45
$1,214.00
$1,508.17
$1,991.20
$1,697.15
7,845.27,713.4
1,628.81,538.1
980.1
1,333.4
194.3
739.3
PerCapitaSalesinDollars
2011 Commercial Foodservice Sales 2011 Commercial Foodservice Sales Per Capita
NationalAverage Per Capita Spend
National Commercial
Foodservice Sales Per Capita
SalesinMillionsofDollars
$1,442.09
$1,405.55
Same Store Sales Growth 2007 through 2012, Selected Publicly-Traded Restaurant Chains
2.9%
2007
1.8%
-1.5%
2008
1.4%
2009
2.5%
20112010
1.1%
2011
0.5%
-0.5%
0.0%
1.0%
-1.0%
1.5%
-1.5%
2.0%
-2.0%
2.5%
3.0%
3.5%
Source: fsSTRATEGY Inc. using data from publicly-traded company annual and quarterly reports.
As the exhibits demonstrate, SSSG declined significantly through the economic recession. A gradual
recovery ensued in 2010 and 2011. However, SSSG declined again in 2012, demonstrating the fragility
of the recovery.
Same Store Sales Growth Percentage
2007 2008 2009 2010 2011 2012
Minimum -3.9% -1.2% -6.5% -1.7% -0.1% -1.2%
Average 2.9% 1.8% -1.5% 1.4% 2.5% 1.1%
Maximum 5.9% 7.3% 2.9% 4.9% 4.9% 3.7%
Source: fsSTRATEGY Inc. using data from publicly-traded company annual and quarterly reports.
Average Same Store Sales Growth 2007 through 2012,
Selected Publicly-Traded Restaurant Chains
3.4 Same Store Sales Growth
Same Store Sales Growth (“SSSG”) is a measure of the performance of restaurant chains year-over-
year, comparing for the same base of stores from one year to the next on a rolling basis. The table
below provides an average of SSSG from 2007 to 2012 for the seven largest Canadian publicly-traded
restaurant chains. Data from 2012 has been taken from either annual reports or Q3 reports as
available by chain.
14 15
14

The following chart, prepared from data from the CRFA’s 2012 Q4 Restaurant Outlook Survey,
compares restaurant operators’ reports on the trend of their Same Store Sales (“SSS”) for Q4 2011, Q4
2012, and their prediction for the next six months.
Quarter Four Same Store Sales Change over Previous Year –
2011, 2012, and Next Six Months Prediction
3.5 C-Suite Expectations for Sales and Traffic
Once again, fsSTRATEGY has completed a survey of Canadian foodservice executives to gain their
insights on the state of the industry for the Canadian Restaurant Investment Summit and to capture
opinions and industry forecasts from Canada’s industry leaders. Executives from 80 restaurant chains
were invited to participate in the 2013 C-Suite Survey. Twenty-nine brands responded, representing
a 36% response rate and approximately 5,870 or 7% of Canadian restaurants. Responses from the
C-Suite survey have been included throughout this book.
Respondents to the C-Suite Survey were asked how they expected industry sales and traffic to change
in 2013.
In 2013, Compared to 2012, Industry Sales are Expected to:
Decline 5.1% to 7.5% 0%
Decline 2.6% to 5% 0%
Decline 0.1% to 2.5% 5%
Remain Flat 5%
Increase 0.1% to 2.5% 60%
Increase 2.6% to 5% 30%
Not sure 0%
In 2013, Compared to 2012, Industry Traffic is Expected to:
Decline 5.1% to 7.5% 0%
Decline 2.6% to 5% 0%
Decline 0.1% to 2.5% 10%
Remain Flat 50%
Increase 2.6% to 5% 15%
Not sure 0%
Source: fsSTRATEGY Inc. C-Suite Survey
Most respondents (60%) expect industry sales to increase by up to 2.5% in 2013, while 50% of
respondents expect traffic to remain flat. This suggests that revenue increases will depend on
operators’ ability to increase average checks.
Source: fsSTRATEGY Inc. using data from CRFA’s Q4 Restaurant Outlook Survey
As shown, more operators reported SSS to be relatively consistent in 2012 than operators reporting
SSS to be growing or declining. Looking forward into the next six months, an even greater number
of operators felt SSS would remain consistent. Clearly, confidence in the recovery of industry sales
remains cautious, underlining the need for operators to focus on retaining existing business and
generating higher margins to achieve better profitability.
24.0%
33.0%
37.5%
51.0%
36.0%
28.2%
21.0%
31.0%
34.2%
0.0% 10.0% 20.0% 30.0% 40.0% 50.0% 60.0%
Next six months
2012 Q4
2011 Q4
Lower
About the same
Higher
16 17

4.1 Opportunities
C-Suite Survey participants were asked to list the three greatest opportunities in the foodservice
industry for 2013.
Greatest Opportunities for Foodservice Industry, 2013
Opportunity Percentage of Respondents
Acquisition and consolidation 23%
Cost control/containment 18%
Guest experience/customer service 14%
Healthy options 14%
Premiumization 14%
Growth 9%
Menu innovation 9%
Smaller unit footprints 9%
Social media 9%
The results suggest sustaining existing business (through improving customer experience, offering
healthy options, and using “premiumization”), consolidating existing units, and cost control are top-of-
mind for Canadian chain foodservice executives.
4.2 Threats
C-Suite participants were asked to list the three greatest threats in the foodservice industry for 2013.
Greatest Threats for Foodservice Industry, 2013
Threats Percentage of Respondents
Operating Costs
Labour Cost 54.5%
Food Cost 36.4%
Rent 13.6%
Other/General 40.9%
Market Saturation/Competition 36.4%
Competition from American Brands 9.1%
Economy 31.8%
Government Policy 13.6%
Availability/Quality of Skilled Labour 13.6%
Given the nature of the opportunities identified in the previous section, the importance of operating
costs as the most significant threat is not surprising. Interestingly, market saturation and competition,
including competition from the United States, are also top-of-mind, as are economic conditions.
Top-of-Mind
What CEOs
Think
4.1 Opportunities
4.2 Threats
4.3 Biggest Changes
4
18 19

4.3 Biggest Changes
4.3.1 Short-Term Changes
C-Suite Survey participants were asked what they thought would be the biggest short-term changes
in the foodservice industry. While responses were quite broad in nature, several key themes emerged:
žž Competition. Competition is expected to intensify, which is not a surprise given limited sales and
traffic growth in the past few years and the constant need for chains to demonstrate performance
improvement to shareholders. Competition is expected to intensify in several ways:
žž new players, especially from the United States;
žž the rise of fast casual concepts;
žž competition on price; and
žž challenges in some local markets from savvy independents.
žž Consolidation. Survey participants from full-service dining concepts predict the fall-out of some
chains, more closures of non-performing units, and declining market share for high-check average
restaurants.
žž Menu changes. Participants expect increasing specialization of menus and concepts, as well as
increased pressure to offer healthy alternatives.
žž Social media. Social media will continue to play a role in influencing consumer behaviour and
therefore the success of chains and outlets.
4.3.2 Long-Term Changes
C-Suite Survey participants were asked what they thought would be the biggest long-term changes in
the foodservice industry. Once again, several key themes emerged:
žž Contraction and redefinition. In general, respondents predict contraction in terms of number of
restaurants and perhaps even the number of chains. Full-service operators expect casual dining
to be redefined – elimination of poorer-performing outlets will continue, better operators will
rise to the top, and casual dining will take on a new face to be more relevant to consumers. One
operator predicts “full-service restaurants will go the way of full-service gas stations.” While the
latter prediction may seem pessimistic, clearly respondents expect full-service dining to change
dramatically.
žž Concept changes. Restaurant concepts will morph to focus increasingly on healthy, convenient,
and improved experience options. Participants expect increases in unique/specialized concepts,
take-out and over- the-counter concepts, and penetration by United States-based concepts.
žž Technology. Technology and social media will play an even more important role in success.
žž Demographic shift. As Baby Boomers retire, participants expect a change in that market
segment’s purchase behaviours and, as a result, a need for operators to adapt.
4.3.3 Opinion Leaders
fsSTRATEGY interviewed a number of key Canadian foodservice industry opinion leaders to get
reactions to the C-Suite survey participants’ responses.
On consolidation, the key opinion leaders indicated that while it is possible that some chains could
fail, consolidation most likely will present itself as chains closing unsuccessful outlets and re-
developing them as more successful, market-relevant concepts. The NPD Group’s CREST® reports
there have been over 500,000 fewer full-service dining occasions over the past two years – something
has to change in the full-service sector. One opinion leader suggested that “perhaps (participants
expect consolidation) because they see how hard it is to sustain flat sales and make a profit, and think
other, weaker chains can’t be long for this life.” On the positive side, one key opinion leader believes
chains will continue to expand market share over independents.
On competition from the United States, several chains have made concerted forays into the
Canadian market. These include Five Guys Burger and Fries, Buffalo Wild Wings, and P. F. Chang’s.
The opinion leaders observe a significant level of “tire-kicking” by other United States-based chains,
triggered by the softness of the economy in the United States and the attractiveness of nearby
Canada as a first foray into international development. One opinion leader commented, “Canadian
CEOs need to prepare for this – it’s coming, and it’s real.”
All in all, as Canadian operators develop new concepts
and well-financed United States chains test the waters
in Canada, existing chains with older facilities will
see significant pressure and may have to rationalize.
Competition for sites is fierce, which will keep the
pressure up on rental rates.
20 21
2013 Canadian Chain Restaurant Industry Review 4 | Top-of-Mind What CEOs Think

5.1 Key Consumer Profiles
Commercial Restaurant Traffic by Age Group
Canadians love using restaurants. During 2012, the percentage of the Canadian population over the
age of 16 visiting a restaurant daily increased to 47%. Representing over six billion guest visits to the
72,641 commercial restaurants across Canada, the Canadian restaurant industry remained a stable
marketplace in 2012. Helping support this stability, older Canadians increased their use of restaurants
faster than any other age group. Specifically known as “Boomers,” consumers age 55 and older
increased their visits to restaurants by 6% in 2012 versus the previous year, making them the fastest-
growing group of restaurant consumers in Canada.
Families continued to represent the largest decline in guest visits to restaurants in 2012, a trend that
carried over from 2011. Uncertain economic conditions appear to have been a factor influencing
out-of-home family dining. Many restaurant concepts that rely heavily on family occasions have
had to increase efforts to attract visitors for the adult-only occasion. This has led to increased menu
innovations targeting adults, specifically for the breakfast and snacking dayparts.
The average Boomer (55+) now eats out of home 174 times a year.
Trends
Impacting
Restaurants
5.1 Key Consumer Profiles
5.2 Key Foodservice
Industry Trends
5.3 Looking Ahead
5
5 | Trends Impacting Restaurants
Commercial Restaurant Traffic by Household Income
As a possible result of increased guest counts from Boomers, households with less than $45,000 in
annual income are the only income group that increased their use of restaurants in 2012. Households
with incomes of $45,000 to $55,000 visited restaurants less in 2012 than 2011, by two visits annually.
The sharpest decline in restaurant use was by households with incomes greater than $100,000,
representing a decline of 10 visits per year in 2012 compared to 2011.
Historical Total Commercial Restaurant Traffic
During the past three years, the global restaurant market struggled to increase sales, while the
Canadian restaurant industry did not experience a prolonged period of sales declines. On average,
the quarter-over-quarter dollar growth has been positive for the past three years for the Canadian
restaurant market. Sustained dollar growth can be attributed to increases in average eater check,
as well as stable customer traffic and an increasing share of the Canadian population using
restaurants daily.
22 23

Percentage Restaurant Sales Growth Year-Over-Year
Total Restaurants – Percentage Growth in Sales Year-Over-Year
Source: The NPD Group /CREST®
Visits to Canada’s commercial foodservice industry remained relatively flat in 2011, growing just 1%
over the prior year, with annual volume that is 70 million visits above 2008 pre-recession levels. GDP
and job growth indicate the Canadian economy is moving from recovery to expansion mode, but
Canadians remain cautious about spending freely at restaurants.
5.2 Key Foodservice Industry Trends
FSR and QSR Growth by Region
The QSR segment in Canada has undergone a transformation during the past five years. Long gone
are the uncomfortable seating and standard décor. Today’s QSRs reflect the interior design elements
of FSRs. With a focus on promoting an upscale image, today’s QSR menus also reflect this change.
The QSR concepts that are winning in today’s market are those that have promoted a platform of
innovation – from décor to menu selection.
Today, 65% of Canadians’ out-of-home occasions occur at quick-service restaurants. FSRs capture
24% of restaurant traffic; retail establishments (home meal replacement at grocery and c-stores)
represent 11%.
Across all provinces, customer traffic to the QSR segment was positive in 2012. Only three provinces,
(Quebec, Ontario, and Alberta) experienced an increase in customer traffic to the FSR segment.
0%
1%
3%
2%
3%
1%
3%
3%
4%
5%
5%
3% 4%
SON’09 DJF’10 MAM’10 JJA’10 SON’10 DJF’11 MAM’11 JJA’11 SON’11 DJF’12 MAM’12 JJA’12 SON’12
24 25
Source: The NPD Group /CRESTz
5.3 Looking Ahead
Understanding today’s consumer allows Restaurant Operators to create detailed strategy plans to
increase guest counts. Equally important is looking ahead at how our population is changing and how
your business can capitalize on these changes.
Population Trends: Age, Income, Ethnicity – Nationally and Regionally
0
5,000
10,000
15,000
20,000
25,000
30,000
35,000
40,000
45,000
50,000
Q1'11 Q2'11 Q3'11 Q4'11 Q1'12 Q2'12 Q3'12 Q4'12
Europe Asia Australasia
United States, West Indies Africa Central America & Other N.A.
South America
Trends Analysis
The most influential trend to shape the Canadian restaurant landscape over the past five years has
been convenience. Today, 58% of all restaurant meals are purchased by take-out, drive-thru, or
delivery. Restaurant segments that cater to convenience, such as home meal replacement (“HMR”) at
grocery stores and QSR operators with drive-thrus, are better positioned to address consumers’ needs
that are motivated by convenience. FSR operators also have recognized the opportunity to increase
sales by increasing delivery options and prompting menu innovation on delivery menus.

Population Projection, by Visible Minority Group Population (000s) by Broad Age Groups 2011 for the Six Largest CMAs
Insights from “The Future of Foodservice” –
The NPD Group’s Five-Year Forecast for the Canadian Market
Published in 2012, The NPD Group’s Future of Foodservice report is the most comprehensive five-
year forecast for the Canadian foodservice industry. The performance of the actual foodservice
market compared to the beginning of the five-year forecast appears to be on track. The report shows
restaurant traffic is anticipated to grow by +2% per year until 2016. Driven by the continued need for
convenience, QSRs will lead the industry in customer traffic, while FSRs will be challenged to increase
guest counts. Regional restaurant markets will experience dollar growth, driven by the increase of
innovative, regional QSR and fast casual concepts.
Average After-Tax Income (000s), by Economic Family Type
2006 2031
Chinese
South Asian
Black
Filipino
Latin American
Southeast Asian
Arab
West Asian
Korean
Japanese
Other visible minorities
72
54
76
70
82
105
43
30
75
57
79
73
86
106
44
31
76
57
80
74
87
111
45
32
76
56
80
74
86
113
47
32
77
56
81
73
89
111
47
32
Economic
families, two
persons or
more
Elderly
families (2)
Non-elderly
families (3)
Married
couples
Two-parent
families with
children
Married
couples with
other
relatives
Lone-parent
families
Unattached
individuals
2006 2007 2008 2009 2010
975
632
354
223 205 211
3,901
2,632
1,646
874 823 868
514
407
226
87 96 115193 152 87 32 36 42
Toronto
(Ont.)
Montréal
(Que.)
Vancouver
(B.C.)
Calgary
(Alta.)
Edmonton
(Alta.)
Ottawa -
Gatineau
(Ont.)
0 to 14 years
15 to 64 years
65 years to 79 years
80 years and over
26 27

6.1 The Economy
The following chart compares total real foodservice sales growth against two economic indicators:
real disposable income growth and real Gross Domestic Product (“GDP”) growth.
Total Foodservice Real Growth vs. Real Disposable Income Growth and Real GDP Growth
Source: Statistics Canada, Canadian Restaurant and Foodservices Association, and TD Economics Conference
Board of Canada
Finance
6.1 The Economy
6.2 Money Markets
6.3 Financial Markets in Canada
6.4 Total Financeable Debt Market Size
and Loan Volumes
6
Year-Over-YearPercentageChange Real Foodservice Sales-Total Real Disposable Income Real GDP
-16%
-11%
-6%
-1%
4%
1990
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012-p
2013-f
28 29
2013 Canadian Chain Restaurant Industry Review 6 | Finance

The previous table illustrates a relationship between real foodservice sales, real GDP, and real
disposable income. Comparing 1991 and 2009 suggests that real disposable income could have a
shielding effect on foodservice sales during times of recession. In 1991, both GDP and disposable
income declined simultaneously, and foodservice sales fell by 15%. Despite a greater decrease in GDP
in 2009 (compared to 1991), real disposable income still grew slightly, and the decrease in foodservice
sales was less than five percent.
The following chart compares Canadian foodservice sales and consumer confidence indices.
Canadian Foodservice Sales versus Consumer Confidence
As shown, a positive correlation existed between consumer confidence and total foodservice sales
between 1989 and 2002. However, since 2002, foodservice sales have continued to increase despite a
sharp decline in consumer confidence.
As shown, employment in the foodservice industry has grown at a faster rate than national
employment. The average number of employees per location has increased significantly, from
10.6 in 2003 to 13.8 in 2012. This trend could be due in part to the increased number of chain
restaurants as a percentage of total operations. Chain restaurants tend to be managed by employees,
while independent restaurants are often managed by owners. The trend could also be a result of
restaurants using a greater proportion of part-time staff.
When asked to list the three greatest threats faced by the foodservice industry, 13.6% of C-Suite
Survey respondents listed the availability and quality of skilled labour, while 15% of respondents to the
Canadian Restaurant and Foodservice Association’s Q4 2012 Restaurant Outlook Survey reported that
shortage of unskilled labour had a negative impact on their business.
Source: Calculated using data from the Canadian Restaurant and Foodservices Association, Statistics Canada,
fsSTRATEGY Inc., PKF Consulting, and the Conference Board of Canada
Source: Statistics Canada
Employment Indices—All Industries, Foodservice and Employees per Foodservice Location
0
20
40
60
80
100
120
140
160
Total Foodservice Sales Consumer Confidence Total Real Foodservice Sales
2002=100
1990
1989
1991
1992
1993
1994
1995
1996
1997
1998
1999
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012-p
98.3
97.3 97.8
99.8
101.6
102.5
104.8
107.3
110.1
112.8
100.0
98.6 100.1
101.4
103.8
105.5
109.8
109.8
114.8
116.4
119.7
97.8
101.5
110.0
116.2
122.2
124.4 124.1
127.0
128.2
80
90
100
110
120
130
140
2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012
Employment Index - All Industries Employment Index - Foodservice
Employees per Foodservice Location
2002 = 100
30 31

0
50
100
150
200
250
300
Commodity Prices, IMF Indices
January 2000 = 100
All Commodities Industrials Materials Food Crude Oil
Jan-01
Jun-01
Nov-01
Apr-02
Sep-02
Feb-03
Jul-03
Dec-03
May-04
Oct-04
Mar-05
Aug-05
Jan-06
Jun-06
Nov-06
Apr-07
Sep-07
Feb-08
Jul-08
Dec-08
May-09
Oct-09
Mar-10
Aug-10
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
6.2 Money Markets
Global Financial Markets
A few key trends will define the global financial environment in 2013. Resilience in household
consumption in North America, policy stimulus by emerging countries, stabilization of China’s outlook,
and a rebound of the Brazilian economy will positively impact global economic growth. However,
uncertainty in Europe and geopolitics are still holding back investment and employment growth.
Although in the Eurozone things are moving in the right direction, the slow pace of progress increases
uncertainty. In Europe, reforms are reducing fiscal deficit and narrowing external imbalances, but debt
levels remain high. In the Middle East, tensions in the region have risen, and a sudden disruption to oil
supplies is a tail risk that could prove extremely damaging to global growth.
The growing importance of liquidity of financial markets drives large swings in assets and commodity
prices. The gas price difference across regions will serve as an incentive to trade, and the competition
between gas and coal will increase investments. However, the pressure on energy, food, and other
commodity prices, as well as overall high inflation risks, will have a negative impact on funding costs
over the next two to three years.
Despite the stabilization of North American housing markets and household consumption’s proven
resilience, the deleveraging of developed markets is increasing growth costs. Governments in
developed markets are still in a multi-year debt reduction process with greater pressure for higher
taxes and budget cuts.
Powerful policy support, reasonable valuations, and strong capital flows to emerging markets are
helping the global equities market to perform better in 2013. The best performers in the last three
months have been Mexico, Australia, China, and the United States. Japan boosted stock prices in the
fourth quarter of 2012, but a weaker Yen is still a concern to sustain high performance. The following
chart shows the current trends of the main stock markets by region.
Stock Market Performance by Region by Quarter—2011
Q12012
Q22012
Q32012
Q42012
MI
Italy
CAC 40
France
Hang Seng
China
Bovespa
Brazil
NIKKEI
Japan
AX 20
Australia
Dax
Germany
FTSE
UK
Dow Jones
US
S&P
US
Nasdaq
US
MexBol
Mexico
Q12012
Q22012
Q32012
Q42012
Q12012
Q22012
Q32012
Q42012
Q12012
Q22012
Q32012
Q42012
Q12012
Q22012
Q32012
Q42012
Q12012
Q22012
Q32012
Q42012
Q12012
Q22012
Q32012
Q42012
Q12012
Q22012
Q32012
Q42012
Q12012
Q22012
Q32012
Q42012
Q12012
Q22012
Q32012
Q42012
Q12012
Q22012
Q32012
Q42012
Q12012
Q22012
Q32012
Q42012
Q12012
Q22012
Q32012
Q42012
IBEX
Spain
Index(Jan2011=100)
60
70
80
90
100
110
120
130
Source: GE Market Intelligence Network
In the commodities market, energy and food contributed to sharp commodity price increases during
the third quarter of 2012. Food prices started to increase strongly in mid-June after remaining broadly
flat for much of the year. Prices for most commodities appear likely to remain in a soft patch in the
near term and longer term. A rebalancing of growth in China likely will favour commodity prices tied to
consumption versus fixed asset investment, but short term volatility is expected.
Commodity Prices (International Monetary Fund Index)
Source: International Monetary Fund
32 33

Crude Oil Prices (Price per Barrel) Since 2000
Commodities Percentage Change Year-Over-Year
Source: GE Capital
The United States Energy Information Association (“EIA”) expects Brent crude oil price to average $109
per barrel this year and $101 per barrel in 2014.
Source: GE Capital and the United States Energy Information Administration
0
20
40
60
80
100
120
140
160
$US Dollars
Brent Crude Oil Price Per Barrel
Jul-00
Jul-01
Jul-02
Jul-03
Jul-04
Jul-05
Jul-06
Jul-07
Jul-08
Jul-09
Jul-10
Jul-11
Jul-12
-60%
-40%
-20%
0%
20%
40%
60%
80%
Commodities percentage change year over year
Jan-01
Jun-01
Nov-01
Apr-02
Sep-02
Feb-03
Jul-03
Dec-03
May-04
Oct-04
Mar-05
Aug-05
Jan-06
Jun-06
Nov-06
Apr-07
Sep-07
Feb-08
Jul-08
Dec-08
May-09
Oct-09
Mar-10
Aug-10
Jan-11
Jun-11
Nov-11
Apr-12
Sep-12
34 35

6.3 Financial Markets in Canada
Analysis
The European sovereign debt crisis is still a concern for Canada’s near-term economic outlook and the
stability of the country’s financial markets. The risks related to the sovereign debt crisis and the United
States economy continue to be key external threats to the domestic financial system. Although the
United States’ “fiscal cliff” turned into a gentle slide with a compromise in some tax increases, a weak
United States recovery remains on track.
The level of Canadian household debt has reached 160% of disposable income, greater than most
other OECD countries. Therefore, corporate spending is becoming a key player in driving growth as
households de-lever.
Canada’s monetary policy remains stimulative at one percent as an incentive to increase investment
and exports as foreign demand strengthens and uncertainty diminishes. With an inflation rate closer
to two percent and the economy expanding, GE Capital expects that the Bank of Canada will hold
interest rates steady until the end of 2013.
The Canadian dollar traded well against the United States dollar in 2012 and will continue to be
strong in 2013. GE Capital sees the Canadian dollar gaining another three to five percent against
the United States dollar. A strong exchange rate is often the sign of a well-performing economy.
Although depreciation can provide a helpful temporary boost, it is not a long-term substitute for faster
productivity growth, stronger competitiveness, and sound macro policies.
Forecast
Although Canada’s overall exports and employment growth rates remained flat in 2012, Canadian
GDP grew 1.3% year-over-year in November. The automotive manufacturing, oil extraction, and
mining sectors showed the strongest growth, supporting the GDP increase. In 2013, strong increases
in investment will be expected in utilities, transportation, and warehousing.
The Canadian unemployment rate will continue to be below seven percent with a moderated wage
growth in the next three years that will help to keep prices in line as the Canadian government holds
the interest rate steady into 2014.
GE Capital sees Canadian GDP growth increasing to 2.5% in 2013 based on a stronger United States
economy and Chinese recovery that will boost Canadian exports of automotive and construction
products.
The United States economy is forecasted to grow by 2.3% in 2013 with supportive monetary policy
and a credible medium-term plan to reduce the fiscal overruns likely to generate a stronger gain of
3.1% in 2014.
Canada—GDP Growth
Source: GE Capital
Interest Rate Policy
Factors influencing policy interest rates in 2013 for G5 countries include:
žž the United States Federal Reserve’s open-ended quantitative easing to persist until unemployment
is below 7% and falling;
žž fiscal austerity to continue across Eurozone - the European Central Bank is likely to undertake
outright quantitative easing;
žž potential increase in inflation in the United States; and
žž policy clarity.
Forecast
-6.0%
-4.0%
-2.0%
0.0%
2.0%
4.0%
6.0%
2002Q1
2002Q3
2003Q1
2003Q3
2004Q1
2004Q3
2005Q1
2005Q3
2006Q1
2006Q3
2007Q1
2007Q3
2008Q1
2008Q3
2009Q1
2009Q3
2011Q1
2011Q3
2010Q1
2010Q3
2012Q1
2012Q3
2013Q1
2013Q3
2014Q1
2014Q3
2015Q1
2015Q3
2016Q1
2016Q3
2017Q1
2017Q3
Canada: GDP Growth (%YOY)
36 37

6.4 Total Financeable Debt Market Size and Loan Volumes
The following charts summarize total financial debt in the Canadian restaurant industry by transaction
type and segment type as prepared by GE Capital. GE Capital estimates assume a total financeable
debt of $4.4 billion. Financeable debt is used for refinancing/renovations, acquisitions, and new builds.
Total Financeable Debt by Transaction Type ($millions)
Total Financeable Debt by Transaction Type ($MM)
Six C-Suite Survey respondents reported making an acquisition transaction in 2012. The following
table summarizes the minimum, maximum, and average multiples for EBITDA quoted by respondents
as a means to establish values in those transactions.
C-Suite – 2012 Transaction Multiples on EBITDA
Minimum Maximum Average
<2.0 5.0 3.6
Source: fsSTRATEGY Inc., C-Suite Survey
As shown, transaction multiples for respondents ranged from less than two times EBITDA to five times
EBITDA, for an average of 3.6.
Source: GE Capital
Source: GE Capital
Total
Market
QSR Coffee Casual Sandwich Pizza Asian Express ChickenFamily
Casual
Premium
Casual
$4,375.0
$1,029.9
$1,230.2
$485.3
$472.2
$414.8
$412.7
$201.0 $67.6 $46.7 $14.6
$4,375.0
$2,333.0
$1,614.1
$427.9
Refinance/Renovation New Build
G5 Average Policy Interest Rates
Source: GE Capital
Note: The G5 economies include the United States, the Euro Area, Japan, the United Kingdom, and Canada.
0%
1%
2%
3%
4%
5%
6%
G5 Average Policy Interest Rate
Mar-00
Oct-00
May-01
Dec-01
Jul-02
Feb-03
Sep-03
Apr-04
Nov-04
Jun-05
Jan-06
Aug-06
Mar-07
Oct-07
May-08
Dec-08
Jul-09
Feb-10
Sep-10
Apr-11
Nov-11
Jun-12
Jan-13
38 39

Cost of
Doing
Business
7.1 Cost of Goods Sold
7.2 Labour Costs
7.3 Rental and Occupancy Costs
7.4 Other Operating Costs
7.5 Capital Expenditures
7
7.1 Cost of Sales
The CRFA’s 2012 Operations Report indicates that cost of goods sold represented 36.0% of foodservice
revenues in 2010 (the most recent year for which data is available).
Historical Average Cost of Goods Sold as a Percentage of Revenues
Cost of goods sold as a percentage of revenues continues to increase, indicating foodservice
operators are unable to increase menu prices to match increased input costs.
35.6%
35.4%
35.7%
35.5%
35.8%
36.0%
34.0%
34.5%
35.0%
35.5%
36.0%
36.5%
37.0%
2005 2006 2007 2008 2009 2010
PercentageofSales
Cost of Sales
Source: Canadian Restaurant and Foodservices Association “2012 Operations Report”
40 41
2013 Canadian Chain Restaurant Industry Review 7 | Cost of Doing Business

The following chart tracks consumer price indices for various core ingredients classifications.
Consumer Price Indices Menu Inflation versus Producer Price Indices
Bakery and cereal product, dairy product, and meat prices have increased in price at a greater
rate than general inflation. Meat prices experienced the greatest increase in 2012, growing by 6.6
index points, followed by bakery and cereal products, which increased by 3.3 index points. Prices for
alcoholic beverages purchased from stores, vegetables and vegetable preparations, and fish, seafood,
and other marine products historically have increased at a rate below general inflation.
The following chart compares menu price inflation (represented by the consumer price index for
food purchased in restaurants) to producer price indices for: meat, fish and dairy, beverage, fruit,
vegetables, and feed.
As shown, producer prices for beverages, fruit, vegetables, and feed have increased faster than prices
for meat, fish, and dairy. Producer prices for beverages and meat, fish, and dairy have increased at
rates lower than that of menu inflation.
The following chart compares menu inflation (represented by the consumer price indices for food from
FSR, food from QSR, and served alcohol) to general inflation (represented by the consumer price index
for all items).
80
90
100
110
120
130
140
150
160
20062005 2007 2008 2009 2010 2011 2012
Meat Fish, seafood and other marine products
Dairy products Bakery and cereal products
Vegetables and vegetable preparations Alcoholic beverages purchased from stores
CPI - All Items
CPI = Consumer Price Index
2002 = 100
80
90
100
110
120
130
140
PPI= Producer Price Index
2002 = 100
99.1
100.8
102.4
105.2
104.1
105.2
108.9
110.2
102
103.1 108.1
118.7 118.6
117.9
126.8
130.9
106.4
107.7
110.9
113.6
116.7
118.7
121.7
123.8
2006 2006 2007 2008 2009 2010 2011 2012
PPI - Meat, Fish and Dairy PPI - Fruit, Vegetables and Feed
PPI - Beverages CPI - Food from Restaurants
42 43

In 2013, Cost of Sales as a Percentage of Revenues is Expected to:
Decline more than 2% points 0%
Decline 1.6% to 2% points 0%
Decline 1.1% to 1.5% points 0%
Decline 0.1 to 0.5% points 5%
Remain flat 15%
Increase 0.1 to 0.5% points 15%
Increase 0.6% to 1% points 25%
Increase 1.1% to 1.5% points 30%
Increase more than 2% points 5%
Not sure 0%
Most respondents (80%) expect cost of sales as a percentage of revenues to increase in 2013. Thirty
percent of respondents expect cost of goods sold to increase by 1.1% to 1.5%, and 25% expect an
increase of 0.6% to 1.0%.
Increasing cost of food and ingredients was listed as a threat by 36% of C-Suite Survey respondents.
fsSTRATEGY interviewed foodservice suppliers and distributors to understand the factors influencing
foodservice cost of sales. Findings of this analysis included:
žž Foodservice demand has increased moderately in most product categories (more so for local
food). Demand for proteins, such as beef and veal, has been flat. Over the next 12 months, most
suppliers and distributors expect demand to be flat or increase slightly. Many suppliers mentioned
the demand from foodservice clients for local food is increasing.
žž The supply of beef, bacon, and chicken wings tightened over the past 12 months. Beef processors
have mixed opinions on whether this will improve over the next 12 months.
žž Food pricing has increased slightly over the past 12 months. Key drivers in price increases are
managed products (e.g., chicken and dairy) and input cost increases (e.g., fuel and feed). Food
prices could increase by as much as 5% over the next 12 months.
žž Key issues for food producers and food processors over the next 12 months will include input
costs, supply of domestic and North American beef, and the impact of severe weather on crops.
Imported produce from Mexico and China will put pressure on pricing for local (North American
and Canadian) prices.
žž Key issues for distributors include input costs (especially fuel), industry consolidation (primarily in
Western Canada), and fierce distributor competition.
Menu Inflation versus General Inflation
As shown, prices for food and alcohol purchased in restaurants have increased at a greater rate and
with less variability than general inflation. Furthermore, unlike general inflation, menu prices did not
decline during the 2009 recession. FSR food prices increased more than QSR.
University of Guelph’s Food Price Index 2013 forecasts that overall food expenditures could increase
by 1.5% to 3.5% and that meat prices could increase by 4.5% to 6.5% in 2013.
Respondents to the C-Suite Survey were asked how they expected cost of sales as a percentage of
revenues to change in 2013.
CPI = Consumer Price Index
2002 = 100
109.1
111.7
115.2
118.8
122.5
125.7
128.9
132.1
107.5
109.2
113.6
115.9
119.5
121.9
125.7
127.9
107.7
109.5
11.9
115.7
114.7
116.8
120.3
121.8
105
110
115
120
125
130
135
2005 2006 2007 2008 2009 2010 1011 2012
CPI - Food from Full-Service Restaurants CPI - Food from Quick-Serivce Restaurants
CPI - Served Alcohol CPI - All Items
44 45

7.2 Labour Costs
The Canadian Restaurant and Foodservices Association’s 2012 Operations Report indicates that
salaries and wages represented 33.9% of foodservice revenues in 2010 (the most recent year for
which data is available).
Historical Average Labour Cost as a Percentage of Revenues
31.5% 31.5%
33.6%
34.8%
33.9% 33.9%
29%
30%
31%
32%
33%
34%
35%
36%
2005 2006 2007 2008 2009 2010
PercentageofSales
Salaries and Wages
Source: Canadian Restaurant and Foodservices Association, 2012 Operations Report
Salaries and wages as a percentage of revenues in 2010 were consistent with 2009.
On average, provincial and territorial minimum wages increased by 21% between 2005 and
2009. Between 2009 and 2012, minimum wage rates increased again by almost 17% on average
nationally.
Provincial and Territorial Minimum Wage Rates
Saskatchewan
Alberta1
Quebec
PEI
NewBrunswick
NorthwestTerritories
Newfoundland
NovaScotia2
BritishColumbia
Manitoba
Ontario
Yukon3
Nunavut
Adult Workers $9.50 $9.75 $10.15 $10.00 $10.00 $10.00 $10.00 $10.30 $10.25 $10.25 $10.25 $10.30 $11.00
Liquor Servers/Workers
Receiving Gratuities
9.05 8.75 9.00 8.90
First Job/Entry Level 9.80
Students (Under 18) 9.60
Homeworkers
(overrides student
wage)
11.28
Source: Human Resources and Skills Development Canada
http://srv116.services.gc.ca/dimt-wid/sm-mw/rpt2.aspx?lang=eng&dec=5
http://srv116.services.gc.ca/dimt-wid/sm-mw/menu.aspx?lang=eng
1
Alberta’s minimum wage will be adjusted annually every April
2
Yukon Territory increases minimum wage every April 1 based on the Consumer Price Index
3
Nova Scotia’s entry level minimum wage is for inexperienced workers (less than three months employed in the type of worked
they are hired to do)
Nunavut has the greatest adult minimum wage at $11.00 per hour, and Saskatchewan has the lowest
adult minimum wage at $9.50 an hour.
46 47

Respondents to the C-Suite Survey were asked how they expected labour cost as a percentage of
In 2013, Labour Cost as a Percentage of Revenues is Expected to:
Remain flat 20%
Not sure 0%
Most respondents (75%) expect labour cost as a percentage of revenues to increase in 2013. Thirty-
five percent of respondents expect labour cost as a percentage of revenues to increase by
0.6% to 1.0%.
Labour cost was listed as a threat to the foodservice industry by 55% of C-Suite survey respondents.
Some provinces have experienced considerable increases in minimum wage in recent years as shown
in the table below.
Current and Dates of Changes in Minimum Wage by Province
Jurisdiction Current 2005 2006 2007 2008 2009 2010 2011 2012 2013
Saskatchewan $9.50
01-Sep-05
$7.05
01-Mar-06
$7.55
01-Mar-07
$7.95
01-Jan-08
$8.25
01-May-08
$8.60
01-May-09
$9.25
01-Sep-11
$9.50
Alberta $9.75
01-Sep-05
$7.00
01-Sep-07
$8.00
01-Apr-08
$8.40
01-Apr-09
$8.80
01-Sep-11
$9.40
01-Sep-12
$9.75
Quebec $10.15
01-May-05
$7.60
01-May-06
$7.75
01-May-07
$8.00
01-May-08
$8.50
01-May-10
$9.50
01-May-11
$9.65
01-May-12
$9.90
01-May-13
$10.15
New Brunswick $10.00
01-Jan-05
$6.30
01-Jan-06
01-Jul-06
$6.70
05-Jan-07
$7.00
01-Jul-07
$7.25
31-Mar-08
$7.75
15-Apr-09
$8.00
01-Sep-09
$8.25
01-Apr-10
$8.50
01-Sep-10
$9.00
01-Apr-11
$9.50
01-Apr-12
$10.00
Prince Edward
Island
$10.00
01-Jan-05
$6.80
01-Apr-06
$7.15
01-Apr-07
$7.50
01-May-08
$7.75
01-Oct-08
$8.00
01-Jun-09
$8.20
01-Oct-09
$8.40
01-Jun-10
$8.70
01-Oct-10
$9.00
01-Jun-11
$9.30
01-Oct-11
$9.60
01-Apr-12
$10.00
Newfoundland
andLabrador
$10.00
01-Jun-05
$6.25
01-Jan-06
$6.50
01-Jun-06
$6.75
01-Jan-07
$7.00
01-Oct-07
$7.50
01-Apr-08
$8.00
01-Jan-09
$8.50
01-Jul-09
$9.00
01-Jan-10
$9.50
01-Jul-10
$10.00
Northwest
Territories
$10.00
01-Apr-10
$9.00
01-Apr-11
$10.00
Nova Scotia $10.30
01-Oct-05
$6.80
01-Apr-06
$7.15
01-May-07
$7.60
01-May-08
$8.10
01-Apr-09
$8.60
01-Apr-10
$9.20
01-Oct-10
$9.65
01-Oct-11
$10.00
01-Apr-12
$10.15
01-Apr-13
$10.30
Manitoba $10.25
01-Apr-05
$7.25
01-Apr-06
$7.60
01-Apr-07
$8.00
01-Apr-08
$8.50
01-May-09
$8.75
01-Oct-09
$9.00
01-Oct-10
$9.50
01-Oct-11
$10.00
01-Oct-12
$10.25
British
Columbia
$10.25
01-May-11
$8.75
01-Nov-11
$9.50
01-May-12
$10.25
Ontario $10.25
01-Feb-05
$7.45
01-Feb-06
$7.75
01-Feb-07
$8.00
31-Mar-08
$8.75
31-Mar-09
$9.50
31-Mar-10
$10.25
Yukon $10.30
01-May-06
$8.25
01-Apr-07
$8.37
01-Apr-08
$8.58
01-Apr-09
$8.89
01-Apr-10
$8.93
01-Apr-11
$9.00
01-Apr-12
$9.27
01-May-12
$10.30
Nunavut $11.00
05-Sep-08
$10.00
01-Jan-11
$11.00
Source: Canada Ministry of Labour
48 49

Respondents to the C-Suite Survey were asked how they expected labour cost as a percentage of
In 2013, Rent and Occupancy Costs as a Percentage of Revenues are Expected to:
Remain flat 25%
Not sure 0%
Respondents’ opinions on how rent and occupancy costs were expected to change as a percentage
of revenues varied. Twenty-five percent of respondents believe this ratio will remain flat, 10% of
respondents expect the ratio to decline by as much as 1.5%, and 65% of respondents expect the ratio
to increase.
Rent and occupancy costs were listed as a threat by 14% of respondents to the C-Suite Survey.
fsSTRATEGY interviewed several landlords to understand the factors affecting rental expenses for
restaurants in Canada. Findings from these interviews included:
žž Demand for premium casual restaurant space is strong, less so for lower-end casual restaurants.
žž Demand for space in food courts is significant. Most landlords have waiting lists for food courts,
indicating demand for this space will remain strong.
žž In shopping centres, restaurant rents are often subsidized by major tenants (i.e., restaurants don’t
pay the market rate).
žž Landlords indicate economics and supply constraints favour landlords in terms of food courts.
Landlords have mixed opinions on the balance of power for restaurants. Landlords in downtown
cores appear to have the advantage due to an insatiable desire for foodservice space in such
areas. In central Canada, this is being fueled by Western Canadian and United States-based
chains. In terms of mall pads and other street locations, the current climate appears to favour
tenants. Recently, in less desirable locations, landlords have been making concessions to get
tenants with strong covenants. This has resulted in some appealing deals for a number of
operators. These trends are expected to continue over the next 12 months.
žž Landlords expect rents for foodservice operators to increase by 2.5% to 3.0% and significantly
more than this in major mall food courts over the next 12 months.
Rental and leasing
PercentageofSales
7.0%
6.8%
7.0%
7.2% 7.2%
7.6%
6.2%
6.6%
6.8%
7.0%
7.2%
7.4%
7.6%
7.8%
2005 2006 2007 2008 2009 2010
7.3 Rental and Occupancy Costs
The Canadian Restaurant and Foodservices Association’s 2012 Operations Report indicates that rental
and leasing costs represented 7.6% of foodservice revenues in 2010 (the most recent year for which
data is available).
Historical Average Rental and Leasing Cost as a Percentage of Revenues
Source: Canadian Restaurant and Foodservices Association, 2012 Operations Report
50
51

7.4 Other Operating Costs
Other operating costs include utilities (including telephone), repair and maintenance, advertising and
promotion, depreciation, and other operating costs.
The Canadian Restaurant and Foodservices Association’s 2012 Operations Report indicates that
total other operating costs represented 18% of foodservice sales in 2010. The following table shows
the average other operating costs as a percentage of revenues for the most recent five year period
available (2006 to 2010).
Historical Average Other Operating Costs as a Percentage of Revenues
2005 2006 2007 2008 2009 2010
Repair and Maintenance 2.4% 2.5% 2.6% 2.6% 2.6% 2.6%
Utilities Including Telephone 2.8% 2.8% 2.9% 2.8% 2.8% 2.8%
Advertising and Promotion 2.8% 2.8% 2.7% 2.8% 2.8% 2.8%
Depreciation 2.8% 2.9% 2.9% 2.9% 3.0% 3.1%
Other 11.3% 11.0% 8.6% 7.0% 7.4% 6.7%
Total Other Operating Costs 22.1% 22.0% 19.7% 18.1% 18.6% 18.0%
Source: Canadian Restaurant and Foodservices Association, Statistics Canada
As shown, other expenses as a percentage of revenues decreased between 2006 and 2010 (the most
recent year for which data is available).
The following chart tracks growth trends of various other operating costs as indices between 2006
and 2010 (the most recent year for which data is available).
Repair and maintenance Utilities including telephone Advertising and promotion
Depreciation Other Total Other Operating Costs
50
60
70
80
90
100
110
120
2005 2006 2007 2008 2009 2010
2005=100
Historical Average Other Operating Costs as a Percentage of Revenues
Source: fsSTRATEGY Inc. based on data from Canadian Restaurant and Foodservices Association and Statistics Canada
As shown, depreciation costs increased by 0.1 percentage points in 2010, while “other1
” declined by
0.7 percentage points. Cost ratios for repair and maintenance, advertising and promotion, and utilities
including telephone continued to remain flat despite variability in energy commodity prices. The
following chart compares commodity price changes for natural gas and electricity.
1
Other expenses include commissions paid to non-employees, professional and business service fees, subcontract expenses,
charges for services provided by head office, office supplies, insurance, travel and entertainment, property and business
taxes, licenses, permits, royalties and franchise fees, delivery, warehousing, postage and courier, financial service fees, interest
expense, and bad debts.
52 53

In 2013, Other Operating Costs as a Percentage of Revenues are Expected to:
Remain flat 10%
Not sure 5%
As shown, most (80%) of respondents expect other operating costs as a percentage of revenues will
increase in 2013, while 5% expect the cost ratio will decline, and 10% expect the ratio to remain flat.
Forty-one percent of respondents to the C-Suite Survey listed other costs and costs in general as
threats to the foodservice industry.
100.0
85.4
99.1
58.3
45.3
40.2
31.5
100.0
90.9
101.8
105.5
116.4
129.1
134.5
0
20
40
60
80
100
120
140
160
2006 2007 2008 2009 2010 2011 2012
2006=100
Natural Gas Electricity
Energy Commodity Price Indices
Source: fsSTRATEGY Inc. based on data from the Ontario Energy Board
As shown, natural gas prices have declined significantly (67.6 index points) since 2008, while electricity
costs have increased by 32.7 index points in the same period.
Respondents to the C-Suite Survey were asked how they expected other operating costs as a
percentage of revenues to change in 2013.
54 55

7.5 Capital Expenditure
Capital expenditure (“CAPEX”) in the accommodation and foodservice sector was approximately $4.0
billion in 2012, $2.4 billion (60%) of which was spent on construction. The following chart compares
capital expenditure and construction expenditure in the accommodation and foodservice sector for
the last eight years.
Capital Expenditure in the Accommodation and Foodservice Sector
Non-Residential Construction Price Index
As shown, construction costs declined significantly in 2009, most likely due to competitive pricing
efforts to capture shrinking demand during the recession. Since 2009, prices have increased, albeit at
a slower rate than pre-recession. The 2012 non-residential price index was 151.0 – 4.9 index points
below the peak in 2008.
The following chart compares average construction cost indices for major Canadian cities against a
30-city United States average.
$2,640 $2,604
$2,911
$3,288
$4,033
$3,321
$3,689
$4,033
$1,509
$1,786 $1,853
$2,278
$2,733
$2,220 $2,257
$2,466
$1,132
$818
$1,058 $1,010
$1,300
$1,100
$1,432
$1,587
$0
$500
$1,000
$1,500
$2,000
$2,500
$3,000
$3,500
$4,000
$4,500
2005 2006 2007 2008 2009 2010 2011 2012
MillionsofDollars
Total Capital Expenditure Capital Expenditures for Construction
Capital Expenditure on Equipment and Machinery
As shown, the 2009 recession had a significant impact on capital expenditure. Expenditures on
equipment and machinery were affected less by the 2009 recession than construction and recovered
to pre-recession levels within two years. Construction expenditures are increasing, but they have yet
to return to pre-recession levels.
The following chart illustrates the changes to non-residential construction price indices over the most
recent eight years.
Construction Price Index: Total Non-Residential
117.0
126.5
1387
155.9
140.5
141.9 147.4
151.0
100
110
120
130
140
150
160
2005 2006 2007 2008 2009 2010 2011 2012
2002 = 100
56 57

C-Suite Survey – Building Cost per Square Foot
Min Max Average
Full Service Restaurants $ 145.00 $600.00 $287.14
Quick Service Restaurants $110.00 $400.00 $250.67
All Restaurants $110.00 $600.00 $266.63
As shown, reported building costs ranged from $110 to $600 per square foot. The average reported
building cost per square foot was $287.14 for FSRs and $250.67 for QSRs.
Respondents to the C-Suite Survey were also asked how they expected building costs for new units to
change in 2013.
In 2013, the Cost to Build New Units is Expected to:
Remain flat 30%
Not sure 0%
As shown, 30% of respondents expect building costs to remain flat in 2013, while 10% expect a
decline, and 50% expect an increase in cost.
Respondents’ reasons for expecting building costs to decline were primarily based on internal
decisions such as direct purchasing strategies and aggressive reconfigurations of design scope and
materials.
Respondents’ reasons for expecting building costs to increase included labour cost, material costs,
increasing demand, government legislation, delivery, and gas prices.
Respondents’ reasons for expecting costs to remain flat include anticipated flat demand (to balance
inflation), industry efficiencies born out of recent market constrictions, and anticipated flat labour and
material costs.
RSMeans Construction Cost Indices by Major Canadian City
Toronto Calgary Montreal Vancouver Winnipeg 30 City US Average
1993 30 City US Average = 100
140
150
160
170
180
190
200
210
220
230
2005 2006 2007 2008 2009 2010 2011 2012 2013e
Source: RSMeans Square Foot Costs 2013. Copyright RSMeans, Norwell, MA 781-422-5000; All rights reserved
As shown, construction costs in each of the major Canadian cities exceed the 30-city United States
average. All regions experienced a decline in construction costs following the 2009 recession. Since
2009, Calgary has increased faster than Toronto, to become the most expensive city for construction.
Vancouver’s construction cost also recovered quickly and is now more expensive than Montreal.
Respondents to the C-Suite Survey were asked to provide the average cost per square foot to
construct a new unit excluding base building cost and land purchases.
58 59

Notes Regarding This Report
This report is not a complete analysis of every material fact with respect to
any company, segment, or industry. Data has been obtained from sources
considered reliable, but is not guaranteed, and GE Capital, fsSTRATEGY, and
The NPD Group make no representations or warranties as to the accuracy
or completeness of this data. Discussion of tax, financial, and economic
developments and the potential consequences of those developments is
provided for informational purposes only. Nothing in this report should be
construed as investment, tax, or financial advice. Readers of the report are
encouraged to consult their own tax, financial, or legal advisors before acting
upon the information provided herein.
Notes8
60

2013 Canadian Chain Restaurant Industry Review (partial version)

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