How restaurants can combat rising food and inventory costs in 2026

Food costs are up 37 per cent on average for Canadian full service operators and more than half are seeing increases of between 21-50 per cent. For an industry already navigating thin margins and cautious diners, that's a significant hit.

The culprit? Tariffs and trade restrictions introduced early last year are largely to blame. The changes moved fast and the impact was widespread, as 79 per cent of Canadian full service operators reported that tariffs and trade restrictions directly contributed to inventory challenges in 2025. Combined with ongoing supply chain pressures and shifting consumer spending habits, it’s clear operators are working in a challenging environment. 

The good news is there are effective ways to respond. Here are three strategies, drawn from TouchBistro’s 2026 Canadian State of Restaurants Report, that operators are using to protect their bottom line. 

1. Re-evaluate your restaurant’s menu strategically

According to TouchBistro’s latest report, 71 per cent of Canadian full service operators chose to increase menu prices as an immediate solution. However, as many operators already know, menu price increases don’t always sit well with diners, especially since diners are already re-thinking their budgets. For example, operators can consider only raising menu prices on items where customers expect higher prices, like seafood or on higher-margin items, like french fries, burgers, and pizza.

While increasing menu prices is a popular solution to help alleviate tariff pressures in the short-term, there are other solutions that operators can turn to that are more sustainable in the long-run such as the following:

• Adjust portion sizes of menu offerings
• Remove dishes with low profitability or excessive complexity
• Limit the number of ingredients used in a dish
• Substituting ingredients for lower cost ones

By looking beyond blanket menu price increases, re-evaluating your menu strategically will eliminate some of the pushback you’ll otherwise get from your guests. 

2. Invest in an inventory management solution

Food costs are often invisible until it creeps up in your end of month numbers. To gain better visibility and control into your restaurant’s actual food costs, investing in the right technology, specifically an inventory management solution can help solve this. 

Take TouchBistro’s Inventory Management solution for example. The robust inventory and recipe management platform helps restaurants save up to 5 per cent on food costs. BB’s Tex-Orleans implemented TouchBistro Inventory Management and was able to cut 2-4 per cent in food costs in a single season. Adam Gilvarry, BB’s Vice President of Food and Beverage operations shared, “During crawfish season, we were hovering between 36 per cent and 38 per cent food costs on average. We average a 34 per cent to 36 per cent food cost during crawfish season now. That’s a 2 to 4 per cent decrease. It’s pretty impressive.”

Beyond food cost savings, the right inventory management solution can give you accurate, near real-time data on where your dollars are being spent. That way you can make informed decisions about what items to keep, adjust, or remove from your menu based on actual data – and not intuition. 

3. Build a more resilient supply chain

Tariffs and trade restrictions exposed how dependent many operators were on imported ingredients and how quickly that dependency can become costly. According to TouchBistro’s latest report, 43 per cent of operators are already planning to increase their use of locally sourced ingredients to reduce exposure to import costs and trade volatility.

But local sourcing is just one piece of the puzzle. Diversifying your supplier base more broadly, rather than relying on one or two vendors can play in your favour. You’ll get more negotiating leverage and greater consistency in what you’re serving, so you’re not left scrambling when supply issues arise. It's also worth revisiting existing supplier contracts to identify where there's room to renegotiate terms or lock in pricing before costs climb further.

Building a more resilient supply chain won't happen overnight, but operators who start making these changes now will be better positioned to absorb future shocks without passing the full cost on to their guests.

Rising food costs aren’t going away anytime soon, but operators who act strategically – on their menus, their operations and their supply chains – are better positioned to weather it. 

For a full picture of what's shaping the Canadian restaurant industry right now, TouchBistro’s 2026 State of Restaurants Report is worth a read. 

Looking to protect your margins against rising food costs? See how TouchBistro can help – learn more here. 

Author Profile

Megan Lee

Megan is the Content Marketing Specialist at TouchBistro, where she uses her passion for food to write about the restaurant industry. She’s a big “foodie” at heart, and you can always find her enjoying a delicious meal at a restaurant with friends and family, or cooking one up at home. She also loves relaxing with a good book and making progress at the gym.