Why so many American fast food chains are setting up shop in Canada

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In a relatively short period of time, Canada has become a hotbed of fast food expansion from the United States.

Shake Shack opened its first Canadian restaurant in Toronto last week, and plans to open 34 more locations by 2035. Sandwich shops Jimmy John’s and Jersey Mike’s are also among the U.S. chains with their sights set on the Canadian market.

The Financial Post details the chains trying to reach the northern border and explains why they believe Canadians have a growing appetite for fast food.

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What channels are coming?

• Shake Shack: The New York-based burger chain, which started in 2001 as a hot dog stand in Madison Square Park, opened its first Canadian restaurant on June 13 in downtown Toronto. Its Canadian-only menu items include the Maple Salted Pretzel Shake and the I Heart Butter Tart Concrete.
• Jersey Mike: In January, Jersey Mike’s announced a deal to bring 300 of its sandwich shops to Canada by 2034, starting with five new locations by the end of the year. The 68-year-old submarine sandwich brand already has two Canadian franchises: in Kitchener and London, Ont.
• Jimmy John’s: Jimmy John’s, founded in Illinois in 1983, announced in January that it would open its first Canadian location in mid-2024, but provided few other details.
• Crumbed biscuits: Utah-based Crumbl opened its first Canadian outpost in Edmonton in 2023 and plans to open at least five more in the region.
• Cookies against insomnia: Launched as a cookie delivery service on a Philadelphia college campus and known for its late-night offerings, Insomnia opened its first Canadian location in Toronto last September. The company has since opened a second location in Kingston and plans to open four more in Ontario by the end of the year.
• Freddy’s Custard and Frozen Steakburgers: In December 2023, Kansas-based Freddy’s announced plans to open five locations in Alberta.
• Ground fire: The Brazilian steakhouse chain opened its first Canadian location in Vancouver in 2023 and will open nine more in the country, including two in Toronto and Montreal this year.

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What is behind the extensions?

For one thing, Canada’s population is booming, having recently surpassed 41 million thanks to ambitious immigration policies that will bring in half a million people a year through 2026 to help offset the country’s aging workforce.

Canada’s immigration policy is a major reason why McDonald’s has made Canada a focal point of its expansion plans. The iconic burger chain plans to open 10,000 new restaurants worldwide over the next four years, with Canada among its priority countries.

Canada is one of my main markets

Jill McDonald

“Canada is one of my top markets,” Jill McDonald, president of McDonald’s operated international markets, told investors in December 2023. “As we look at the demographics that are happening, we definitely see significant growth opportunities in Canada, across the country.”

Michael Kark, Shake Shack’s director of global licensing, said his company has been looking to expand into Canada for some time. “We’ve been eyeing this incredible opportunity in Canada for some time and are thrilled to have found exceptional partners to serve Shack classics and Canadian-exclusive custom items to our sophisticated neighbors to the north,” he said in a statement in 2023.

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Michael Haley, president and international CEO of Inspire Brands, the parent company of Jimmy John’s, also pointed to Canada’s growth as a driver in bringing the sandwich chain north.

“Canada is one of the largest sandwich markets in the world,” he said in a statement to the Financial Post. “We are excited to launch the brand in Canada with Foodtastic, a leading Canadian restaurant franchisor.”

What is the market growth?

The Canadian Franchise Association — citing data from Statista — reports that quick-service restaurants reached a record market size of US$33.6 billion in 2022, a 22% increase from the previous year.

Meanwhile, in the 12 months to November 2023, these restaurants attracted 825 million visitors, up 28% from the previous year. August and September 2023 were exceptional cases, with year-on-year growth of 52% and 47% respectively.

“Canadians have become more strategic in choosing where they buy food due to rising inflation and reduced discretionary income, making financial vulnerability a key factor in choosing where customers shop,” the Canadian Franchise Association article states.

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During the pandemic, fast food has overtaken full-service restaurants as the primary dining out option for Canadians. According to a Statistics Canada report, in 2021, limited-service restaurants (which include fast food and coffee shops) saw record sales and profit margins of $33.6 billion and 6.9%, respectively. While sit-down restaurants appear to be making a comeback, fast food remains the go-to choice during times of economic uncertainty.

How successful have other major expansions been?

Fried chicken chain Chick-fil-A made a successful foray into Ontario in 2019 and announced in February that it would open 20 restaurants in Alberta, starting with two locations in Edmonton and one in Calgary. Other newcomers, however, haven’t been so lucky.

PF Chang’s China Bistro expanded to Canada in 2012, but filed for bankruptcy protection three years later, citing high food and operating costs.

Carl’s Jr. expanded to Canada in 2011, with locations across the country, but most of those outside Alberta have since closed.

Krispy Kreme, the once-popular doughnut chain, has had a rocky relationship with Canada. The company launched here in 2001 with plans for 40 outlets, but by 2015 it had shrunk to six. Now it is expanding its presence in Canada again.

More recently, Wahlburgers closed its downtown Toronto restaurant, citing a decision that “came naturally.” Its Toronto airport restaurant remains open.

• Email: bcousins@postmedia.com

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