Canada's restaurant sector is warning of reduced hours and the possibility that some businesses may have to shut down in response to the federal government's decision to to impose an immediate moratorium on allowing restaurants to hire temporary foreign workers.

Joyce Reynolds, Executive Vice-President of Government Affairs for Restaurants Canada, said restaurant shut downs and long lineups were a reality in Alberta before Ottawa approved the program and those problems are now likely to return.

"We're getting calls from members saying we don't know how we're going to be able to keep our restaurants open," she said in an interview.

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"We're expecting that we may return to the days when restaurants close due to lack of staff and huge lineups out the door and hours of operation curtailed and parts of the operation shut down. We can only serve you on the patio. We're going to have to close our restaurant inside. Those are the types of things that happened in Alberta and we anticipate that these types of things are going to start happening again."

On Thursday Employment Minister Jason Kenney announced a surprise decision to impose an immediate moratorium on allowing restaurants to hire temporary foreign workers.

The federal announcement – which came in an e-mail to reporters at 8:46 p.m. Thursday – represents a major change to a federal program that has been gripped by controversy over the past year. Employees across the country have complained publicly about being replaced by temporary foreign workers. Mr. Kenney said in a statement Thursday evening that his earlier effort to sanction specific outlets wasn't working and that wider action was needed.

"There remain serious concerns regarding the use of the temporary foreign worker program in the food services sector," he said.

The decision took businesses by surprise, as they decried a lack of consultation and said the move would force some employers to close shop.

"I knew a shoe was going to drop, but this was both shoes. This is a far bigger reaction than what I thought," said Dan Kelly, head of the Canadian Federation of Independent Business.

"In the minister's province of Alberta many small businesses will teeter on [the brink of] survival based on this decision."

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Mr. Kenney said his office will not process any new or pending labour market opinion applications in the food sector. The opinions are required before permission is granted to hire a temporary foreign worker. As well, any restaurant that has already obtained an LMO but hasn't yet filled the position will be unable to do so.

"Abuse of the Temporary Foreign Worker Program will not be tolerated," Mr. Kenney said in the statement.

Ian Tostenson, president of the B.C. Restaurant and Foodservices Association, said he agreed the program needs review but that Mr. Kenney has overreacted. "There are a lot of small business people in British Columbia who are wondering what this means for them. It's chaos. We would have really liked a heads up."

Mr. Kenney had hinted earlier this month that he was considering such a move.

He told CBC Radio in British Columbia last week that it was not an "unreasonable question" to ask about limiting the use of the program for fast-food restaurants.

"I am skeptical that food-service jobs in urban areas with still relatively high youth unemployment need to use this program," he said at the time.

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Those comments got a cool reception from the food industry, as well as the governments of British Columbia and Alberta, where the program is more commonly used by businesses to fill job vacancies.

Alberta Labour Minister Thomas Lukaszuk told The Globe and Mail last week that the government should not be "picking out one industry and making an assumption there is a problem."

Mr. Kenney's move comes on the same day that Tim Hortons announced it would inspect each of its franchises that employ temporary foreign workers after reports that two stores belonging to the Canadian coffee chain breached labour rules.

The chain confirmed Thursday that it had terminated franchisee control of locations in Fernie, B.C., and Blairmore, Alta., after foreign workers in the neighbouring Rocky Mountain towns claimed they were denied overtime pay. About 4,500 temporary foreign workers are employed by Tim Hortons, most of them in Western Canada.

With 5 per cent of its 90,000-strong work force made up of foreign workers on temporary permits, Tim Hortons spokeswoman Olga Petrycki said the company is expanding an existing audit program. A new mandatory independent audit will start "over the next few months."

McDonald's Canada put a stop to all new foreign hires on Wednesday after criticism that the fast-food giant was favouring foreign workers over Canadian applicants.

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Three McDonald's locations in Victoria were blacklisted by the federal government last week and forbidden from using the temporary worker program after applicants complained they were being turned away and locals were offered fewer hours than foreign workers.

Earlier this week, two long-time waitresses at a small pizzeria in Weyburn, Sask., complained they had been fired and replaced by foreign workers. Weyburn has been cited in the past as an example of the type of small Canadian community dealing with worker shortages and best served by the temporary work permits.

Mr. Kenney questioned last week whether the food-services sector should be eligible to use the program. Tim Hortons and McDonald's collectively employ nearly 9,000 temporary foreign workers. A study released by the C.D. Howe Institute on Thursday was sharply critical of the federal program and blamed it for a higher youth unemployment rate in Western Canada.

The report also argued that a new $275 user fee imposed in 2013 was not high enough to serve as an incentive for employers to seek out Canadians. The report noted that fees in the United States and elsewhere are much higher for similar programs, and part of the money raised is used to fund programs to train domestic workers.

The Temporary Foreign Worker Program has grown quickly under the Conservatives. The Globe and Mail reported this week that use of the program by the service sector rose sharply between 2006 and 2012, the most recent date that statistics are publicly available.

The number of approved foreign worker positions in accommodation and food services in that period grew from 4,360 to 44,740 – an increase of 926 per cent, according to public data from Employment and Social Development Canada.

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Workers under the program are approved for two-year stints, although many can work for longer by stringing together multiple jobs and immigration initiatives.

NDP employment critic Jinny Sims said she welcomed the government's decision.

"We had been calling for a moratorium and I'm glad the government is finally listening," she said in a statement. "But a moratorium on its own is not enough. We need an independent review of the whole program to end its abuse. The minister has the responsibility to ensure that people living in Canada get first access to Canadian jobs."

Mr. Kelly of the CFIB had just returned from a small Indian restaurant in Scarborough when he heard the news. A spokesman for Canadian business, he has taken a large public role during the debate on temporary foreign workers as many businesses fear public shaming.

The owner of the Indian restaurant told him during his supper that he needed nine cooks, with skills learned only in India. The restaurateur currently has five cooks, of which four are in Canada on temporary permits that expire next year.

"I doubt that a restaurant like that would survive if this moratorium lasts more than a few weeks," Mr. Kelly said.