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Author Topic: Coffee shop/Cafe. Cost of doing business.  (Read 1649 times)

Lwowiak

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Coffee shop/Cafe. Cost of doing business.
« on: 09/01/2017, 10:26 PM »

http://www.telegraph.co.uk/news/uknews/12099760/TripAdvisor-York-Bennetts-cafe-owner-leaves-brilliant-response-to-one-star-review.html

While a year old, the above is still relevant. One of the points that stood out the most in the article was the cost of GBP27.50 per hour of trading. For rent, rates, power and associated costs.
I doubt that you could obtain premises at those rates, in any busy city centre, in Australia. The wages  at GBP12.50/hr are a lot lower than in Australia, even if you double it (exchange rate), as they include holiday pay etc.

The cost of doing business in Australia is very high, and when you have a close look at the prices set in cafes, restaurants etc, they do not always reflect this. Some are way to low in comparison to the cost of doing business. Greedy landlords, and Super funds investing in commercial real estate only exacerbates the issue, and makes it difficult for the shop owner trying to offer value.

Whilst in Europe recently, I talked to many a cafe/coffee shop owner (or manager), and while wages were lower in Eastern Europe and reasonable in other parts, the rents were not as high as here in Australia. Granted, certain prime real estate (especially city squares) commands high rents, but overall the costs were reasonable and businesses were viable. Most places I came across were run by managers.

I have family who work in the industry supplying restaurants etc,and their insights were quite an eye opener.
Europe has a lot of tourism all year round, and empty shops in busy areas were non existent.

Our standard of food and coffee is very high in Australia, but there are too many shops and not enough patrons to support them.

I feel for the coffee shop who gets complaints for $5 coffees (perceived as high by some), especially when a neighbouring "health food/juice bar" charges $10 for fruit juices/smoothies.

In Eastern Europe (and parts of Germany) coffee was more expensive than beer or juice, but not quite as tasty.


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mycuppa

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Coffee shop/Cafe. Cost of doing business.
« Reply #1 on: 10/01/2017, 11:39 AM »
That cafe owner was spot on with his retort and the customer is yet another example of the increasingly disrespectful and ungrateful society we live in today. Expecting everything for free and demonstrating their lack of intelligence by venting on review sites only ends up in exposing their own stipidity.

If you counted the real hourly costs of trading for a cafe in an Australian capital city, the average cafe customer would be mortified and as LW has indicated, it's a good deal higher than the example from the story.

I wish more owners did that so the great majority of whinging people out there would either pull their head in, or stay home and spare the cafe staff from the rudeness because it's taking a toll on owners and staff.......hospitality has become a terrible occupation for those wanting to make a career out of it. The anxiety generated from these faceless and spineless negative reviewers is completely unfair and very toxic to the owners and their staff.

The downside of the "cafe available within 50m" situation we have in Australian capital cities is partly the fault of the people who engage and either build or buy these businesses.  It's developers that take sites and tart them up like a honey pot for new entrants into hospitality.

I know of real estate agents managing the re-letting of commercial retail outlets telling and warning prospective tenants NOT to open another cafe.......but the warnings go on unheeded. Who would have thought real estate agents would have a heart or be ethical !.

For those of you that have not been aware, there is an underground segment in the cafe market that flogs cafes to overseas people desperate to gain citizenship to buy property, or to enable them to stay in the country while their children are educated - I have no idea how it all works, but I do know of so many cafes in the last 3 years that have been sold to FOB's (not meaning to be disrespectful.....just used this term in a descriptive sense only). Heck, even one of my own customers has his business model built purely on the "flip" - setup a cafe cheaply, run it for 9 months then sell it to a hungry investor seeking a "cheap, established, entry-level business".

I wouldn't say the landlords are greedy, except in shopping centres where they are not only greedy but demanding of expensive refurbs and refits every 2 years and they have their hand in your till.

Landlords for either residential or commercial have rent linked to indexes (percentage value of the asset). it has to work this way because investments are defined by the rate of return (or yield). It's not so much SMSF's because LRBA was repealed more than 12 months ago. There are a lot of mum & dad's using the equity in their home to borrow more so they can feed the greedy property cycle.

In commercial it's a bit more complex as there can be other uplifts at play and for retail there is the added clip of the revenues stacked on top of the rental base, but the core problem is always the bellwether of residential property market pricing.

Commercial is yet to catchup in growth (but hopefully will do so this year and next) as both Sydney and Melbourne have been operating in commercial surplus for the last 5 years. As an example, commercial property in Industrial areas of Melbourne have grown a fraction of the rate we have seen in residential property, making most commercial property poor performance in terms of capital growth.

The "cafe every 50m" in Australia also has the downside of deteriorating standards. Yes, our coffee and food seems to be better, but it's the small minority and largely limited to a handful of very good operators that garner plenty of publicity for doing so. The rest is a different story as cost pressures and lack of staff mean owners cut back in quality.

We like to support the local cafes in the main street behind our house by investing in lunch every weekend. There are many "great" cafes including one that was previously ranked #1 in Melbourne for a short time a couple of years ago - but has since changed hands. The reason we like to invest in these cafes is because we don't want them knocked down and replaced by more high density apartments - but it's only a matter of time.

Unfortunately, these days all of the cafes in our Main street are shocking and we are not being fussy or pedantic.

The quality of the food has spiraled to a deplorable state and whilst we keep on blindly trying by going back in the hope our small spend will help, it's now deemed a lost cause. Last weekend's $62 for 2x burgers and 2x juices........the burgers were ......disgusting..... (and I will eat anything!).

It's clear they cant afford a proper chef and have resorted to students doing the dishes and also in charge of the kitchen. All the cafes have signs on their windows desperately seeking Staff and we rarely see staff lasting longer than a few weeks. This is an area with 10+ cafes, not just an isolated outlet.

After encouraging a local friend to have her young daughter apply for a "Staff Wanted", it was shocking to hear soon afterwards that the advertised waitress/front-of-house role quickly changed to a shove in the kitchen making up covers (food orders). This poor young girl had never cooked anything in her life........but a slice of toast at home..........it was really stressful for her.......so she quit because it was not what she thought the job entailed and the other staff were complaining about the food quality - can you believe it, a schoolgirl with no cooking experience responsible for a gourmet $18 smashed avo !

Most of the traders in that Main Street are struggling except the butchers, bread and fruit shops (because the supermarket is a distance). All other types of retail are marginal or in decay. There are more vacancies now and I understand the rent being asked is quite literally off the planet because the asset value of the space is astronomical. It's hard to justify such rents when there is so much competition for foot traffic everywhere else and yet minimal (read nothing) invested in the street over the last 17 years, so it's very tired and dispirited. The shops are really old, crappy buildings with bad floors and bad access - prime for re-development (oh dear....just a matter of time).

Welcome to strip shopping in Melbourne folks and the classic Australian "cafe within 50m"surviving by hiding cash from the taxman and stretching out suppliers to 120 day terms (that is....if your lucky).






Brett H

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Coffee shop/Cafe. Cost of doing business.
« Reply #2 on: 11/01/2017, 10:08 PM »
Wow guys, thank you for a fascinating read and a some privy insider knowlege!  I've nothing much to add of any interest despite paying for my first and second degrees with hospitality work and I did love it.  I was a cook and I was trained and I undertook extra cooking study and training to improve my skill-set. Yes, I did see a lot of young people who had no desire to be there crash there.  As in all things remuneration brings desire and status while competition breeds results.  One without the other is disaster... irrespective of which one!
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Koffee Kosmo

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Coffee shop/Cafe. Cost of doing business.
« Reply #3 on: 13/01/2017, 06:38 PM »
Cant add much on the answers posted above
Except to say that I agree

The restaurant trade is the same - as noted by family members that operate a business in that industry

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