Labour and food costs account for up to 70% of the sales most cafes achieve. Now to the important stuff, the numbers! If you can effectively control just two costs you will be successful. For them, it's a luxury habit that must include a warm greeting ("the usual?") and the fit-out and atmosphere of the cafe must provide the customer with an experience that lets them escape their busy day, whether it be a worker on a quick break or a stay-at-home parent looking for some me time. However the $4 coffee customer expects more - they want the experience. Whether this is sourcing the right coffee bean, milk alternatives (the list is never-ending), hipster barista or sparkling new colour coordinated La Marzocco machine, these efforts are critical in winning over your customers. If you can predict one thing this is it: customer loyalty starts with quality coffee. If there are multiple cafes in close proximity then in our experience, the customer may forgive consistency and pricing on food but will not negotiate on finding the best cup of coffee. Ignoring financials and taking the most simplistic view, the success of your cafe ultimately comes down to how good your coffee is. However, with an average industry entry rate of over 20% per year, the number of net new establishments continues to grow with the exception of 2020/2021 which for the first time recorded a net loss of establishments. IBISWorld statistics from the ABS indicate an average exit rate from the industry of over 18% per year over the last 5 years. While the demand exists, the increasing number of cafes in inner-city locations in close proximity to Melbourne and Sydney CBD's has resulted in volatile trading conditions with approximately 20% of operators contacted in 2018 no longer in business in 2021. However, further lockdowns could be the straw that finally breaks the camels back for owners who have been through significant financial, business, and mental stress as a result of having their livelihoods put on hold or at significant risk.Īt the time of writing this report, Australian vaccination levels have crept up slowly over 2% while most developed countries are approaching 50% and are therefore able to lift restrictions and start returning to a sense of normality. Thankfully the Australian Government's stimulus measures including the $100bn JobKeeper program has allowed many businesses to move from being on life support back into operation. To think a global event would result in the forced closure of businesses and then staged re-openings would of been hard to fathom before 2020. COVID-19 arrived in early 2020 and depending on the state you were operating within, had a moderate to severe impact on the industry. Fast forward to 2021 when those same cafes were contacted to check in on changes in sentiment and the world was not in the same state. Employ over 5 million people (44% of all people employed in the private sector)Ĭonsidering there are over 20,000 cafes employing more than 127,000 workers and that they literally fuel the country through providing that essential cup of coffee or bacon and egg roll, it seemed like the perfect industry to start with.Īt the time of sending out the initial survey to selected cafes around Australia in 2018, the country and the world were in a relatively good place.Contribute over a fifth of the nations GDB.Account for 35% of the value generated in the economy.2.1 million actively trading businesses (97% are small businesses).Small Business - Contribution to the Australian Economy These macro-economic results are largely dependent on macro events such as the price of iron ore which obviously has no relevance to the trading conditions for a cafe owner, plumber, electrician, or gym owner.Ĭonsidering small business' (defined as an entity that employs less than 20 employees) contribution to the Australian economy, we wanted to assist in creating information that would be relevant to small business owners. Key economic information reported readily in the media such as gross domestic product (GDP), consumer price index (CPI), retail sales, interest rates, and labour market statistics are largely irrelevant to the average small business owner and are not industry-specific. Coffee Shop Owners is the first in a series of reports focusing on industries with a significant small business presence.
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