Cafe Seen: February Edition

What’s happening in the industry?

The grass is greener; the life of a cafe owner is all lattes and leisure!

If you happen to peer into the life of a cafe owner you may get a shock at the intensity of the ‘job’. Before I reveal some new stats, let me tell you that, while it has its pressures, owning a cafe, if done correctly, can be one of the best jobs around. The network of contacts, the access to fresh, tasty food and typically early mornings/early nights leads to a generally positive life balance.

The Stats

The issue here is that many cafe owners are sitting just under the profitability line, meaning they are constantly playing catch-up. Below are a few of the latest industry stats:

The Australian cafe industry as a whole now boasts 5,488 cafes across the nation, with 33% in NSW, 29% in VIC and 18% in QLD. It’s considered a mature industry and you don’t need to tell any cafe owner that the competition is getting crazy!

The issue is that IF the number of cafes around is increasing more than the growth in customers, there’ll be less trips to Bali for the overworked owners….and that’s what’s happening. With profitability set to only grow at 0.3% next year, the industry will be looking to shed costs. With wages accounting for about 23% of the overall revenue (though in a cash economy, its hard to predict) and most cafe leases set to increase at CPI (inflation rate) or flat 3%, the costs aren’t slowing down.

The Solution?

Now, if all these stats are getting you down, I’m here to reassure you that the industry is a good place to be. It’s clear that, as prices increase, we need to pass on many of these costs to customers. The shrinking profit will lead to sure failure if you don’t increase the price of that cappuccino with soy milk. If, as an industry, we do it all together, customers may start to understand what the retirement plans of a cafe owner is really like.

As an industry consultant, I work with my clients on a few key points to improve profitability:

1) Why would a customer come to your cafe over your competitors?

2) Know your hourly profitability

3) Overachieve at service

4) Promote your message in a clear, efficient way

Seems simple right? A well thought out strategy, rehearsed every day can mean you make some great money in this industry.