Cafe boss warns public holidays could shut doors

Before the Fair Work Commission’s latest annual wage review bumped award rates up by 4.75 per cent and pushed the baseline minimum wage to $26.44 an hour, cafes around the nation were already at a tipping point. On public holidays, when the 150 per cent penalty rates kick in, the lowest-paid cafe workers will make a staggering $78/hour from July 1. Industry leaders say the system has become entirely “dysfunctional”, forcing business owners to choose between slugging customers with massive surcharges or turning off the

lights completely. John Hart, the executive chairman of the Restaurant and Catering Australia — a national peak body representing more than 57,000 cafes, restaurants and caterers — said cafes are under immense pressure and that was only amplified on public holidays. “It’s dysfunctional at the moment. The wages have gone up to a point where it means businesses effectively can’t operate profitably at any point,” Mr Hart said. The pressure becomes critical when a public holiday rolls around on the calendar. “It just makes it

that much more pronounced on a public holiday because of the rates. It brings the decision right to the fore as to whether you open,” he said. “You’re not opening because you’re gonna make money; you’re opening because you want to be there for your customers and you might want the cash flow. but you’re gonna lose money. It’s pretty much that straightforward.” He said cafes nationally are now, on average, spending more than 50 per cent of their revenue on wages. He said adding

a surcharge to prices, which 70 per cent of cafes apply on public holidays, made opening “a little bit more bearable” – but that doesn’t mean they are making money. “The problem is that if you don’t open and you choose to not open and not apply a surcharge, you’ve got your business sitting idle that you’re paying rent on,” Mr Hart said. “So you’re losing money anyway.” ‘Muppets’: Cafe boss erupts, says venues making $35 an hour Phillip Di Bella, founder of Di Bella

Coffee and head of The Coffee Commune, an initiative representing more than 1300 independent cafe owners, outlined how much profit an average cafe makes on a public holiday. When making a baseline of 100 coffees an hour at $7 each, so $700 in revenue, wages would swallow $350 of that, goods would cost $140, GST would be $70 and utilities and rent would take $105. So the total profit made on those coffees would be just $35. Despite this, he said the public debate around

minimum wages completely misses the point and that keyboard warriors who tell struggling businesses “if you can’t afford wages, don’t open” were out-of-touch “muppets”. He said hardly anyone is on minimum wage in hospitality because in order to attract them, they have to pay more. “Our baristas are averaging $33, $34 an hour. So in order to attract good people, you’ve got to pay above the minimum wage anyway,” he said. “So that’s one misconception is people understanding what minimum wage is and what we’re

paying. “You’ll not find many people when you are running at three per cent unemployment, most people are not paying minimum wage. And if you’ve got really good staff, you’re certainly not paying minimum wage.” He said to run a semi-profitable business, the percentage of wages should be no more than 30 per cent, maximum 35 per cent of takings. “Wages across 1300 cafes that we get the data from are running at 45 to 50 per cent of turnover,” he said. “Now, if wages

are running at up to 50 per cent, that means they’re either overstaffed — which they’re not, because they can’t afford to be — or two, the customer’s not paying enough for their product.” Mr Di Bella notes that a standard weekend brunch has become a loss-leader for independent operators due to these ratios. “So when the customer says, ‘oh, why’s my bacon and eggs $30 on a weekend?’, well 50 per cent of that has just gone straight to wages,” he said. “So when

idiots go, ‘I can make it at home for half the price,’ you certainly can. Take away the wages, take away the GST, take away the rent, and you’ll make it cheaper at home. “But if hospitality owners took the advice of ignorant customers and said ‘don’t open if it’s not profitable,’ then where do you expect to go and eat, you muppets?” ‘Garbage’: Boss slams minimum wage debate Mr Di Bella said owners don’t want to pay low wages, but they are fighting a

losing battle against an “expense problem” rather than a “wage problem.” He said the debate about minimum wage increases is “obsolete” because even Aussies on $100k salaries were struggling. “Roughly 95 per cent of Australians are under $100,000 a year,” he said. “My heart goes out to them, because that’s tough. Because you need $170,000 a year to service a $1 million mortgage. He said when he started in hospitality 36 years ago, he was paid $20 a night, but that money could fill up

his car and pay for a meal at a “very nice” restaurant. The difference now, he said, was that even well-paid Aussies are not able to do that. “So all this garbage about minimum wage and all the rest of it is actually obsolete. The whole take on minimum wage should be simple. How do we lower the cost of living so that what people are earning can go further? Because the higher wages, the higher the product or service. “The higher the wages, the

higher the product or service. And we keep having this. And I’ve been in this industry now for 36 years, and it’s been no different.” He described the current regulatory environment for small business owners as completely “relentless.” “They get around one bit and then something else gets hit. They were just coming to grips with Covid, then you’ve got credit card changes, then the credit card changes become the minimum wage hike, and everyone’s like, ‘well, what’s next?’ Electricity used to be something you

just paid; now it’s something you’ve got to budget for because electricity prices have doubled in the last two to three years.” At his own cafe, The Coffee Commune, Mr Di Bella has altered trading hours and embraced automation to keep prices stable for consumers. Warning we could become like the US The long-term fear for the sector is that Australia will lose its world-renowned premium hospitality culture and devolve into a faceless, automated landscape similar to the United States or fast-food chains. “We’re gonna

end up like the US,” Mr Hart warned. “When you go out for a cup of coffee, you get it out of an automated coffee machine at a Wendy’s or a Dunkin’ Donuts because they can’t afford to have decent facilities, decent coffee, or staff to serve it. “If we want to dumb down our service offering to a point where we have this faceless person serving you from a machine, then keep doing what we’re doing. But if we want to have an industry

that is vibrant and a pleasure to be dining in, then we’ve got to have a system that makes it work for us.” Mr Di Bella urged the government to look at other parts of the world — like Europe’s that has no weekend penalty rates or the UAE where a coffee costs $12 but that has income tax so people are happier to pay more — rather than continuously hiking wages to address the cost of living crisis. He said the US was an

example of what happens when you jack up wages, with coffees made by baristas surging in price. “America’s hospitality has gone kaboom. You’re paying $8, $9 now for a coffee in America,” he said. “The wages doubled, which is great, because they were talking about terrible minimum wages. The wages in America have doubled. But guess what? So is the price of something. And the customers are happy to pay for it because their wages doubled.” ‘We can’t be the mugs’: Penalty rates slammed Mr

Hart was more critical of the increase in the minimum wage because of its unfair effect on the hospitality industry, arguing that supermarkets and other types of business don’t get slugged with penalty rates. He said cafes have to pay 2.25 times higher for their staff on a public holiday. “So an increase of $6.50 is not an increase of $6.50 for cafes and restaurants,” he said. “It’s an increase of nearly $8 for every hour in the hospitality industry. “We just can’t afford to

be the mugs that have to pay that much more because the industry is just not that much more profitable,” he said. “In fact, it’s that much less profitable. “So they can’t just keep increasing for our businesses that much over the top of what they’re doing for all the others. Their (the Fair Work Commission’s) minimum wage formula has to change so that a $6.50 increase to the minimum wage is a $6.50 increase for a casual employer.”

Fair Work Commission, minimum wage, penalty rates, cafes, public holidays, Restaurant and Catering Australia, The Coffee Commune, automation, cost of living, hospitality wages