Advertisement
Australia markets open in 5 hours 11 minutes
  • ALL ORDS

    8,262.40
    +56.30 (+0.69%)
     
  • AUD/USD

    0.6765
    -0.0021 (-0.31%)
     
  • ASX 200

    8,017.60
    +58.30 (+0.73%)
     
  • OIL

    81.94
    -0.27 (-0.33%)
     
  • GOLD

    2,428.40
    +7.70 (+0.32%)
     
  • Bitcoin AUD

    93,944.95
    +5,207.25 (+5.87%)
     
  • CMC Crypto 200

    1,323.45
    +54.50 (+4.30%)
     

Aussie cafe owner exposes grim reality facing thousands: 'Not viable'

Gavin Diener said this is the “toughest time” he has experienced as a business owner as the price of goods, electricity and wages all increase.

Gavin Diener and NYC Bagels
Aussie cafe owner Gavin Diener says businesses are struggling to stay afloat. (Source: Supplied)

An Aussie cafe owner says he is struggling to stay open each day as rising costs, coupled with a drop in consumer spending, brings the industry “on its knees”. Business insolvencies have hit a record high, with those in the food and beverages industry most at risk.

Gavin Diener is the owner of NYC Bagels in Melbourne’s Mornington Peninsula and says it is “barely possible to survive” as the cost of goods, electricity and wages all skyrocket. He said this is the “toughest time” he has ever experienced as a business owner.

And that’s counting the pandemic and 2008 Global Financial Crisis.

“The cost of everything just keeps going up and up and up. If we put our prices up by 10 cents or 15 cents for a cup of coffee, you lose customers,” Diener told Yahoo Finance.

ADVERTISEMENT

“It’s a day-to-day sort of thing at the moment, really. You don’t know what the next day is going to hold and people just don’t understand that.”

RELATED

Diener said he, like many other business owners he knows, is currently working on less than 10 per cent margins.

Despite his cafe being located in a tourist hotspot, he noted he was down about 30 per cent over the Christmas period compared to the year prior.

Rising costs have also forced him to start charging customers an 8 per cent surcharge on weekends and 15 per cent surcharge on public holidays, something which has recently drawn criticism from customers over the King’s Birthday long weekend.

“On weekends it isn’t even viable to open a cafe or a restaurant unless you do a surcharge because of the cost of wages and the cost of everything has gone up,” he said.

Are you a small business owner with a story to share? Contact tamika.seeto@yahooinc.com

Diener said it costs him at least 20 per cent more to just open on the weekends and public holidays, meaning the surcharges don’t fully recoup the added costs.

“A lot of people in hospitality from my experience do it because - we want to make a living as well - but do it because they enjoy it and enjoy interacting and engaging with customers,” he said.

“That’s what keeps a lot of people in it for longer than sometimes they should be. They hold onto it because they really enjoy it. But the reality is, the numbers aren’t actually there. It’s not really a viable thing long term.”

Business insolvencies have climbed to record levels, as high inflation, multiple interest rate hikes and declining consumer demand squeeze margins.

CreditorWatch’s latest business risk index found a 38 per cent average increase in insolvencies in the year to May across all industries. The total number of insolvencies is up 34 per cent year on year and 41 per cent above its pre-COVID maximum.

Small businesses in the electricity, gas and waste services drove the uptick in the insolvencies rate, followed by the education and mining industries.

Gavin Diener
Diener owns NYC Bagels in Melbourne's Mornington Peninsula. (Source: Supplied)

CreditorWatch CEO Patrick Coghlan said cost-of-living pressures had forced consumers at all income levels to cut back on spending.

“We don’t expect a meaningful turnaround in consumer confidence until the impact of at least two rate cuts has been felt, which won’t be until well into 2025,” Coghlan said.

“The only bright-spot for households is next month’s tax cuts, although we don’t see much of this going to discretionary spending.”

Food and beverage services are the most at-risk industry, with a 7.54 per cent business failure rate. They were also the top ranked industry for outstanding ATO tax debts above $100,000, CreditorWatch found.

Tax debts are putting pressure on businesses, with insolvency firm Jirsh Sutherland seeing a “noticeable uptick” in businesses being driven to rescue programs like small business restructuring and voluntary administrations across industries

The Australian Taxation Office is currently working through more than $50 billion in outstanding tax debt, including more than two-thirds owed by small businesses.

The tax office returned to “firmer debt collection actions” towards the end of last year, after giving some breathing room during the pandemic.

Diener said there is a perception from some Aussies that business owners were “better off” than others.

“That isn’t the case. A lot of business people aren’t making a fortune. A lot of them are just about making a living,” he said.

Diener said he is “grateful” his cafe is still up and running but he is now taking things “day by day”. He recently found out his lease would be increasing by $700 a month in six months time.

“Are we going to be here in six months’ time? I can’t say we are. I’d like to think we will be but who knows?” he said.

Get the latest Yahoo Finance news - follow us on Facebook, LinkedIn and Instagram.