Yahoo Finance Shock as cafe owner reveals measly profit from each coffee
It isn't small business owners getting greedy, but the rising cost of living as well as other factors.
An Australian cafe owner has revealed the tiny amount of money that is left over from every coffee sold.
While there are fears your daily dose of caffeine could soon jump to an average of $6, don’t think for a second it’s because small business owners are getting greedy.
Cafes, like every business, have a load of costs associated with keeping the lights on and the coffee flowing, and the high cost of living is hitting their profit margin.
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Yasmin Chung runs the Sisterhood cafe in Hobart and she told Yahoo Finance times were pretty tough at the moment.
Costs are going up
“Milk’s going up, it’s gone up lots in the last 12 months,” she said. “Our coffee prices have gone up. It’s a lot of money and it makes it more of a luxury good as opposed to everyday good."
She posted a TikTok video revealing exactly how much was left over for her business after selling just one coffee.
“If I'm selling a small takeaway for $4.80 … the first 45 cents goes straight to the government, and that is the GST portion that we have to give the government for all our sales,” she explained.
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“Next up is $1.30. That's 30 per cent And that's our COGS [Cost Of Goods Sold]. That's the coffee. It's the milk. It's the coffee cup and the lid.”
Yasmin said 40 per cent then went to paying her staff and their superannuation, but she admitted that was being conservative and depended on staffing levels.
Then there’s 45 cents, which is nearly 10 per cent of a $4.80 coffee. That goes into insurance, electricity, repairs and maintenance.
Profit margins lower than you’d think
That leaves just 40 cents profit if prices are “standard”. Chung explained that many cafes operated on a profit margin of between 5-10 per cent, but told Yahoo Finance people couldn’t believe it was that low.
“I was surprised that people didn't know that,” she explained after seeing all the comments on her TikTok video.
She said letting people use her venue for functions has been a good way to make a bit more money, but said she was “grateful” for every customer who came in and bought a coffee.
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