Australian Cafe Owner Questions Viability of New Businesses Amid Soaring Operational Costs

A Sydney cafe owner has expressed deep concern over the current business climate, stating he would not open a new establishment today given the mounting operational costs that are increasingly challenging for small businesses across Australia.

Gerardo Barrios, owner of Don Adan Coffee, moved to Australia 30 years ago and has witnessed firsthand the escalating expenses. "When you're dealing with rising wages, utilities and supply costs all at the same time - every extra dollar is money that could help a local business grow and employ people," Barrios told news.com.au. He candidly admitted that if he were starting from scratch with his current knowledge, he would not open his cafe.

Small businesses in Australia have experienced a surge in costs, with a small business cost pressure index by AMP Bank indicating an increase of more than 25 percent since the COVID-19 pandemic. The index showed a rise from 100 in March 2020 to 124.6 by March 2026, reflecting the weighted cost of keeping a small business operational.

"Behind the price of a coffee, haircut or call-out is a long list of costs most customers never see - wages, rent, power, fuel, insurance, tools, packaging and payment costs," AMP Bank GO Director John Arnott said. "Small businesses are caught in the middle. Their own bills keep rising, but their customers are watching every dollar."

AMP Bank's report detailed significant cost increases since 2020, with insurance costs surging by 50 percent, interest repayments climbing by over a third, and wage costs increasing by 20 percent. For labor-reliant businesses like cafes, wages represent the largest single expense.

Recent changes, including a national minimum wage increase to $26.44 per hour as of July 1, and new rules requiring superannuation contributions to be paid with wages, have added to these pressures. Arnott noted that business owners are sharing experiences of unprecedented challenges, with some considering difficult decisions about staffing and the very future of their operations.

Barrios indicated that wage pressure has significantly impacted his business, with wages now accounting for over 45 percent of total costs, up from about a third previously. Despite these hurdles, he is actively working with suppliers to mitigate costs and maintain sales volume. "Rather than just raising the price, we have to look at ways that we can maintain high volumes that will make sure that we have consistency of sales," he explained. "And then we can go to our suppliers and say, look, I'm doing this many coffees. This is how much value I can bring to you. You surely can give me a five per cent discount."

Despite the financial strain, Barrios emphasized the community role his cafe plays, providing a vital social space for locals, particularly those who are isolated. He expressed a commitment to maintaining this service, acknowledging that such community-focused spaces are becoming increasingly rare. "This is the value we bring to the community but we're going to be one of the very few coffee shops still providing this space as we are disappearing," Barrios stated.