Australia’s cafe and restaurant scene is in trouble. With more businesses closing than ever before, the hospitality industry is facing a crisis that’s leaving owners scrambling. But what’s behind this surge in closures, and what does it mean for the future of dining out in Australia?
A Tough Year for Food Service
The numbers don’t lie: 10.4% of food service businesses shut their doors in the past year, according to CreditWatch’s latest Business Risk Index, reports 9News. That’s a huge increase—double the economy-wide average—and it’s hitting cafes and restaurants the hardest. In fact, the rate of closures is the highest the food service sector has seen in years. For many, the combination of rising costs and weakening consumer demand has made it nearly impossible to stay afloat.
While pubs, clubs, and bars have fared better, largely due to stronger cash flows and asset backing, the food service industry is feeling the pinch. Smaller establishments that rely on a steady flow of customers, particularly cafes and independent restaurants, are operating on razor-thin margins. They can’t afford to pass on price increases to customers without risking losing their business entirely. And when consumer spending drops, it becomes even harder to stay in the game.
Rising Costs and Fewer Diners
It’s no secret that operating a business in the hospitality industry is expensive, but recent increases in costs are really taking a toll. Food inflation is one major factor. With prices rising on everything from vegetables to meats, cafes are paying more to source the ingredients they need. At the same time, rent for commercial properties has gone up, and the rising cost of power bills is only adding to the strain. Wage increases, though necessary, also contribute to higher operational costs, which many owners struggle to absorb.
Then there’s the consumer factor. As cost-of-living pressures mount and interest rates stay high, Australians are simply dining out less. The ‘treat yourself’ meal out is becoming a rare indulgence for many, and when people do go out, they’re turning to cheaper options like pubs, clubs, and even fast food. Restaurants and cafes are losing out, and the drop in foot traffic is taking its toll on sales.
The Divided Hospitality Sector
Not all parts of the hospitality industry are suffering equally. Pubs and clubs, with their larger spaces and diverse offerings, are proving more resilient. Their business models, with a greater ability to absorb rising costs and attract customers, are giving them an edge over the smaller players. But even these businesses are starting to feel the squeeze, just at a slower pace.
For cafes and independent restaurants, though, it’s a different story. They’re fighting to stay afloat, and the rising number of overdue invoices (now at 12.4%, compared to a national average of 5.9%) shows just how deep the financial stress runs. Businesses without strong cash reserves, diversified revenue streams, or pricing power are facing an uphill battle.
