Australian hospitality leaders have issued dire warnings that the nation's iconic cafe culture is on the verge of collapse, as venues struggle to stay profitable amid rising wage costs. The latest annual wage review by the Fair Work Commission has increased award rates by 4.75 per cent, pushing the baseline minimum wage to $26.44 per hour. From July 1, the lowest-paid cafe workers, such as dishwashers and kitchen hands, will earn a staggering $78 per hour on public holidays when 150 per cent penalty rates apply.
Industry Leaders Sound the Alarm
John Hart, executive chairman of Restaurant and Catering Australia, which represents over 57,000 cafes, restaurants, and caterers, described the current system as "dysfunctional." He stated that wages have risen to a point where businesses can no longer operate profitably, especially on public holidays. "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," Hart said.
According to Hart, cafes nationally now spend more than 50 per cent of their revenue on wages. While 70 per cent of venues apply surcharges on public holidays to offset costs, he noted that this only makes opening "a little bit more bearable" and does not guarantee profitability. The alternative—closing on public holidays—still incurs fixed costs like rent, leaving businesses losing money either way.
Public Holiday Profit Margins Under Scrutiny
Phillip Di Bella, founder of Di Bella Coffee and head of The Coffee Commune, which represents over 1,300 independent cafe owners, provided a stark breakdown of public holiday profits. For every 100 coffees sold at $7 each, generating $700 in revenue, wages consume $350, goods cost $140, GST takes $70, and utilities and rent account for $105. This leaves a mere $35 profit. Di Bella criticised the public debate around minimum wages, calling out-of-touch critics "muppets" who suggest struggling businesses should simply close if they cannot afford wages.
Di Bella emphasised that few hospitality workers are paid minimum wage, with baristas averaging $33 to $34 per hour due to low unemployment and the need to attract skilled staff. He argued that the real issue is not wages but expenses, as wages across his network of cafes run at 45 to 50 per cent of turnover—far above the ideal 30 to 35 per cent. "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," Di Bella said.
Criticism of Minimum Wage Debate
Di Bella described the focus on minimum wage increases as "obsolete," noting that even Australians earning $100,000 annually struggle with the cost of living. He pointed out that higher wages lead to higher prices for goods and services, perpetuating a cycle. "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?" he asked. Di Bella has adjusted trading hours and embraced automation at his own cafe to keep prices stable.
Warnings of a US-Style Future
Hart warned that Australia could lose its premium hospitality culture and devolve into a faceless, automated system similar to the United States. "We're gonna end up like the US," he cautioned, predicting that automated coffee machines at fast-food chains would replace skilled baristas. "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," he added.
Di Bella urged the government to look at international examples, such as Europe, which has no weekend penalty rates, or the UAE, where higher coffee prices are accepted due to lower income taxes. He argued that the US example shows that wage hikes lead to price increases, with coffee now costing $8 to $9 in America after wages doubled.
Call for Fairer Penalty Rates
Hart criticised the Fair Work Commission's approach, arguing that the hospitality industry is unfairly burdened by penalty rates that do not apply to supermarkets or other businesses. He noted that a $6.50 increase in the minimum wage translates to nearly $8 per hour for hospitality employers due to penalty rates. "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," Hart said, calling for a change in the wage formula to ensure equal treatment for all employers.
