A record share of Australian food businesses shut this year. The reason is not what the comments think.
The numbers this year are grim, and I am not going to soften them. CreditorWatch's Business Risk Index recorded around 9.3 per cent of food and beverage businesses closing in the year to February 2025, roughly one in eleven, up from 7.4 per cent the year before. It is the highest closure rate in the sector on record. Separately, ASIC insolvency data showed accommodation and food services insolvencies jumped 57 per cent in the twelve months to March 2025, with 1,837 businesses going under. Whichever way you cut it, a lot of good rooms went dark.
When a cafe closes, the easy story is that the coffee was too dear or the owner could not run a business. Both are usually wrong. I have watched genuinely excellent operators, people who could out-pour and out-host anyone, close their doors this year. Skill was not the problem. Arithmetic was.
Here is what actually did the damage, and none of it is glamorous. Rent that kept climbing while foot traffic did not. Energy bills that doubled. Insurance. Wages rising, correctly, to keep pace with the cost of living, which is right and also real money out the door. And the ATO, after going quiet through the pandemic, coming back to collect tax debts that had piled up while everyone was just trying to survive. Stack those on top of green beans that had roughly tripled, and the margin that used to absorb a bad week simply was not there anymore.
The part that annoys me most is the model itself. For twenty years, coffee was the loss leader. You sold it cheap to get people in the door, then made your money on the food, the second coffee, the muffin. That model quietly broke, because when everyone is watching their spending, the muffin is the first thing to go. So the cafe is left selling its cheapest, most price-sensitive item into its highest-ever cost base, and wondering why the numbers do not work.
So what do you do with this if you are a customer. Not much, except maybe reframe how you see the board. The cafe that put its flat white up to $5.50 is not the villain of this story. It is the one trying to stay on the right side of that arithmetic. The ones that held the line at $4 to seem generous are disproportionately the ones that are gone.
And if you run a venue reading this, the lesson is old and unfashionable. Know your real cost per cup, price for survival not for applause, and pick suppliers who lower your costs and your stress rather than adding to both. I care a great deal about the ones still standing, because I supply a lot of them, and I would like every one of them open next winter.
There is one more thing worth saying plainly, because the closure numbers can read as cold statistics and they are not. Every one of those businesses was somebody's savings, somebody's late nights, somebody's name over the door. When one goes under it is not a tidy market correction. It is a family, a crew of casuals who lose shifts, a street that loses its meeting place. The trade talks about closure rates. I think about the specific people, because I have stood exactly where they stood.
Stay caffeinated. I'm out.
Carlos
Sources: CreditorWatch, ASIC.
