A Cafe: Goldmine or Money Pit?

Have you ever complained about the prices charged by a small business owner?
 
“Plumbers make a fortune.”
“Selling coffee is a goldmine.”
“ I’m not paying that price!” 
“Can I have a discount if I buy two?”
“I can buy ten of those in K Mart for the price of that one.”

Observing a small business is like everything else in life - you don’t really understand the other person’s situation until you’ve walked a mile in their shoes.

Not for the first time, I recently heard someone complaining about paying $4.50 for a cup of green tea in a cafe. I also read a remark from a very seasoned business adviser stating that shop fitters are the ones who make money from small business. 

How can that be? How can someone be making a killing selling green tea for $4.50 a cup but not making money?

Well, here’s the answer.

When you pay for a cup of tea in a cafe you’re not just paying for a cup of tea. Mostly you’re paying a very small portion of the very significant cost of providing the space and making it operate smoothly. 

Your $4.50 contributes to the wages and associated costs (workcover premiums, super contributions, insurance) of the people who purchased and delivered the ingredients, took,  your order, made your tea, served your tea, cleared up after you and cleaned the premises after hours.
 
It pays for the furniture you sit on, crockery you use, your napkin and cleaning products. If you sit by yourself you may read a physical newspaper which is provided to entice customers to come in and stay a while. 

 It pays for the rent of the building and any work vehicles; most of the landlords outgoings: property insurance, rates, fire services levy. It’s retrospectively  paying for the fit-out of the building and purchase or lease of all the equipment and appliances. It pays the business owners’ insurances: business, work vehicle and public liability.

It pays for the separate council permits for

• the food premises (ie the permit to prepare and sell food -  the more the food is prepared from scratch on site, the more expensive level of permit you require)
• the advertising on the footpath (the council owns the food path and effectively rents the business owner a small portion for their sign)
• Outdoor furniture - also renting the footpath space

You contribute to the cost of pumping out the grease trap (a mandatory piece of plumbing for a food premises), and to the cost of giving to all the schools and community groups who come asking for donations to use in their fundraising silent auctions.
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All the essential services such as electricity, gas, water, internet, phone - most of which are charged at a higher than domestic ‘business rate’ and are a considerable cost to any business. You pay a few cents to the bank for transaction fees and to pay the accountant. 

A significant portion of your money goes as GST to the government.
So you can see, most of your $4.50 is spent behind the scenes to allow your cup of tea to appear at your table.

On balance, I think you actually get quite a lot for your money. 

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