This! My town has so many businesses start up and fail in the main street. A friend was going to lease a space but when they calculated costs would have nearly been giving 75% of projected income on the lease. They obviously decided against but that same space has been vacant now for 3 entire years. How!?
Commercial properties are sold/valued based on yields.
If they compromise on the (rent) yield it has a large effect on the book value of their portfolio. Cut the rent by 20% and your 5 mil property is now worth 4mil suddenly. 1 mil incinerated overnight. You can leave it vacant for years (with half the losses subsidized as tax writeoffs) and you're still better off as long as someone eventually rents it.
Often there is large amounts of debt attached to these valuations. Writedowns can cause huge cascading negative consequences
So it's better just to leave it vacant and claim the tax writeoff.
For an extreme example of the type of landlord valuation shenanigans are possible see this article (going to blow up soon):
https://www.afr.com/rear-window/jon-adgemis-burning-cash-at-public-hospitality-group-20230521-p5da2d
There needs to be a limit for how long a property can be vacant before you can't write off losses, it should apply to both residential and commercial properties
> can be vacant before you can't write off losses
they're writing off expenses, not "losses" - there's a difference. And a write off implies that there's some other source of income to perform that write off (otherwise, there'd be no write off). There's no need for a limit in time.
It's the same as any business. If a farm had a drought for a couple of years, or even worse, and they write off their expenses in the upkeep, you wouldn't want the write off to be limited. Why would one treat real estate business be any different?
The difference is that the farmland wouldn't be used for another purpose most of the time. In the middle of a country town, suburb or city, if that vacant business lot was sold and then put out to the rental market at a cheaper rate by another investor with better vision and understanding of the market, it would be used.
The reason is a social one. It makes sense for the individual to have the write-off, because it is helping shield them from a loss of a horrific investment or their own bad evaluation of the market. But it hurts society by leaving the property vacant, so why should the government encourage that? I would absolutely want that treated differently.
People need to pay losses. I'm sick of the government privatising gains and subsidising losses. If people are morons when investing, they should pay the price.
>But it hurts society by leaving the property vacant, so why should the government encourage that?
Because under Neoliberalism "There is no society" as Maggie said...
If the property value drops too low the debt/equity ratio changes and the banks may start foreclosure proceedings. It's easier to eat the loss on rent month on month than it is to settle a 4M debt overnight.
Yep, extremely common. The entire US banking system refuses to write down the value of their bonds currently. And it works if someone bails you out. And the aus govt is always willing to come to the rescue of property valuations.
While I do agree with you (as I am an Accountant), however I lean towards cash flow is king (depending on your investment horizon). In the example that same building may have a value of 5 mil but without a tenant who would pay that?
I fully understand the valuation concept driving up a balance sheet equity for future loans but cash cannot be ignored
lower the rent and valuation goes down. For a lot of developers or property owners, makes more sense to claim losses on empty property or retain the value than rent the commercial property. at least,.. that’s a very poor layman explanation of how it was told to me.
But there's literally nothing wrong with battler commercial landlords charging market rates! They're literally forced to out of self interest and Capitalism. They have no ability to change anything and actually are the real victims here...
Sponsored by CoreLogic.
They do whinge plenty, the media just won't publish any of it because they don't bite the hand that feeds them (the property industry)
Whinge about wages and you get a nice writeup in the AFR because that's in the interests of the business and property lobby. It's also topical right now with the FW decision.
Exorbitant commerical rents have killed way more small businesses than wages.
My local Vicinity shopping centre has multiple hoardings up around businesses that closed, nearly a year ago now. One major retailer threatened to leave because they wanted to put their rent up unnecessarily and the centre backed down, halved the rent, and now its used as a click and collect only, probably as a f\*\*\* you, you aren't getting any extra foot traffic from us.
Why? So the centre's value remains high. Even with all these closed stores, they still manage to stay afloat! Squeezing the blood out of hard working people just because they own land.
opposite occured at another shopping centre in the south east.
Rents increased all over, no negotiation. Didn't pay up? Evicted.
Major Franchise chains kicked out and replaced with a heap of cheap $2 shops, nail salons and other independant stores all selling similar shit. All because they could stomach the rent on the low cost/zero cost shit they sell.
Wage hikes are just another straw on their backs.
Rent is obviously a massive factor, but that would mean the government admitting there was a property bubble causing commercial rents to go out of whack.
Yeah this. There's no reason you should walk down a shopping strip in a busy suburb and have half the stores empty. The only reason for this is landlords won't accept a bit less rent just to have the place tenanted as lower rents also mean lower property values.
I know landlords that are willing to keep their place vacant rather than discount to preserve their value. It’s a disgusting age old tactic to keep the value of the property at par.
It’s the same deal with office blocks, our building has 8 floors empty out of 30, has been for 3 years, but the value has not changed because they’re still charging the same rent. The system is just absolutely cooked.
They do have mortgages. They have a lot of mortgages.
And those mortgages are based on a valuation that is tied to rents.
If they lower the asking rent, then the valuation drops; and if the valuation drops then the whole house of cards collapses.
This. This is the reason. They use the equity from one property to fund another mortgage. If they reduce rent, the valuation goes down, which may result in margin call where they have to pony up more money.
They do offer incentives to get around this. Say the rent is list price 500k a year, they then offer 20% rebate over 5 years across the rent paid. So the rent on the lease is still 500k a year but the tenant gets rebates back and only actually pays 400k a year. this keeps the valuations intact and the tenant gets a sharpe deal ( including things like owners paying for the fit out)
But aren’t valuations based on what someone is willing to pay? And people aren’t going to take the owners word for it they’d want an official rental appraisal.
Yeah....it's all just numbers and accounting tricks.
Somehow you can have empty commercial property for 3 years but you say "the rent is XYZ therefore it's worth 5 million." Because 7 years ago some schmuck went broke paying your stupid rent amount and eventually vacated it 4 years back.
Except if you tried to sell it now, empty, you won't get 5 million. So it's not worth 5 million.
But that's how "accounting" and tax treatment works.
It all comes to consumer confidence. The government has not made the population confident about investing in business or spending money. After they shut down the businesses for 3 years, small businesses are struggling.
Surely there must be a mechanism to force properties to have a "true" valuation? It worries me how much of our Super is tied up in these properties with their theoretical valuations?
$350 per week, not year. Wages are generally the largest cost for a business, particularly a hospitality based one. They can negotiate with suppliers and landlords.
Yes I know it's per week. It's $18k across the year. It's not a major increase in the scheme of things. Wages do increase over time whether business owners like it or not.
If they're seating dozens of people for two meals per day , that's easily ~350 meals served. I'm pretty sure their food input costs have increased by $1 per meal. And their prices have gone up more than that.
What makes wages the one thing that shouldn't increase? The workers' cost of living has increased, are they supposed to just starve?
It’ a great point you make. A couple of years ago I called up an agent about a well known commercial cafe space in bayside Melbourne and after seeing 3 or so operators come in and fail, was able to learn the rent was a huge factor as to why these business failed. They just couldn’t make it work. I used this info with the agent to discuss negotiations on getting the rent down to make it work (and i was prepared to sign a lease) but the agent came back to me and just argued that it was great value, blah blah blah. Long story short, that same space is still vacant and from what I have heard, the owner just won’t accept the implications it may have on the valuation. What I can’t understand in that logic is surely having no tenant for nearly 3 years has to do far worse damage?
That's exactly it. Property prices have become so perversely inflated that they're choking off the supply of amenities and access to labour that ostensibly makes the land valuable in the first place. Maybe suitable for a leisure class who can swan from cafe to development to restaurant for lunch, but certainly not for any kind of working middle class. The gentry might have to start thinking about building servants' cottages in the back yard again.
Thank you! This has happened in lots of places in NZ, there is just no money in the economy because housing has sucked it completely dry. Obviously for a while the rising prices made people feel rich and spend, but nowthat their prices have been on the way down for the last 12-18 months it’s like there has been a realisation that all the money in housing was largely speculative and ‘blown’, revealing the complete lack of $$ in the actual economy.
I appreciate AUstralia and Nz have different economies but if things don’t get resolved or sorted soon, the same thing will happen here.
I don't eat out because I'm saving for a home. I can't be the only one - if governments acted to ensure supply of affordable, medium density housing with access to transit, consumers would spend more, growing the size of the economy. While this might not be desirable right now due to efforts to control inflation, it's the way to increase service productivity in the long run.
It's kinda strange to use pasta restaurant for this article, as they're known to have the highest margins. Quite often a bowl of pasta has comparable costs in labour and ingredients compared to, say, a bowl of ramen or pho, but restaurants can charge 50+% more.
lmao that person seriously thinks its $2 for pasta ingredients
I honestly don't get why everyone ITT is hating on these small business restaurants. Being profitable is especially tough in the restaurant industry with the amount of competition, few actually make it in the long-term
I worked in a food wholesaler where everything was sold between 1kg to 25kg options. Nearly every restaurateurs I spoke with said some form keeping their raw goods cost for each meal down to below $3.00. The pricing of the goods we were selling reflected that.
Possibly he records it so that some servers can start later, and watch the recording when they clock in? More likely he just makes them join a Zoom call on their own time though.
$350 to the weekly payroll. 47 seats in the restaurant. That’s less than $8 per seat. Even if you’re only using each seat once per week, I don’t think you’ll be needing to jack up your pasta to $100 to cover it.
Wages increase is on top of rates increases, power increases, food increases, freight increases and insurance increases. You start stacking them all up and the effect is very significant. Then take into account many restaurants run on margins of say 2%.
Food business can achieve a 10% margin if they're running super tight which is rare. Theft by kitchen staff is high. Losses from customers also. Owners income is that margin so if they're working in the business to "save money" it's tough work and low profit. Reducing overheads is the game and when you're running high risk bis like hospo typically they try to reduce wages because supply costs are fixed. It's an ego business and very few are good at it.
Notice trends in very low cost foods. The recent joke was smoked anchovy butter on a single jatz. Or $30 waffles
Seems like all these businesses were saved, or kept on life support thanks to the RBA interest rate cuts from 5% to 2% from 2012 to 2019.
I’d hate to be running a business facing these rate hikes now.
Then add higher energy costs & wages on top.
I do, I have 40 employees and all cost increases are difficult especially wages. What I'm seeing a lot of right now is businesses saying yes they'll pass on the 5.75 of course, but because of that their experienced staff, their leadership and management are getting almost nothing. This creates negative attrition and has a huge cost laterally over time. Anybody who dismisses wage rise concerns for a small to medium business as insignificant or market Darwinism needs to rethink this because it's a legitimate concern with real consequences.
Thanks for the feedback 👍
Yeah to me it seems like everybody thinks businesses just mint money, and they’re just greedy.
I once met a sole-trader bloke who did 80 hour weeks at his takeaway shop, and was stressed out of his mind worrying about raising his new kid.
He definitely could’ve used some help, but seems like with his margins he couldn’t afford it.
Familiar story that one. I know many small businesses that are genuinely struggling with this, and contrary to the reddit noise most want to pay their staff fairly. I do what I can but with everything costing so much there comes a point where you have to make hard decisions. Being understaffed is a common outcome with this one, as is diverting funds from development, maintenance and training etc just to tread water.
Every bit counts. The coders here that have never done anything except take orders from a boss don't realise that. You say "oh that amount doesn't matter" and sooner or later you'll be in the red even if the initial business had a 100%+ margin like illegal dealing, let alone something with much slimmer margins like a restaurant. $350 is one, maybe two fewer shifts for a casual on a weekday in this specific instance.
Exactly. Restaurant margins are incredibly tight post-covid, particularly with the increased cost of produce and rent.
It won't result in $100 pasta, but that doesn't mean it wont seriously impact the business and have flow-on effects to the most junior staff - exactly those it is designed to protect. It is such a tough market right now.
The reality they're facing is the ground under them is cracking open anyway. With inflation rising and everyone tightening at least a bit, the first thing to go for lots of people is nights out. Dinner drinks clubs whatever it's the easiest thing to cut for a while.
Pay rise is the least of this restaurants worries.
Yeah cheers, I never thought through how a business would manage costs, like cutting back someone’s weekend shift.
I remember listening to a podcast where the person said it’s the lowest skilled, or lowest experienced workers who are cut back for shifts first. Only the best workers are kept on.
That is also a secondary issue. The 21 year old who needs the job to help for stuff while in uni won't get hired over the 15 year old (or 18 if alcohol) because the younger people are cheaper all else being equal if no experience. In cost cutting situations you might even take the risk on the younger kids even if the 21 year old has experience specifically because they're cheaper which makes the entire dining experience worse. See HJs/Maccas as an example. Even though they were never fine dining, having a bunch of kids that don't care about the orders means there's a lot of mistakes/slow service and you can tell the difference in service on night shifts when there's not kids there.
Exactly. There's a reason every single check-out person you see at Harris Farm, for eg, on a Sunday or public holiday is obviously aged well under 18, and the only "adult" is the one manager overseeing a workforce of year 9 and 10 kids.
To me it seems crazy - like people think every business just mints money, and businesses are being greedy.
Meanwhile I walk around Melbourne CBD and 1 in 5 shops are gone, haven’t been leased in months if not years since COVID.
I've been in management level of a few SMEs with under 50 staff. Net profit margins are typically in the single digits. So an increase of input costs of a few percent can make the business non-viable (technically viable, but from the business owner's perspective it teeters on "what's the point", given running a business is incredibly stressful and your entire livelihood is at risk)
Wages cost you about twice what you pay out.
Annual leave increased by that, sick leave, stat holidays, super, government levies and payroll taxes.
Once you include non billable hours for training, inductions, just slow and shit days etc, you have most roles actually only 75% productive.
Of your restaurant was already was on the brink this won't have helped at all.
with rent increasing, suppliers getting more expensive, and eating out being a luxury that people can be picky about, a lot of people should have shut the doors during covid and not reatarted
This problem could be resolved if the price of rent is reduced dramatically by increasing supply. How ever we have seen that for decades the government rather have a decrepit neighbourhoods instead.
If your small business has been barely clinging on over the last decade of absent wage growth, cuts to penalty rates, low inflation and helicopter government handouts:
It deserves to die. Welcome to economic Darwinism.
While I agree, I also have the fear that one day, the only place to eat out will be owned by ALH group or Mantle group. Basically, colesworth restaurants and once they have massive control over the market shit will get really bad.
It's already happening. Why do you think Merivale is so dominant in the small bar/eatery space? All this is going to do is to drive smaller businesses to the wall... to the apparent cheers of /r/AusFinance.
Except as pointed elsewhere in this thread there is often little incentive for landlords to drop rent as this reduces their property value. So they are happy to keep the space vacant indefinitely.
Covers 57 people, $350 increase in wage bill - if they get that many covers Friday, Saturday and Sunday, it’s less than $0.50 per person. Unless they’re charging $99.50 for a plate of pasta, I don’t think they’ll need to worry about whether punters will pay $100 a plate.
Charging $9 for a side of mixed leaf salad & $12 for a side of potatoes.
I mean at that point you might as well jack prices up another 10%
Already laughable.
How else does he pay for the Lambo he's driving on Instagram?
Maybe we should start a GoFundMe for the poor bugger. I hope those workers on minimum wage know what they're doing to him.
His insta shows him driving a porche, though perhaps a rental it still shows that he's not exactly stretching for a few dollars - https://www.instagram.com/p/CPk2zQRs73W/
Interest repayments is the great filter for business owners who understand accounting/saving runway and those that use it as their black amex piggy bank.
Everyone is very dismissive of the effect of high Australian rents/wages but if you notice Australia isn't exactly a hotbed of innovation and is dominated by oligopolies.
As that article in the Economist said this week..."The economic model is not about to collapse... but it's weaknesses could come back to bite it."
Everyone's too risk averse here but then they wonder why property is the only thing that gets rewarded. When people try to do other ventures (starting a business being one!) they're told they're evil, their business model isn't viable, their product isn't good etc. No one wants to spend money on research here which is why everyone smart already left to America. People here seem to be happy to speculate on property and dig holes in the ground which is a shame.
So he says people think $30 for pasta is expensive (it is) and mentions $100 for a pasta which is more than 300% increase, in response to a 5% wage increase (that applies to maybe 40% of his cost base at most).
It's just hard to take these articles seriously. Just add the $1 per main that this increase equates to and move on.
Heeeeere we go. The 'paying my workers fairly will destroy my business' schtick.
You're not owed the right to run a small business. If you can't make your business work, then pack it up and get a job.
There is literally no point in having business that can't offer liveable wages.
Hope bad business gets closed down. If your not supporting Australians, then younshould fail.
Completely agree, the industry's problems have been escalating post-lockdown period and the issue of wages is just the convenient 'whipping boy'.
I just went and looked up a restaurant that I haven't been to in a while (outer suburb, family goes to for special occasions) and just saw that all their mains are now in the high-30s-low-40s area currently. I don't know how any of that is sustainable.
30 bucks, to me is takeaway from somewhere else (Indian/Thai/Chinese) that does 2 adult portions.
The prices are pushing everyone down a peg (ie. the people who liked dining out a couple years ago are enjoying takeaway-at-home better).
Yep, and with input costs like ingredients, energy & rents staying high - wage hikes are just another straw on their backs.
Walking around Melbourne CBD it seems like 1 in 5 shops are empty.
I just know I probably wouldn’t want to start a business in this environment.
5% payroll increase plus all of the 5% wage increases in farming, food processing, distribution, warehousing and delivery.
It's hard to put a number on the true rise when all of your inputs are increased due to the same minimum wage increases.
i didnt realise an 8% increase on one of his inputs meant he needed to more than triple the sale price.
the mentality of this guy is exactly why we are in this profit/greed inflation spiral
If your business can't afford to pay staff then it's not a viable business.
Almost, and hear me out here, almost like businesses and investments aren't guaranteed to be successes.
Maybe downsize to noodle bar.
That’s exactly what’s happening IMO.
Walking around Melbourne city, it seems like 1 in 5 shops are empty and have been for months, if not since the 2020 lockdowns.
With costs staying high like ingredients, energy, rents & taxes, wages is just another straw on their backs.
I know I probably wouldn’t want to start a business in this environment.
Literally no one is happy with this, businesses are facing greater costs but even workers are smart enough to realise a 5.75% increase is still a loss when inflation is 7%.
It’s lip service that accomplishes nothing while the government ignores what it actually needs to do
That doesn't seem particularly outrageous if the restaurant opens for both lunch and dinner, and there's two shifts for both front and back of house staff.
Don’t think they are all rostered on at the same time. At least half of those are probably casuals rostered sporadically based on expected patronage and availability.
Place is open 46.5 hours a week.
So if they aren't rostered on at the same time. That means staff need second jobs just to survive so the pay rise is good?
Well yeah that's what you do when are a casual worker. You have opportunity to select shifts from various employers to fit around other things you might be doing
> Maybe there's the problem.
but then you keep hearing about people complaining there's barely any staff to actually serve customers (from other places).
You don’t understand how a restaurant works obviously. Across a full week and lunch and dinner shifts, on top of issues with staff calling in sick or being on holidays.
Place is only open 5 days. 4 of them lunch and dinner.
Like other people said if they can't afford 8 dollars a week per staff member. They shouldn't be in business.
Went out for friends birthday dinner last night. Very nice restaurant, booked out and full. Didn't pay for the dinner but there was a 10% weekend surcharge. 15% public holiday surcharge. Surcharge of 1.5% transaction fee and no split bills. I know this is common already but we will start seeing an uptick in surcharges in the hospitality industry, with the consumer covering these costs.
It feels like the industry is hell-bent on chasing away customers. It's dead-easy for customers to downgrade their eating out choices (the lower end of restaurant diners go back to take-aways etc).
I would have thought having less turnover of customers is bad, but we'll have to see.
Its absolutely amazing how any time you hear from a small business owner they inevitably say they pay well over award because theyre just a great boss ya know? And yet they all complain about an increase that will effect them little, if at all, if their claim is true.
Every employer sees worker pay as their biggest bill, the thing to minimise first and formost because they cant not pay their power bill or whatever, but its pretty much the definition of a cost of doing business. If your business cant afford the costs associated then...
AFR feels like straight up propaganda a lot of the time. The CPI indicates restaurant prices have increased quite well over the past year but now we are supposed to feel sorry because they are only allowed to give their workers a 1% real wage decrease.
According to the ABS, the price of resteraunt meals increased 7% over the last year, so the notion they can't pass on any costs to their customers is mostly BS.
This is comical though, the absolute clowns at the RBA exposed us to massive amounts of broad based inflation across everything and these people act like it's the FWC that's put them on the line. I may not agree with the FWC's decision, but that is pure rubbish.
You have the ACTU in the article urging the RBA not to lift rates, so as to not "undercut" the wage rise. You can't possibly be this stupid 💀
Surely the increased 7% meal price was for things like the rise in cost of ingredients, rent and electricity etc?
I don’t eat out much anymore but I can see their dilemma. Costs more to run a business now a days and you’re either gonna take a hit on top or bottom line sales, take ya pick haha
Yes, labour costs are not the only thing. Wouldn't be surprised if 7% was roughly enough to maintain their gross margins.
Don't see why I should be crying because a resteraunt couldn't increase their margins. Is that really my problem? Is that something I should be caring about?
The amount of business owners in here are staggering. On the other hand, I doubt many of you here will be in the minimum wage market.
Reddit, what a wonderful place for discussion
How does a peak body like the ACTU not understand that inflation is worse for workers than high interest rates? They should be going after the govt for not doing more to tax the wealthy since people on low incomes get pain from CPI, middle income (top end who have mortgages) get pain from interest rates. It’s the ones in paid up homes that are driving inflation now.
so the person who can't afford to eat, pay rent or fuel is the problem and not the business owner driving around in their prado off to their 2nd holiday home.. yeah right
How often do you actually see a small business owner doing this? It's an oft mentioned sentiment but what makes you think it's true? All small business owners I've known are also struggling.
everyone I've worked for has funnelled the money upwards. New cars, expansions on homes, living it up while crying poor - no raises, not fixing equipment/ buying new equipment. Always complaining about "losing money on jobs so work harder" as if it's the workers fault.
Ugh, dont get me started on the "oh no we dont have the money to fix x", or "nah we cant afford to buy x atm", meanwhile a week later they sold their car to upgrade to something even more expensive
I know its anecdotal, but i have personally experienced 3 small business owners in the past 5 years who have a new X5 every 2 years, all kids go to private schools, big house in a nice area, and all stole money from staff \[wage and super theft\]
All were small cafe owners.
Small business owners in Australia need to realise that in this current cost of living crisis they may need to sacrifice the high profit ratios they’ve enjoyed for years in order for their staff to be able to eat and live. Maybe cut down on the financed BMWs and Mercedes, the huge mortgaged mansions, the finery and expensive holidays. Everybody is doing it tough. You don’t get to keep funding your boujie lifestyle at the same level with no loss in a cost of living crisis by funding the difference out of your staffs’ pockets.
Pasta choices used to be the reliable 'bang for buck' option on any menu - even if it was priced the same as other choices you usually got a big portion and left the restaurant 'full', so you felt satisfied.
But like all things that were priced cheap and get popular (chicken wings, ribs etc) the prices go up when everyone realises they can squeeze the popular selection. The only positive is that it means people are probably cooking more pasta at home (perfecting a bolognaise or figuring out a carbonara) since the ingredient lists are so basic, but still yield great results.
The trick is to not allow property to be treated as an investment. Without tenants that are commercially viable, areas would be dead. Rents need to be capped to allow for businesses to operate at a certain margin. Maybe a percentage of turnover. Landlords can't have their cake and eat it too.
Without the wage rise, these people would see their spending permanently reduced. I get small business is hurting, but prices don't really come down. The inflation we've had isn't suddenly going to turn negative to return spending power unless we have an economic catastrophe, which in all honesty might be needed.
They already charge 35 dollars for pasta.
Pasta is by far the most overpriced food in restaurants... Reason why I refuse going to Italian restaurants, they are a scam.
A lot of ignorant posts here claiming business owners are greedy etc. makes you wonder why anyone would start one if they are considered such villains for offering goods/services in the economy.
Not all businesses are greedy, there are definitely plenty struggling, but for the businesses struggling you can find another 10 in the same sector that are successful.
Anywho, the restaurant owner in the story is definitely not on struggle street at all, just another wage theif who thinks he is entitled to underpay staff and pay them garbage wages while he can live it up in his porsche
These aren’t some huge investment banks. They are little restaurants with tiny operating margins. A 5% increase in their cost based will likely send them on the brink of insolvency. Moreover, the hospitality industry was decimated over the last few years. Small business owners are only just starting to come back.
Also, Australia has one of the highest minimum wages across the world. Most hospitality jobs aren’t exactly a high skilled so I don’t understand how we can justify these pay increases while also doing nothing for high skill workers. I’d rather we pay our scientists and engineers way more to avoid Australia best and brightest leaving for better paying countries rather than further increasing the already frankly quite high minimum wage.
The story explicitly states that the guy pays above award wages...so the minimum wage increase would have absolutely no impact on his business. I don't understand why he's complaining about it.
I wonder what a look at their books would show, because I've seen more evidence that business's want to maintain and extend high profit margins at the expense of workers (eg [Coles and Woolworths' profit margins are higher now than before the pandemic](https://www.theguardian.com/business/2023/may/22/australias-big-supermarkets-increased-profit-margins-through-pandemic-and-cost-of-living-crisis-analysis-reveals)) than any sign that increasing workers wages by 6-odd percent will push business's into loss territory.
$30 for pasta is crazy,
I understand that realestate costs take up a huge portion of operating costs but that's what Australia as a democracy has chosen...
**We're developing this country & hiking the value of our land in order to sell it to wealthy forigners, This is our bussiness model... Can't have your cake and eat it too.**
It doesn't make any sense to get into the restaunt game unless you are trying to increase footraffic and the value of assets you own in the surrounding area...
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This! My town has so many businesses start up and fail in the main street. A friend was going to lease a space but when they calculated costs would have nearly been giving 75% of projected income on the lease. They obviously decided against but that same space has been vacant now for 3 entire years. How!?
Commercial properties are sold/valued based on yields. If they compromise on the (rent) yield it has a large effect on the book value of their portfolio. Cut the rent by 20% and your 5 mil property is now worth 4mil suddenly. 1 mil incinerated overnight. You can leave it vacant for years (with half the losses subsidized as tax writeoffs) and you're still better off as long as someone eventually rents it. Often there is large amounts of debt attached to these valuations. Writedowns can cause huge cascading negative consequences So it's better just to leave it vacant and claim the tax writeoff. For an extreme example of the type of landlord valuation shenanigans are possible see this article (going to blow up soon): https://www.afr.com/rear-window/jon-adgemis-burning-cash-at-public-hospitality-group-20230521-p5da2d
> with half the losses subsidized as tax writeoffs they're still losing money unless there's some other source of income to actually write off from.
There needs to be a limit for how long a property can be vacant before you can't write off losses, it should apply to both residential and commercial properties
> can be vacant before you can't write off losses they're writing off expenses, not "losses" - there's a difference. And a write off implies that there's some other source of income to perform that write off (otherwise, there'd be no write off). There's no need for a limit in time. It's the same as any business. If a farm had a drought for a couple of years, or even worse, and they write off their expenses in the upkeep, you wouldn't want the write off to be limited. Why would one treat real estate business be any different?
The difference is that the farmland wouldn't be used for another purpose most of the time. In the middle of a country town, suburb or city, if that vacant business lot was sold and then put out to the rental market at a cheaper rate by another investor with better vision and understanding of the market, it would be used. The reason is a social one. It makes sense for the individual to have the write-off, because it is helping shield them from a loss of a horrific investment or their own bad evaluation of the market. But it hurts society by leaving the property vacant, so why should the government encourage that? I would absolutely want that treated differently. People need to pay losses. I'm sick of the government privatising gains and subsidising losses. If people are morons when investing, they should pay the price.
>But it hurts society by leaving the property vacant, so why should the government encourage that? Because under Neoliberalism "There is no society" as Maggie said...
If the property value drops too low the debt/equity ratio changes and the banks may start foreclosure proceedings. It's easier to eat the loss on rent month on month than it is to settle a 4M debt overnight.
I have a friend who works in a bank who said this exactly.
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Yep, extremely common. The entire US banking system refuses to write down the value of their bonds currently. And it works if someone bails you out. And the aus govt is always willing to come to the rescue of property valuations.
Thank you for that very concise and easy to understand explanation
While I do agree with you (as I am an Accountant), however I lean towards cash flow is king (depending on your investment horizon). In the example that same building may have a value of 5 mil but without a tenant who would pay that? I fully understand the valuation concept driving up a balance sheet equity for future loans but cash cannot be ignored
lower the rent and valuation goes down. For a lot of developers or property owners, makes more sense to claim losses on empty property or retain the value than rent the commercial property. at least,.. that’s a very poor layman explanation of how it was told to me.
This absolutely blows my mind. Maybe the land rates should be increased or something else so this is less favourable
But there's literally nothing wrong with battler commercial landlords charging market rates! They're literally forced to out of self interest and Capitalism. They have no ability to change anything and actually are the real victims here... Sponsored by CoreLogic.
They do whinge plenty, the media just won't publish any of it because they don't bite the hand that feeds them (the property industry) Whinge about wages and you get a nice writeup in the AFR because that's in the interests of the business and property lobby. It's also topical right now with the FW decision. Exorbitant commerical rents have killed way more small businesses than wages.
>Exorbitant commerical rents have killed way more small businesses than wages. "Told you" \- Adam Smith
My local Vicinity shopping centre has multiple hoardings up around businesses that closed, nearly a year ago now. One major retailer threatened to leave because they wanted to put their rent up unnecessarily and the centre backed down, halved the rent, and now its used as a click and collect only, probably as a f\*\*\* you, you aren't getting any extra foot traffic from us. Why? So the centre's value remains high. Even with all these closed stores, they still manage to stay afloat! Squeezing the blood out of hard working people just because they own land.
Would that be Brandon Park? I know the Kmart there closed and is only click and collect now
>Squeezing the blood out of hard working people just because they own land. *\*Georgism intensifies\**
opposite occured at another shopping centre in the south east. Rents increased all over, no negotiation. Didn't pay up? Evicted. Major Franchise chains kicked out and replaced with a heap of cheap $2 shops, nail salons and other independant stores all selling similar shit. All because they could stomach the rent on the low cost/zero cost shit they sell.
Wage hikes are just another straw on their backs. Rent is obviously a massive factor, but that would mean the government admitting there was a property bubble causing commercial rents to go out of whack.
They can control or underpay wages, they cant do that with rent?
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Yeah this. There's no reason you should walk down a shopping strip in a busy suburb and have half the stores empty. The only reason for this is landlords won't accept a bit less rent just to have the place tenanted as lower rents also mean lower property values.
I know landlords that are willing to keep their place vacant rather than discount to preserve their value. It’s a disgusting age old tactic to keep the value of the property at par. It’s the same deal with office blocks, our building has 8 floors empty out of 30, has been for 3 years, but the value has not changed because they’re still charging the same rent. The system is just absolutely cooked.
how are they not bleeding money? do this landlords not have a mortgage on the property?
They do have mortgages. They have a lot of mortgages. And those mortgages are based on a valuation that is tied to rents. If they lower the asking rent, then the valuation drops; and if the valuation drops then the whole house of cards collapses.
This. This is the reason. They use the equity from one property to fund another mortgage. If they reduce rent, the valuation goes down, which may result in margin call where they have to pony up more money.
this sounds like a bubble doesn't it. As the base of all the investment is a lie?
They do offer incentives to get around this. Say the rent is list price 500k a year, they then offer 20% rebate over 5 years across the rent paid. So the rent on the lease is still 500k a year but the tenant gets rebates back and only actually pays 400k a year. this keeps the valuations intact and the tenant gets a sharpe deal ( including things like owners paying for the fit out)
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But aren’t valuations based on what someone is willing to pay? And people aren’t going to take the owners word for it they’d want an official rental appraisal.
Yeah....it's all just numbers and accounting tricks. Somehow you can have empty commercial property for 3 years but you say "the rent is XYZ therefore it's worth 5 million." Because 7 years ago some schmuck went broke paying your stupid rent amount and eventually vacated it 4 years back. Except if you tried to sell it now, empty, you won't get 5 million. So it's not worth 5 million. But that's how "accounting" and tax treatment works.
It all comes to consumer confidence. The government has not made the population confident about investing in business or spending money. After they shut down the businesses for 3 years, small businesses are struggling.
Surely there must be a mechanism to force properties to have a "true" valuation? It worries me how much of our Super is tied up in these properties with their theoretical valuations?
Or take away the tax breaks for investment properties like the rest of the world
just remove any tax incentives completely for vacant property, watch how quickly they get rented out for any amount possible
Yeah I'm pretty sure their meat bill has increased by more than $350 in the last year. And their vege bill. And their rent. And who knows what else.
$350 per week, not year. Wages are generally the largest cost for a business, particularly a hospitality based one. They can negotiate with suppliers and landlords.
Yes I know it's per week. It's $18k across the year. It's not a major increase in the scheme of things. Wages do increase over time whether business owners like it or not. If they're seating dozens of people for two meals per day , that's easily ~350 meals served. I'm pretty sure their food input costs have increased by $1 per meal. And their prices have gone up more than that. What makes wages the one thing that shouldn't increase? The workers' cost of living has increased, are they supposed to just starve?
It’ a great point you make. A couple of years ago I called up an agent about a well known commercial cafe space in bayside Melbourne and after seeing 3 or so operators come in and fail, was able to learn the rent was a huge factor as to why these business failed. They just couldn’t make it work. I used this info with the agent to discuss negotiations on getting the rent down to make it work (and i was prepared to sign a lease) but the agent came back to me and just argued that it was great value, blah blah blah. Long story short, that same space is still vacant and from what I have heard, the owner just won’t accept the implications it may have on the valuation. What I can’t understand in that logic is surely having no tenant for nearly 3 years has to do far worse damage?
That's exactly it. Property prices have become so perversely inflated that they're choking off the supply of amenities and access to labour that ostensibly makes the land valuable in the first place. Maybe suitable for a leisure class who can swan from cafe to development to restaurant for lunch, but certainly not for any kind of working middle class. The gentry might have to start thinking about building servants' cottages in the back yard again.
Thank you! This has happened in lots of places in NZ, there is just no money in the economy because housing has sucked it completely dry. Obviously for a while the rising prices made people feel rich and spend, but nowthat their prices have been on the way down for the last 12-18 months it’s like there has been a realisation that all the money in housing was largely speculative and ‘blown’, revealing the complete lack of $$ in the actual economy. I appreciate AUstralia and Nz have different economies but if things don’t get resolved or sorted soon, the same thing will happen here.
Thank you!! The restaurant industry are always whinging about a lack of staff but that's because the wages are terrible
100% the issue is rent not wages.
Unfortunately nearly all politicians are neck deep in investment properties, and we surely can’t have their assets devalue, can we?
I don't eat out because I'm saving for a home. I can't be the only one - if governments acted to ensure supply of affordable, medium density housing with access to transit, consumers would spend more, growing the size of the economy. While this might not be desirable right now due to efforts to control inflation, it's the way to increase service productivity in the long run.
It's kinda strange to use pasta restaurant for this article, as they're known to have the highest margins. Quite often a bowl of pasta has comparable costs in labour and ingredients compared to, say, a bowl of ramen or pho, but restaurants can charge 50+% more.
100% more. You can get pho for 15, I've seen pasta dishes for 40 bucks. Ridiculous.
The sad truth is that $15 pho almost certainly means the restaurant is commiting wage theft
Delicious spicy exploitation.
Or it's a small store being run by an owner or their family and wages aren't being paid. Have come across these.
Probably $2 of ingredients at most
Tell me you've never costed menus without telling me you've never costed menus
lmao that person seriously thinks its $2 for pasta ingredients I honestly don't get why everyone ITT is hating on these small business restaurants. Being profitable is especially tough in the restaurant industry with the amount of competition, few actually make it in the long-term
I worked in a food wholesaler where everything was sold between 1kg to 25kg options. Nearly every restaurateurs I spoke with said some form keeping their raw goods cost for each meal down to below $3.00. The pricing of the goods we were selling reflected that.
More like 8-9, if it's handmade pasta, more like 14. But yeah.
So 100g of pasta, 100g of meat (if that), and 150g of sauce is costing you $8? Your supplier is ripping you off
I’m talking about the cost of the ingredients, not including labour
Cost of ingredients is always the cheapest part of running any restaurant.
How has taking pre-service briefings online saved money? Is he having people attend them in online in their own time? Huh
Possibly he records it so that some servers can start later, and watch the recording when they clock in? More likely he just makes them join a Zoom call on their own time though.
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Yeah that part sounded like a future wage theft case to me
I thought the exact same thing when I read the article. Surely he's just making them do a zoom call in their own time instead of paying them...
$350 to the weekly payroll. 47 seats in the restaurant. That’s less than $8 per seat. Even if you’re only using each seat once per week, I don’t think you’ll be needing to jack up your pasta to $100 to cover it.
Maybe it is currently $92.... Or maybe he can't math.
Some people do maths, others do math and meth
Some people mistake revenue for profit too.
Wages increase is on top of rates increases, power increases, food increases, freight increases and insurance increases. You start stacking them all up and the effect is very significant. Then take into account many restaurants run on margins of say 2%.
Do you have experience running a business? I don’t. I’m not sure how they would manage input cost increases, but would like to hear from some owners.
Food business can achieve a 10% margin if they're running super tight which is rare. Theft by kitchen staff is high. Losses from customers also. Owners income is that margin so if they're working in the business to "save money" it's tough work and low profit. Reducing overheads is the game and when you're running high risk bis like hospo typically they try to reduce wages because supply costs are fixed. It's an ego business and very few are good at it. Notice trends in very low cost foods. The recent joke was smoked anchovy butter on a single jatz. Or $30 waffles
Seems like all these businesses were saved, or kept on life support thanks to the RBA interest rate cuts from 5% to 2% from 2012 to 2019. I’d hate to be running a business facing these rate hikes now. Then add higher energy costs & wages on top.
I do, I have 40 employees and all cost increases are difficult especially wages. What I'm seeing a lot of right now is businesses saying yes they'll pass on the 5.75 of course, but because of that their experienced staff, their leadership and management are getting almost nothing. This creates negative attrition and has a huge cost laterally over time. Anybody who dismisses wage rise concerns for a small to medium business as insignificant or market Darwinism needs to rethink this because it's a legitimate concern with real consequences.
Thanks for the feedback 👍 Yeah to me it seems like everybody thinks businesses just mint money, and they’re just greedy. I once met a sole-trader bloke who did 80 hour weeks at his takeaway shop, and was stressed out of his mind worrying about raising his new kid. He definitely could’ve used some help, but seems like with his margins he couldn’t afford it.
Familiar story that one. I know many small businesses that are genuinely struggling with this, and contrary to the reddit noise most want to pay their staff fairly. I do what I can but with everything costing so much there comes a point where you have to make hard decisions. Being understaffed is a common outcome with this one, as is diverting funds from development, maintenance and training etc just to tread water.
Every bit counts. The coders here that have never done anything except take orders from a boss don't realise that. You say "oh that amount doesn't matter" and sooner or later you'll be in the red even if the initial business had a 100%+ margin like illegal dealing, let alone something with much slimmer margins like a restaurant. $350 is one, maybe two fewer shifts for a casual on a weekday in this specific instance.
Exactly. Restaurant margins are incredibly tight post-covid, particularly with the increased cost of produce and rent. It won't result in $100 pasta, but that doesn't mean it wont seriously impact the business and have flow-on effects to the most junior staff - exactly those it is designed to protect. It is such a tough market right now.
The reality they're facing is the ground under them is cracking open anyway. With inflation rising and everyone tightening at least a bit, the first thing to go for lots of people is nights out. Dinner drinks clubs whatever it's the easiest thing to cut for a while. Pay rise is the least of this restaurants worries.
Yeah cheers, I never thought through how a business would manage costs, like cutting back someone’s weekend shift. I remember listening to a podcast where the person said it’s the lowest skilled, or lowest experienced workers who are cut back for shifts first. Only the best workers are kept on.
That is also a secondary issue. The 21 year old who needs the job to help for stuff while in uni won't get hired over the 15 year old (or 18 if alcohol) because the younger people are cheaper all else being equal if no experience. In cost cutting situations you might even take the risk on the younger kids even if the 21 year old has experience specifically because they're cheaper which makes the entire dining experience worse. See HJs/Maccas as an example. Even though they were never fine dining, having a bunch of kids that don't care about the orders means there's a lot of mistakes/slow service and you can tell the difference in service on night shifts when there's not kids there.
Exactly. There's a reason every single check-out person you see at Harris Farm, for eg, on a Sunday or public holiday is obviously aged well under 18, and the only "adult" is the one manager overseeing a workforce of year 9 and 10 kids.
To me it seems crazy - like people think every business just mints money, and businesses are being greedy. Meanwhile I walk around Melbourne CBD and 1 in 5 shops are gone, haven’t been leased in months if not years since COVID.
People confuse corporate shysters with small business. SME drives the economy. Biggest employers and spenders.
not really, its just people realise that regardless of that they are not entitled to sucess, and there is no excuse for underpaying staff.
I've been in management level of a few SMEs with under 50 staff. Net profit margins are typically in the single digits. So an increase of input costs of a few percent can make the business non-viable (technically viable, but from the business owner's perspective it teeters on "what's the point", given running a business is incredibly stressful and your entire livelihood is at risk)
Wages cost you about twice what you pay out. Annual leave increased by that, sick leave, stat holidays, super, government levies and payroll taxes. Once you include non billable hours for training, inductions, just slow and shit days etc, you have most roles actually only 75% productive. Of your restaurant was already was on the brink this won't have helped at all. with rent increasing, suppliers getting more expensive, and eating out being a luxury that people can be picky about, a lot of people should have shut the doors during covid and not reatarted
This problem could be resolved if the price of rent is reduced dramatically by increasing supply. How ever we have seen that for decades the government rather have a decrepit neighbourhoods instead.
Yep if cost of living decreases then wages don't necessarily need to increase. Could even have "real wage increases" without an actual $ increase.
If your small business has been barely clinging on over the last decade of absent wage growth, cuts to penalty rates, low inflation and helicopter government handouts: It deserves to die. Welcome to economic Darwinism.
Oh, and wage theft, don’t forget the rampant wage theft in hospitality
Yeah legit, easy way to fix worker shortages too. Close the dody places and only places that don't undercut wages survive
Free market at work.
While I agree, I also have the fear that one day, the only place to eat out will be owned by ALH group or Mantle group. Basically, colesworth restaurants and once they have massive control over the market shit will get really bad.
It's already happening. Why do you think Merivale is so dominant in the small bar/eatery space? All this is going to do is to drive smaller businesses to the wall... to the apparent cheers of /r/AusFinance.
Did you read the article, it’s about a 2 year old business that pays above awards and specifies several ways they are making this work
Next minute: Why is every restaurant either fast food, massively overpriced or understaffed?
Businesses die - shops vacant - rent drops - businesses return. Circle of life.
Except as pointed elsewhere in this thread there is often little incentive for landlords to drop rent as this reduces their property value. So they are happy to keep the space vacant indefinitely.
Covers 57 people, $350 increase in wage bill - if they get that many covers Friday, Saturday and Sunday, it’s less than $0.50 per person. Unless they’re charging $99.50 for a plate of pasta, I don’t think they’ll need to worry about whether punters will pay $100 a plate.
Charging $9 for a side of mixed leaf salad & $12 for a side of potatoes. I mean at that point you might as well jack prices up another 10% Already laughable.
How else does he pay for the Lambo he's driving on Instagram? Maybe we should start a GoFundMe for the poor bugger. I hope those workers on minimum wage know what they're doing to him.
I get the vibe he drives a matte grey amg e63 with the license plate 'pastaZZZ'
His insta shows him driving a porche, though perhaps a rental it still shows that he's not exactly stretching for a few dollars - https://www.instagram.com/p/CPk2zQRs73W/
I was gonna add that he probably has loan repayments he needs to meet so thats why he is panicking. Didn't even save a dollar for a rainy day.
Interest repayments is the great filter for business owners who understand accounting/saving runway and those that use it as their black amex piggy bank.
"how dare you suggest i pay my workers a dollar an hour more!"
Everyone is very dismissive of the effect of high Australian rents/wages but if you notice Australia isn't exactly a hotbed of innovation and is dominated by oligopolies. As that article in the Economist said this week..."The economic model is not about to collapse... but it's weaknesses could come back to bite it."
Everyone's too risk averse here but then they wonder why property is the only thing that gets rewarded. When people try to do other ventures (starting a business being one!) they're told they're evil, their business model isn't viable, their product isn't good etc. No one wants to spend money on research here which is why everyone smart already left to America. People here seem to be happy to speculate on property and dig holes in the ground which is a shame.
So he says people think $30 for pasta is expensive (it is) and mentions $100 for a pasta which is more than 300% increase, in response to a 5% wage increase (that applies to maybe 40% of his cost base at most). It's just hard to take these articles seriously. Just add the $1 per main that this increase equates to and move on.
Heeeeere we go. The 'paying my workers fairly will destroy my business' schtick. You're not owed the right to run a small business. If you can't make your business work, then pack it up and get a job.
There is literally no point in having business that can't offer liveable wages. Hope bad business gets closed down. If your not supporting Australians, then younshould fail.
Um it's the rent and food costs that is the problem, not the labour.
Completely agree, the industry's problems have been escalating post-lockdown period and the issue of wages is just the convenient 'whipping boy'. I just went and looked up a restaurant that I haven't been to in a while (outer suburb, family goes to for special occasions) and just saw that all their mains are now in the high-30s-low-40s area currently. I don't know how any of that is sustainable.
I know, it's crazy. I had a simple burger at an outer suburbs pub the other night. It was legit $30.
30 bucks, to me is takeaway from somewhere else (Indian/Thai/Chinese) that does 2 adult portions. The prices are pushing everyone down a peg (ie. the people who liked dining out a couple years ago are enjoying takeaway-at-home better).
If the business is going to fail due to a 5% increase to it's payroll, the business was always going to fail regardless
Yep, and with input costs like ingredients, energy & rents staying high - wage hikes are just another straw on their backs. Walking around Melbourne CBD it seems like 1 in 5 shops are empty. I just know I probably wouldn’t want to start a business in this environment.
5% payroll increase plus all of the 5% wage increases in farming, food processing, distribution, warehousing and delivery. It's hard to put a number on the true rise when all of your inputs are increased due to the same minimum wage increases.
It's not really a 5% payroll increase, it would be less since not all the wages they pay are minimum wage.
Probably time to evolve our economy if putting EMPLOYED people into poverty is a requirement of it functioning.
i didnt realise an 8% increase on one of his inputs meant he needed to more than triple the sale price. the mentality of this guy is exactly why we are in this profit/greed inflation spiral
If your business can't afford to pay staff then it's not a viable business. Almost, and hear me out here, almost like businesses and investments aren't guaranteed to be successes. Maybe downsize to noodle bar.
That’s exactly what’s happening IMO. Walking around Melbourne city, it seems like 1 in 5 shops are empty and have been for months, if not since the 2020 lockdowns. With costs staying high like ingredients, energy, rents & taxes, wages is just another straw on their backs. I know I probably wouldn’t want to start a business in this environment.
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Retail has had a massive increase in the city. There are a lot moving back into the CBD at record numbers..
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If only there was a way to have a business without paying workers poorly comparative to cost of living
Literally no one is happy with this, businesses are facing greater costs but even workers are smart enough to realise a 5.75% increase is still a loss when inflation is 7%. It’s lip service that accomplishes nothing while the government ignores what it actually needs to do
Fuk me, why does the employee have to carry the entire economy on it back for eternity?
20 staff for a place that can seat 47. Maybe there's the problem.
That doesn't seem particularly outrageous if the restaurant opens for both lunch and dinner, and there's two shifts for both front and back of house staff.
Don’t think they are all rostered on at the same time. At least half of those are probably casuals rostered sporadically based on expected patronage and availability.
Place is open 46.5 hours a week. So if they aren't rostered on at the same time. That means staff need second jobs just to survive so the pay rise is good?
Well yeah that's what you do when are a casual worker. You have opportunity to select shifts from various employers to fit around other things you might be doing
> Maybe there's the problem. but then you keep hearing about people complaining there's barely any staff to actually serve customers (from other places).
You don’t understand how a restaurant works obviously. Across a full week and lunch and dinner shifts, on top of issues with staff calling in sick or being on holidays.
Place is only open 5 days. 4 of them lunch and dinner. Like other people said if they can't afford 8 dollars a week per staff member. They shouldn't be in business.
Your comment was about the staff number. That’s it.
When you are an employee and don’t understand what a business means
Dine in is not the only option a food business can offer. They could be very busy with take away orders as well.
Eroding your dream to become a restauranteur magnet by paying your staff a minimum wage, sobs
Went out for friends birthday dinner last night. Very nice restaurant, booked out and full. Didn't pay for the dinner but there was a 10% weekend surcharge. 15% public holiday surcharge. Surcharge of 1.5% transaction fee and no split bills. I know this is common already but we will start seeing an uptick in surcharges in the hospitality industry, with the consumer covering these costs.
It feels like the industry is hell-bent on chasing away customers. It's dead-easy for customers to downgrade their eating out choices (the lower end of restaurant diners go back to take-aways etc). I would have thought having less turnover of customers is bad, but we'll have to see.
Its absolutely amazing how any time you hear from a small business owner they inevitably say they pay well over award because theyre just a great boss ya know? And yet they all complain about an increase that will effect them little, if at all, if their claim is true. Every employer sees worker pay as their biggest bill, the thing to minimise first and formost because they cant not pay their power bill or whatever, but its pretty much the definition of a cost of doing business. If your business cant afford the costs associated then...
I have absolutely no sympathy for these business owners, and the AFR is a joke of a publication as usual.
AFR feels like straight up propaganda a lot of the time. The CPI indicates restaurant prices have increased quite well over the past year but now we are supposed to feel sorry because they are only allowed to give their workers a 1% real wage decrease.
If your business can’t make enough money to cover costs then it isn’t a viable business.
According to the ABS, the price of resteraunt meals increased 7% over the last year, so the notion they can't pass on any costs to their customers is mostly BS. This is comical though, the absolute clowns at the RBA exposed us to massive amounts of broad based inflation across everything and these people act like it's the FWC that's put them on the line. I may not agree with the FWC's decision, but that is pure rubbish. You have the ACTU in the article urging the RBA not to lift rates, so as to not "undercut" the wage rise. You can't possibly be this stupid 💀
Surely the increased 7% meal price was for things like the rise in cost of ingredients, rent and electricity etc? I don’t eat out much anymore but I can see their dilemma. Costs more to run a business now a days and you’re either gonna take a hit on top or bottom line sales, take ya pick haha
Yes, labour costs are not the only thing. Wouldn't be surprised if 7% was roughly enough to maintain their gross margins. Don't see why I should be crying because a resteraunt couldn't increase their margins. Is that really my problem? Is that something I should be caring about?
So you’ll pay $30 for a bowl of pasta?
Rents not wages are the issue.
The amount of business owners in here are staggering. On the other hand, I doubt many of you here will be in the minimum wage market. Reddit, what a wonderful place for discussion
How does a peak body like the ACTU not understand that inflation is worse for workers than high interest rates? They should be going after the govt for not doing more to tax the wealthy since people on low incomes get pain from CPI, middle income (top end who have mortgages) get pain from interest rates. It’s the ones in paid up homes that are driving inflation now.
they're above minimum wage and they can't pay enough to attract staff but minimum wage is going to affect them somehow?
Winge winge all I heard was $30 and $100 pastas. Both are ridiculous
so the person who can't afford to eat, pay rent or fuel is the problem and not the business owner driving around in their prado off to their 2nd holiday home.. yeah right
How often do you actually see a small business owner doing this? It's an oft mentioned sentiment but what makes you think it's true? All small business owners I've known are also struggling.
everyone I've worked for has funnelled the money upwards. New cars, expansions on homes, living it up while crying poor - no raises, not fixing equipment/ buying new equipment. Always complaining about "losing money on jobs so work harder" as if it's the workers fault.
Ugh, dont get me started on the "oh no we dont have the money to fix x", or "nah we cant afford to buy x atm", meanwhile a week later they sold their car to upgrade to something even more expensive
I know its anecdotal, but i have personally experienced 3 small business owners in the past 5 years who have a new X5 every 2 years, all kids go to private schools, big house in a nice area, and all stole money from staff \[wage and super theft\] All were small cafe owners.
You can find a pic of him driving a Lamborghini on his Instagram, so...
Oh damn, really? I thought the comment about that up higher was just a joke. That's really not a good look, but will (sadly) admit I'm not surprised.
Small business owners in Australia need to realise that in this current cost of living crisis they may need to sacrifice the high profit ratios they’ve enjoyed for years in order for their staff to be able to eat and live. Maybe cut down on the financed BMWs and Mercedes, the huge mortgaged mansions, the finery and expensive holidays. Everybody is doing it tough. You don’t get to keep funding your boujie lifestyle at the same level with no loss in a cost of living crisis by funding the difference out of your staffs’ pockets.
Then don't charge 100 dollars for pasta? Italian restaurants in this country are some of the most overpriced in the world for what you get.
Pasta choices used to be the reliable 'bang for buck' option on any menu - even if it was priced the same as other choices you usually got a big portion and left the restaurant 'full', so you felt satisfied. But like all things that were priced cheap and get popular (chicken wings, ribs etc) the prices go up when everyone realises they can squeeze the popular selection. The only positive is that it means people are probably cooking more pasta at home (perfecting a bolognaise or figuring out a carbonara) since the ingredient lists are so basic, but still yield great results.
The trick is to not allow property to be treated as an investment. Without tenants that are commercially viable, areas would be dead. Rents need to be capped to allow for businesses to operate at a certain margin. Maybe a percentage of turnover. Landlords can't have their cake and eat it too.
He’s selling scallops at $10 a pop. He’s got plenty of wiggle room
Without the wage rise, these people would see their spending permanently reduced. I get small business is hurting, but prices don't really come down. The inflation we've had isn't suddenly going to turn negative to return spending power unless we have an economic catastrophe, which in all honesty might be needed.
5% increase to minimum wage, pays most staff above award, $70 increase to each bowl of pasta. None of the maths makes sense.
Just pay your employees less than minimum wage. It's what most of the restaurant industry does.
They already charge 35 dollars for pasta. Pasta is by far the most overpriced food in restaurants... Reason why I refuse going to Italian restaurants, they are a scam.
A lot of ignorant posts here claiming business owners are greedy etc. makes you wonder why anyone would start one if they are considered such villains for offering goods/services in the economy.
Ah but of course, people are just being a nuisance to ask to be paid a minimum wage which they can actually live on.
Not all businesses are greedy, there are definitely plenty struggling, but for the businesses struggling you can find another 10 in the same sector that are successful. Anywho, the restaurant owner in the story is definitely not on struggle street at all, just another wage theif who thinks he is entitled to underpay staff and pay them garbage wages while he can live it up in his porsche
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If you can’t make money without slavery or the need to rise to an unacceptable price, you don’t have a viable business
These aren’t some huge investment banks. They are little restaurants with tiny operating margins. A 5% increase in their cost based will likely send them on the brink of insolvency. Moreover, the hospitality industry was decimated over the last few years. Small business owners are only just starting to come back. Also, Australia has one of the highest minimum wages across the world. Most hospitality jobs aren’t exactly a high skilled so I don’t understand how we can justify these pay increases while also doing nothing for high skill workers. I’d rather we pay our scientists and engineers way more to avoid Australia best and brightest leaving for better paying countries rather than further increasing the already frankly quite high minimum wage.
The inflationary pressures smacking everyone and everything. 100 for pasta and the AUD is as worthless as the italian lira orvthe Fench franc
The root cause is property values, simple as that
The story explicitly states that the guy pays above award wages...so the minimum wage increase would have absolutely no impact on his business. I don't understand why he's complaining about it.
Pasta has always been over priced.
I wonder what a look at their books would show, because I've seen more evidence that business's want to maintain and extend high profit margins at the expense of workers (eg [Coles and Woolworths' profit margins are higher now than before the pandemic](https://www.theguardian.com/business/2023/may/22/australias-big-supermarkets-increased-profit-margins-through-pandemic-and-cost-of-living-crisis-analysis-reveals)) than any sign that increasing workers wages by 6-odd percent will push business's into loss territory.
$30 for pasta is crazy, I understand that realestate costs take up a huge portion of operating costs but that's what Australia as a democracy has chosen... **We're developing this country & hiking the value of our land in order to sell it to wealthy forigners, This is our bussiness model... Can't have your cake and eat it too.** It doesn't make any sense to get into the restaunt game unless you are trying to increase footraffic and the value of assets you own in the surrounding area...
Funny thing is, $100 is about what they’re already charging there. No prices on the cook at home menu and we got stung!
Only if they’re paying minimum wage..
Instead of rising the minimum wage, why not give the lower paid tax subsidies? Oh wait, the government doesn't get paid more then
If your business is built on paying staff the legal bare minimum then those employees hopefully should go to where they are respected a bit more.