Hard Times for Hospitality Businesses Due to Rising Food and Power Costs

By Rachael Merritt

Topic: Cost of Living

Tuesday, June 2, 2026, at 6:05 am

Simone Douglas says that running a hospitality business has become very expensive.

In short:

The hospitality sector is facing very high cost increases, according to business owners and experts.

A publican who closed her cafe two years ago says businesses are struggling with costs they cannot control.

What's next?

The small business minister of South Australia says the state is the best place to do business despite growing pressures.

Publican Simone Douglas has been serving drinks for decades, but the rising cost of staying in business worries her every day.

If you own a small business, you probably have more sleepless nights now than before.

Every day, Simone sees posts on Facebook about cafes, restaurants, or pizza bars that are closing down.

The state of the local and national hospitality industry is very sad right now.

Simone Douglas has two pubs in Adelaide and Port Adelaide and has dealt with the pandemic's effects on the hospitality industry.

She says it is 100% more challenging to run a business now than during COVID-19.

The cost of doing business in South Australia, especially in hospitality, is rising very fast, and these are costs that businesses cannot control.

If we keep creating an environment where small businesses cannot succeed, the economy will suffer.

Simone Douglas says the hospitality industry is in a sad state.

She had to close her cafe in the city center in 2024 because operating costs, like electricity and insurance, had increased too much.

They tried to keep the cafe open for 18 months, but it was losing a lot of money.

The smart decision was to close the cafe and pay for the rent instead.

'Unprecedented' cost rises

Restaurant and Catering Australia represents over 57,000 cafes, restaurants, and caterers.

The executive chair, John Hart, says the challenges in South Australia are part of a national trend, with about 10.9% of businesses closing in the last year.

This means thousands of restaurants and cafes have closed across the country.

John Hart says the costs of food, transportation, and labor have increased.

The current cost increases are unprecedented.

Food prices are going up, and the cost of transporting goods is also increasing, along with labor costs, which have risen 21% in the last three years.

In the last four months, there has been a 17% increase in the cost of goods.

Serving a cup of coffee now costs nearly a quarter more than it did three years ago.

Despite rising living costs, more people are dining out, but their habits have changed.

People are choosing different menu items, sharing food, and looking for better value.

Customers want to eat out locally and in a way that is better value for them.

Diners are choosing options that make meals less expensive.

However, for the 10.9% of businesses that closed, another 10.9% opened their doors.

Many new businesses fail within the first year, and by the fourth year, about 50% have failed.

It's surprising how quickly businesses close, but another business always takes its place.

Surviving 'tough times'

After working in hospitality, Elliott Brown opened his first cafe in 2023.

Within a year, he was running three cafes in different locations.

Things got tough as he opened the third cafe, and staff became a challenge.

Prices were going up, so they had to increase their prices, and customers who used to buy three coffees a day were now buying one.

Elliott Brown talks about the struggles of running a business.

To cut costs, Elliott produced his own coffee beans, introduced a weekend surcharge, reduced staff, and didn't hire a chef.

But eventually, he closed all three cafes, with the most recent one selling earlier this year.

People don't want to pay more than $22 for avocado toast, but the cost of avocados has gone up.

To make money, a business needs a lot of customers, which wasn't possible towards the end.

Elliott Brown thinks the state government should provide more subsidies and rebates to support businesses.

He believes businesses should have access to rebates for expensive things like gas and power.

Many restaurants and cafes have closed in the past year.

The Minister for Small and Family Business, Nadia Clancy, said South Australia remains the best place to do business due to competitive tax and planning settings.

More than 25,000 small businesses opened in South Australia last financial year, showing the third-highest growth rate in the nation.

South Australia also has the second-highest survival rate for new businesses and a relatively low share of national insolvencies.

South Australian small businesses will get a break on energy costs, with a 12.1% drop in the default power price.

Tuesday, June 2, 2026, at 6:05 am

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