New data released today shows that Australian households are increasingly abandoning cafes and restaurants in favour of pubs and clubs.
According to CreditWatch’s January Business Risk Index, an alarming 10.4 per cent of food service companies closed over the past year—the highest failure rate of any industry and double the economy-wide average. By contrast, pubs, clubs, and bars, supported by stronger cash flows and asset backing, recorded lower annual failure rates of around 8 per cent.
The report highlights a growing divide within the hospitality sector. In the food service industry, the share of business-to-business invoices overdue by more than 60 days has risen to 12.4 per cent, compared with a national average of 5.9 per cent. Pubs and clubs, on the other hand, reported overdue levels of just 3.1 per cent, reflecting stronger balance sheets and a greater ability to absorb rising costs.
CreditorWatch CEO Patrick Coghlan said the figures demonstrate a clear divergence: “Asset-backed pubs and clubs are holding firm, but cafes and restaurants operate on razor-thin margins with very little room for error. When overdue invoices in food service are running at more than double the national average, that’s not cyclical noise—it’s sustained financial stress.”
The balance sheets of cafes, restaurants, and takeaway outlets have been severely impacted by rising operating costs and weakening consumer demand. Successive minimum wage increases, steep commercial rent hikes, food inflation, higher power bills, and pre-existing high debt levels have pushed many operators to the brink.
Smaller food service businesses, typically run on slim profit margins and unable to pass on cost increases without losing customers, are particularly vulnerable. Retail data shows that cafe and restaurant turnover has largely remained flat since early 2023, as cost-of-living pressures and high interest rates discourage dining out and reduce consumer spending.
Coghlan added, “Businesses without pricing power, diversified revenue, or cash reserves are being exposed, and the pressure has been building for months.”
