Are Melbourne’s Cafes Out of Ideas?

It’s a chilly Saturday afternoon in June. Project281, a new cafe in Brunswick, rumbles with gentle excitement. It’s the opening weekend. Locals who’ve spent the past year walking by a construction site are finally sitting inside with their first coffees, taking in the lofty fit-out. Elaborate wrought-iron chandeliers dangle overhead, a kitchen garden beckons from the mezzanine and an imposing coffee-roasting machine is visible under the stairs. Proud owners Sarge Michael and Connell McGrath have taken a break from troubleshooting issues with the staff to chat with me. We’re seated at a quiet corner table, away from the action. I’m learning about all the effort they put into the venue; how carefully everything was thought out in collaboration with local architect Splinter Society.

“This place is built for bloggers,” McGrath says, referring to sunlight that touches the warehouse’s every nook. “We were at Higher Ground about nine months ago, seated on the mezzanine level. It’s stunning and I’m very envious … but there was this lady with 60,000 followers on Instagram and she couldn’t get a good photo of her food because there’s no natural lighting up there. That’s the sort of hindrance I didn’t want to have.” (Ironically, if anyone knows how to create Insta-famous destinations, it’s Nathan Toleman, the main brain behind Higher Ground, The Kettle Black, Top Paddock and several other groundbreaking, high-profile daytime eateries.) McGrath goes on to explain the importance marketing played in the success of The Glass Den, the cafe he managed for Michael before they became business partners. Each week they hosted “four or five” food bloggers free of charge, which fuelled the hype machine and brought customers to the secluded site inside the former Pentridge Prison in Coburg.

This is far from a one-off. Dozens more cafes – hundreds, even – adhere to the rules unwittingly imposed by new media. Aesthetics have never been more important. Who hasn’t trawled their Instagram feed for brunch inspiration? Visited a photo-heavy blog or flicked through the digital pages of Broadsheet looking for somewhere new and pretty? We even maintain a page named “Most Beautiful Cafes in Melbourne”.

Ten years ago, this kind of thing wasn’t possible. Not just because social media were in their infancy, but because Melbourne’s cafe scene was too. There were a few forerunners, such as St Ali in South Melbourne and Ray’s and A Minor Place in Brunswick. But if you wanted the sort of coffee and breakfast we have almost everywhere today, in a cool, informal atmosphere, it usually entailed a drive. Breakfast wasn’t as enshrined as a social outing, either. Nightclubs were still the main places people were prepared to line up.

From that tiny pool of savvy cafe operators and skilled baristas, we’ve developed a culture of enormous breadth and depth that stretches across the city. Broadsheet’s directory now lists more than 800 cafes in Melbourne, including 160 in the CBD and 30 in Fitzroy. In the past year or two, we’ve added others in Frankston, Bayswater, Templestowe, Reservoir, Deer Park and Hoppers Crossing. Cafes have existed in these suburbs for a long time, of course. But they’re of a different kind now, with trained chefs in the kitchens and fit-outs by recognised interior designers. That’s incredible. Los Angeles may have its taquerias, Paris its patisseries and Tokyo its ramen bars, but no other city in the world has breakfast restaurants – sorry, “cafes” – like ours.

So why does it feel like Melbourne has backed itself into a corner?

Our autumn 2015 cover story, “The Design Question”, asked why so many cafes were starting to look the same: polished timber, white subway tiles and Edison light bulbs. Since then, the similarities have become more pervasive than just aesthetics. Many of our cafes have begun to feel the same, too. It’s like everyone’s read the same basic manual on how to open a “Melbourne cafe”. “It’s become a very fashionable industry, and the barrier to get in is very low – you just need an apron and a beard and you’re in,” jokes Al Keating, a partner at Coffee Supreme, one of Melbourne’s earliest specialty roasters.

It was 2016 when Toleman and his business partners turned a former power station into the immense Higher Ground – an unprecedented space somewhere between a restaurant, cafe and hotel lounge. Among the plethora of cafe openings this year, we’re yet to see anything that original. “Cafes have stalled a bit,” Toleman says. “They need to take a risk again. I think consumers are ready for it – it’s about people having the guts to do it.”

Sydney is arguably a more exciting place to be right now. It might even have us licked on the “no other city in the world” front. Next time you’re up north, stop by A1 Canteen, Cavalier 2.0, Devon Cafe or The Grounds of the City and see what we mean. Where are the full-service Melbourne cafes brave enough to forgo avocado altogether, like Cavalier? Or open in a dim, almost windowless space and serve coffee via 1920s-style trolleys, like The Grounds? In a city of four million people – and the self-declared cafe capital of the world – surely we can support something more daring and niche?

Toleman opened his first business, Apte, in 2006, serving dishes such as ricotta hotcakes and banana bread with stewed rhubarb and labneh. Though heavily inspired by Ray’s and A Minor Place, Apte stood out in a market where most cafes still behaved like sandwich bars. Kitchens were cramped or non-existent, and espresso machines tended to be cheap makes rather than La Marzocco, the Italian stallion so deservedly ubiquitous today. Our expectations were also lower. Toleman and his team built Apte for $50,000, without an architect or designer. The modest sum was enough to cover everything: tables, chairs, kitchen equipment and a basic fit-out. The risk was relatively small. “It was a chance for people to express themselves without having to spend a lot of money, and create something that had value,” he says. “That was the really exciting time. You’ve got a lot to lose these days. It costs so much more to open a venue, and you’ve got so much more competition.”

Today, after design, branding, kitchen, interior, website and PR, a small cafe like Apte might cost $300,000 to launch. A larger, more ambitious site such as Project281 can easily devour a million dollars before the first customer sits down. Cafes that don’t invest this sort of cash risk looking dull or cheap next to their more expensive counterparts. Instagram might be free to use, but building the perfect set for it isn’t. Broadsheet is implicated here too, of course. We’ve always used sharp, original photography to convey the atmosphere at new cafes, restaurants and bars. But we never foresaw that anyone might start designing rooms with the camera in mind.

Harry Butler has found modest success with Frank’s, an understated neighbourhood cafe he opened in Cheltenham last year. Frank’s is his first serious experience in the hospitality industry, but Butler went in with his eyes open. He grew up nearby and knew a looks-driven destination cafe wouldn’t necessarily work there. “Too many people now are confusing success in a business with likes on Instagram,” he says. “It’s a really slippery slope. You’ve got to remember that your locals are the ones coming in Monday to Friday every day. They don’t care what’s on Instagram.” Butler is mainly referring to food here, which he reckons often doesn’t taste as good as it looks on a screen. Beyond its plates, Frank’s is entirely photo-ready thanks to attractive timber panelling, white tiles and lots of greenery. Butler used his trade background to do most of the build himself, saving as much as a quarter of a million dollars.

Most would-be cafe owners don’t have this option. Beyond their own savings and the generosity of family and friends, they turn to lenders such as Geared and Rentlite, which have sprung up in the past decade to assist people like Butler who want to enter the hospitality industry but don’t have the cash. These companies typically charge between eight and 14 per cent interest on loans, depending on the borrower’s existing assets and industry experience. To put that in perspective: if a new owner borrowed $250,000 at the top rate, their repayments are likely to be $4000 or more a month. That’s a lot of flat whites.

Other companies offer finance and leased equipment including ovens, furniture, cash registers and espresso machines, usually at much higher interest rates. Silverchef, which pioneered this model, will pre-approve $65,000 worth of gear for anyone with a name, address, ABN, Medicare card and current driver’s licence.

Property developers are another common source of start-up capital. “Every developer that does a place in Melbourne now, whether it’s offices or apartments, wants to put a cafe underneath it,” says Kael Sahely, who runs Lobbs, Vacation and Square and Compass. “And they’re prepared to throw quite a bit of money at it, if need be.”

Having money isn’t the same as making money, though. And it’s getting increasingly hard to turn a profit in Melbourne. Every operator we spoke to for this story said they’re feeling the squeeze – and this is an experienced bunch. Once, there was a something called the 30/30/30/10 rule, whereby business owners spent 30 per cent of revenue on fixed overheads such as rent, utilities, crockery and repaying debt; 30 per cent on food; and 30 per cent on wages. The 10 per cent left over was profit margin.

But that rule is a relic of the era when cafes behaved like sandwich bars, rather than restaurants. These days, when trained chefs staff most kitchens and front-of-house service expectations are so much higher, wages are more likely to be 35 to 40 per cent during the week, and 50 per cent or more on weekends, assuming the staff is being paid the correct award rate. When you pay $16 for avocado on toast, it might seem like the owner is making a killing, but in reality they’re probably netting about 80 cents from that dish. Or to put it another way, if a group of four customers spend $100, $5 of that might be left in the business’ bank account at the end of the month.

Julien Moussi owns six cafes spread across Melbourne, including Bentwood, Tinker and Clubhouse Malvern. Last year he decided his businesses could no longer absorb weekend penalty rates and introduced a 10 per cent surcharge, which has helped his bottom line. “The industry as a whole needs to do it,” he says. “Every cafe should make weekend surcharges mandatory.”

Here’s the paradox, then: it’s never been this easy or appealing to open a cafe, but at the same time, it’s never been this risky and expensive. Is it any wonder we have so many cafes, and that many of them feel safe, familiar and derivative?

Customers, it should be said, are not always sympathetic to these pressures. Some leave hostile, exaggerated reviews over the pettiest things, often without considering that someone’s livelihood is at stake. We could stand to be a little more understanding of non-day-ruining mistakes such as slow service and one-off bad coffees. The same goes for price rises. Sahely remembers one regular at Square and Compass in East Melbourne. Every week for a year, this customer ordered a $10 bacon and egg roll. When the price went up by 50 cents to cover Sahely’s costs, the customer made a fuss and stopped coming.

“People are outraged when things cost too much; they're often outraged when it’s too slow,” says Aaron Maxwell, co-owner of Everyday Coffee, Everyday Midtown and All Are Welcome. “It’s pretty tough. You’ve got to be quick; you’ve got be affordable; look great, taste great. You've got a lot of boxes to tick, really. That’s definitely part of the reason a lot of cafes are doing the same thing.

“It’s amazing, because lots of people have the opportunity to go and create a small business,” he continues. “But the repercussion of that is saturation of the market and lots of mediocrity. There’s a lack of originality – people see something that’s working, and it’s easier to copy something that’s working.”

There are benefits to this widespread and highly competitive culture. As we noted earlier, the overall quality of Melbourne’s food has lifted immensely over the past decade, in part thanks to so many chefs leaving restaurants for the friendlier hours offered by cafes. “Some of the food going out is really impressive – it’s restaurant food,” Sahely says. “Even a Bircher muesli nowadays is so much better than it was.” Likewise, our coffee is of a higher grade and sourced more ethically than it ever has been, and our roasters and baristas have a better idea what to do with it.

Improvement isn’t quite the same thing as innovation, though. And when innovation does happen, it often leans towards flashy. Freakshakes. Dishes blanketed with edible flowers. Hot chocolates topped with fairy floss. Nutella everything. Empty doughnuts ready to be injected with syringes full of jam. It’s all designed for Instagram first, and taste second. But when the stakes are so high and a failed cafe could mean bankruptcy, we can hardly blame owners for being risk averse and using the marketing tools available to them.

In this climate of trial-by-Instagram, crippling debt, slim profit margins and intense competition, even Melbourne’s best operators are struggling to innovate. Last year Nolan Hirte of Proud Mary, Stagger Lee’s and Aunty Peg’s handed his local businesses over to his brother and moved to Portland, USA to open a Proud Mary there. “I have so much love for what Melbourne’s been able to do for us,” he told me then. “I’ve always been able to get as crazy as I want with my ideas about coffee. There’s always been someone to say, ‘Thank you, man.’ But in the last few years, it’s been harder and harder for me to excite customers. I’m pouring my heart and soul out and I’m feeling exhausted and flat at the end of the day from not seeing it come back.”

Owners could definitely stand to try something new, but they can’t go it alone. Customers also need to be more accepting of new ideas. Only through this marriage of risk-taking and open-mindedness might we see a resurgence of cafes that dispense with routine fit-outs and predictable menus, and create concepts that Melbourne’s never seen before. Let’s do it for ourselves, yes, but also because the world is watching.

This story originally appeared in Melbourne print issue 23.