A bustling Melbourne cafe has been forced to shut its doors after being hit with a “culmination” of cost increases. Small businesses across the country are facing the toughest conditions in decades, with recent wage, superannuation and surcharge rule changes being the final straw for some.
Coburg sisters Angie Markou and Chryssie Swarbrick opened the doors to their neighbourhood cafe Two Franks three years ago. The sisters grew up across the street from the store, which was previously a butcher shop, and had always dreamed of turning it into a gathering space for locals.
Despite attracting daily crowds to the cafe and cementing itself as a beloved part of the community, Markou told Yahoo Finance the reality was that running a small business had become increasingly difficult.
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“As small business owners, you know you have to work hard, you know there’s stresses, you put so much into it, but if you’re doing all of that and you just feel like you’re going backwards and it’s not working and it’s not viable, you have to work out whether it’s time to go,” she said.
The cafe has seen operating costs rise “across the board”, with higher costs for goods like coffee and milk, along with overheads like rent, electricity and insurance edging higher.
The final tipping point was the recent July 1 changes, which saw award wages increase by 4.75 per cent and payday super introduced, along with the upcoming RBA surcharge ban on debit and credit cards.
“While individually [the changes] are reasonable and you could make it work, having them all come in all at once with such a short period of time to get prepared,” Markou said.
“It was just the nail in the coffin. I’m pre-empting how much more challenging it’s going to be and getting out before it gets even worse.”
The pair say rising operating costs, along with wage increases, payday super and the upcoming RBA surcharge ban all added pressure. · Source: Supplied
Swarbrick, who took a step back from running the cafe last year, said the business believed in fair wages and had always paid staff above award rates.
“It’s just there doesn’t seem to be a consideration of the actual day-to-day logistics that go into implementing these changes in a small business and the fact that we’re treated the same as big operations when we just don’t have that same cash flow,” she told Yahoo Finance.
Markou estimated the upcoming October surcharge ban would add another $10,000 a year to its ledger.
“Most hospitality businesses are running on 2 to 7 per cent margins, adding in an extra $10,000 that you have to find somewhere – especially if you don’t want to pass that onto the customer by putting your prices up you want to try and absorb it – that’s a huge loss for us.”
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14,000 Aussie businesses collapse in last year
The latest insolvency figures from ASIC show 14,011 businesses collapsed during the 2025-26 financial year.
This was slightly less than the 14,722 recorded in the previous 2024-25 financial year, which was the highest recorded level since 1999-2000 when public data was available. Both exceed the pre-Covid average of 8,219 corporate insolvencies per year.
CreditorWatch’s latest June Business Risk Index found insolvencies are totalling around 0.5 per cent of all operating businesses as at June 30, with overall numbers declining compared to the previous financial year.
However, it noted accommodation and food services and construction continued to carry “structurally higher levels of risk”.
“In Hospitality in particular, insolvency rates remain around three times the national average, reflecting the sector’s ongoing exposure to thin margins, high labour costs and sensitivity to changes in consumer spending,” Creditorwatch said.
“Even with improved conditions, many businesses in this sector are still operating with limited buffers.”
Since sharing the news of Two Frank’s closure online, with the cafe set to close its doors for good on August 1, the sisters have been inundated with messages from customers and other small businesses across the country.
“We’ve had a lot of businesses reach out and say they’re in exactly the same boat,” Swarbrick said.
“From the outside it looks great because they’re busy and they’ve got massive turnover. On paper, it looks great, but that profit margin is what kills you.”
Markou said she doesn’t think the government realises how many small businesses have “reached the limit” and hopes to see more education around how changes will impact businesses.
“Small business owners put so much love and passion and care into what they do and it is external circumstances that are putting us in these positions. It’s just really sad and unfortunate,” she said.
Two Franks was named after the two butchers, both coincidentally called Frank, who ran the space before them. · Source: Supplied
While closing Two Franks was the “hardest decision” the sisters have had to make, they say the endeavour has been worthwhile.
“The everyday little moments are the ones that make it so special. Things like seeing someone go through pregnancy, maternity leave, and then the baby’s grown up and having their first baby chino. It’s just the most beautiful thing,” Markou said.
“It’s just the interaction with the community that has just been the most wonderful, most joyous part of this whole thing.”
Swarbrick agreed the “silver lining” has been the community aspect the cafe has cultivated, with neighbours now often rolling up their garage doors to others and forming new connections.
“It just made the community more close-knit and warmer, and these are connections that hopefully live on beyond us and what we’re done there in that space.”
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