Setting Up Shop in Melbourne: The High Cost of Opening a Cocktail Bar
Two ambitious Australians, Matt Chong and Allan Ngo, are on the verge of launching their dream: Buvons Bar, a cocktail bar in the heart of Melbourne’s Central Business District (CBD) at 357 Collins Street. Buvons Bar promises a unique fusion of Vietnamese and French influences, blending Asian flavours with Parisian elegance. The grand opening is slated for the end of the year, but the journey to get there has been an eye-opening experience, particularly when it comes to the financial investment required.
The sheer cost of setting up a business in Australia, particularly in the hospitality sector, has sparked considerable debate. Chong and Ngo’s experience highlights the significant financial hurdles entrepreneurs face.
The $800,000 Price Tag
In a video shared on the bar’s Instagram account, the co-owners revealed that a staggering $800,000 has already been invested just to get the bar ready for its first customers. “Ever wondered how much it really costs to start a bar? It’s not just rent and alcohol,” they captioned the video, hinting at the myriad of expenses involved.
A Breakdown of the Costs
Mr. Chong provided a detailed breakdown of the costs, revealing the financial realities of opening a bar in Melbourne:
Rent: The 110-square-metre space, situated on a busy street, commands a monthly rent of $17,000.
Architectural Design: Hiring an architect to design the space cost $25,000.
Appliances: As the establishment will function as both a café and a bar, the cost of appliances doubled, reaching $130,000.
Kitchen Fit-Out: Serving brunch and tapas necessitated a comprehensive kitchen setup, costing $74,000.
Facade (Windows/Doors): The long glass facade, while aesthetically pleasing, came with a price tag of $55,000.
Furniture: Seating for 65 people required a $24,000 investment in furniture.
Signage and Lighting: Signage and lighting added another $46,000 to the overall cost.
Ventilation and Fire System: A crucial element for safety and compliance, the ventilation and fire system cost a substantial $112,000.
Cabinetry and Joinery: The most significant expense was cabinetry and joinery, amounting to a staggering $300,000.
Invisible Costs: Beyond the tangible expenses, Chong highlighted the “invisible” costs that are often overlooked, including permits, licenses, and branding, which totalled approximately $33,000.
“All up, that’s roughly $800,000 we’re in for. It’s much more than we imagined,” Chong confessed. He then posed a question to fellow Australians: Were they being “ripped off,” or is this simply the price of starting a hospitality business in the current climate?
Public Reaction and Concerns
The revelation of these costs sparked a range of reactions among Melbourne residents and the wider Australian community. While many praised Chong and Ngo for their determination and expressed excitement about visiting Buvons Bar, others voiced concerns about the high cost of doing business in Australia.
Some commenters suggested the pair were being “ripped off” and attributed the high costs to government “red tape.”
One person shared their experience of leaving Melbourne for Dubai, citing the prohibitive costs of setting up a business.
Others questioned why it costs so much more to establish a business in Melbourne and other major Australian cities compared to other countries.
Another commenter stated that the high costs were simply the “price of doing business,” citing councils, landlords, and government regulations as contributing factors.
The Broader Economic Context
The challenges faced by Buvons Bar highlight the broader economic difficulties confronting the Australian hospitality sector. A recent report indicates a concerning trend of business closures.
Nearly one in ten businesses have closed down in the past year, marking a record-high closure rate of 9.4 per cent.
This surge in closures is part of a broader trend, with economy-wide insolvencies rising by 17 per cent year-on-year.
The hospitality industry is particularly vulnerable due to its reliance on discretionary spending and its susceptibility to rising operational costs, increasing rents, labour shortages, and declining customer spending.
One industry expert described the current situation as a precarious time for businesses, with many already struggling with higher inflation, interest rate increases, and lower demand. Businesses are encouraged to take proactive steps to manage risk, such as reviewing credit policies, conducting portfolio health checks, and monitoring customers more closely.
The story of Buvons Bar serves as a stark reminder of the financial challenges facing aspiring entrepreneurs in Australia’s hospitality sector. While the dream of opening a cocktail bar in Melbourne remains alive for Chong and Ngo, their experience highlights the need for greater support and reform to ease the burden on small businesses and foster a more sustainable environment for entrepreneurship.