Pop-up restaurants flourish as cafes get creative on covering costs
It can feel impossible to find a cafe serving coffee after 3pm in most Australian cities, but increasingly you might be able to buy a taco instead.
As a large chunk of small business owners grapple with soaring rents, utilities and wage bills while customers feel an ever greater pinch from the cost of living, a growing number of cafes and daytime eateries in Sydney and Melbourne are sub-letting their shopfronts and kitchens.
Luxe Cafe in Rosebery, Sydney, is a cafe by day and a popular Mexican restaurant by night.Credit: Steven Siewert
Beyond sharing the burden of rent, the trend has paved the way for food entrepreneurs, often individuals or couples who maintain day jobs and would have otherwise tested their culinary business ambitions as a market stall or food truck, to take over a cafe’s physical location, sometimes for a handful of nights each week.
One business responding to the mounting pressures is the Rosebery iteration of Sydney cafe group Luxe.
Damian Burcher, who has owned Luxe Rosebery since August 2023, was acutely aware of difficulties ahead, having seen several branches of the brand shut in Sydney in recent years. Last year, when nearby Luxe Green Square closed, one of its employees, Luis Arana, approached Burcher with an idea.
“I said: Mate, you’re still paying rent after 2pm until the next morning, why don’t you let me try out a taco night. What do you have to lose?” Arana said, having noted a lack of authentic, casual Mexican eateries in the area.
Arana had migrated from Mexico to work as head chef at a pub owned by hospitality giant Merivale, but had left to pursue a less stressful existence, working between a butchery and Luxe Green Square. There, he had trialled taco pop-up nights and was eager to continue the side hustle in Rosebery.
Adobo Taco was born. Initially opening on Friday and Saturday nights, within months it had added Thursdays to cope with demand.
Arana said that sharing a location made barriers to entry far more manageable than the costs and regulations associated with a food truck, which he and his partner Andrea Tenorio had explored earlier. All the couple needed was an ABN, insurance and an Eftpos terminal. Luxe’s kitchen, liquor licence, and over time, its customers would be shared.
“We didn’t have to take out a loan or go into debt,” Arana said. “Our only investment was $500, and we were out of the negative after our first week.”
As with any sharing agreement, some ground rules were needed.
Luis Arana and partner Andrea Tenorio (far right) transform Luxe cafe to serve Adobo Tacos’ diners several nights a week.Credit: Steven Siewert
Arana and Tenorio, who maintain their respective jobs at a butcher and as an architect, pay only a share of the rent and utilities on the three days they’re open. The couple arrives in the afternoon to prep from an unused bench, and move into the kitchen once Luxe staff have finished cleaning. There are compromises, too. Only a few Mexican-style decorations are installed, something Tenorio would ramp up if they had sole control.
“Fridge shelves were tricky,” Arana said. “I remember thinking, ‘Where did that kilogram of avocados I had go?’ But we moved past those problems early on.” Now, the rewards far outweigh any negatives.
“If we had to rent a shop, we’d have to open seven days a week just to cover our costs, and we couldn’t even consider keeping our other jobs,” he said. “Now, I have a life, time for my kids, and because our expenses are low, we can charge less.”
The arrangement is succeeding. So much so, that when the couple returns from a trip back to Mexico in coming months, they will contemplate opening for a fourth night each week.
The fruits have been shared with Burcher, the head tenant and owner of Luxe Rosebery, too.
“Rising costs come at you from all angles and need to be met,” he said. “Price increases can only go so far before they become too much for customers to bear.
“Sharing the space definitely reduces that burden.”
It’s just one way some businesses are responding to spiralling costs. While this masthead is aware of several eateries across Sydney and Melbourne sub-letting their space to separately owned pop-ups, it has also reported some cafe owners choosing to extend their opening hours and expand into a dinner offering, as well as lunch and dinner restaurateurs struggling with costs merging into the one conjoined business to maximise the returns on their rent.
Though the trend is in its infancy, NSW government data shows an increase of 366 additional food, drink and leisure businesses open between 6pm and 6am in the 12 months to the end of the December quarter last year.
‘With rising costs and overheads, the profitability of a lot of small businesses is under threat.’
Luke Achterstraat, CEO of the Council of Small Business Organisations Australia
Meanwhile, rents have been steadily rising. Average annual retail rents for neighbourhood locations – a bracket that excludes CBDs – rose in Sydney from $1088 a square metre in June 2022 to $1175 this June, up about 8 per cent, on data from CBRE. In Melbourne, the rate rose from $685 a square metre in June 2022 to $729 this June, a rise of 6.4 per cent.
Luke Achterstraat, chief executive of the Council of Small Business Organisations Australia, said that “with rising costs and overheads, the profitability of a lot of small businesses is under threat”.
“Owners are having to get creative,” he said.
Mick Gibb, chief executive of the Night Time Industries Association, said the creativity trend among cafe owners showed that “commercial rents in capital cities are just astronomical” and have outpaced what have been stable levels of patronage and post-pandemic foot traffic.
Gibb said some cafes were also offering more by hosting live music at night, but he warned that higher public liability insurance costs can punish such attempts at innovation. Zoning and building codes also pose a regulatory barrier to such arrangements.
In Rosebery, Burcher and Arana agree that trust is the crucial ingredient to making the arrangement work. “If there are trading opportunities that you are not willing or able to take on yourself, bringing in a trusted partner is a no-brainer,” Burcher said.
Arana adds: “This is the only way I think you can be a chef, run a business and have a work-life balance. We wouldn’t do it any other way.”
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