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Written for café buyers
Before you buy a café, price the goodwill against build cost.
Written by Priyank Thakkar: finance broker, former bank commercial credit assessor, active property developer.
Written for first-time and returning café buyers, and the advisers alongside them.
Australia has nearly 28,000 cafés. Competition is high and rising, and the barriers to entry are low, which changes what you are actually buying and what it can rationally be worth. In an industry where someone can open across the road for the cost of a fit-out, goodwill has almost no moat.
Subject to lender criteria, security position and eligibility. Figures on this page reviewed quarterly, last reviewed August 2026. Next review: November 2026.
30 minutes with Priyank, former bank lending manager and commercial credit analyst, member of the Australian Institute of Business Brokers.
Download the 5-page guide (PDF) → No email required.
The industry, in four numbers
A thin industry. Not a collapsing one, but thin.
Revenue across the sector runs about $15.9 billion shared between 27,821 businesses: roughly $571,000 each, with about five staff. Total industry profit is $526 million, which works out at around $18,900 per business per year before the owner’s own wage is considered. Margin sits at 3.3%, and it has held steady for five years.
| Measure | Industry | What it means for your deal |
|---|---|---|
| Cafés | 27,821 | Low barriers to entry. A competitor can arrive next month for the cost of a fit-out. |
| Revenue each | ~$571,000 | Turnover is modest, so small cost movements matter more than they look. |
| Profit each, before the owner’s wage | ~$18,900 | Two owners working sixty hours between them can be most of the advertised profit. |
| Margin | 3.3% | Steady for five years. There is very little room for a rent review to go wrong. |
Published Australian industry research current to August 2026. General information only, not a valuation and not advice about any particular business.
Where the money actually comes from
Coffee is 59% of industry revenue, food 21%, other drinks 20%. Coffee carries the margin; food carries the labour and the waste. A café that looks busy on brunch and quiet on coffee is a different business from one that looks the same on the takings sheet. Ask for the split before you assume.
The test that sets your price
What would it cost to build an equivalent shop across the road?
In an industry with low barriers to entry, goodwill has almost no moat. So the honest question on every café you look at is not what it is earning. It is what it would cost you to replicate. That number is the ceiling on what goodwill can rationally be worth.
Do the sum before you fall for the place
If a café is priced at $400,000 and you could fit out an equivalent site for $250,000, you are paying $150,000 for a customer base, in a market where a competitor can open next month. Sometimes that is worth it: an irreplaceable corner, a locked-in lease below market, a genuinely established trade. Often it is not.
What makes goodwill real in this industry: a site that cannot be replicated nearby, a long lease with options at a rent you could not get today, a trade that is habitual rather than novel, and systems and staff that run without the owner. Anything else is a fit-out with customers attached.
The rebuild
Cafés are advertised on earnings before the owner’s wage.
PEBITDA adds back what the owner pays themselves, because the buyer is assumed to work in the business. In a 3.3% margin industry that add-back is not a minor adjustment. It can be most of what is being advertised as profit.
| The rebuild | Amount | Why it moves |
|---|---|---|
| PEBITDA as advertised | $140,000 | The number the listing leads with. |
| A manager to run it at market wage | − $78,000 | Someone has to open at 6am. If it is you, that is a job, not a return. |
| A second unpaid role the owners cover | − $22,000 | The partner on the floor at weekends, currently costing nothing. |
| Rent under the lease you will sign | − $11,000 | The accounts carry the old rent. You will not. |
| Equipment due inside 24 months | − $7,000 | Machine, grinder or fridges already at the end of their life. |
| What the lender assesses | $22,000 | The business has not changed. Only your understanding of it has. Your loan is sized on this number, not the advertised one. |
Illustrative only, to show the shape of the adjustment. Not a valuation and not a representation about any particular business. General information only, current at August 2026.
Wages run about a quarter of revenue industry-wide. If the shop is overstaffed at 2pm, that is a margin problem you inherit on day one.
The first visit
Two hours in a café tells you more than any information memorandum.
Go at 7:30am, go again at 2pm, and take a notebook.
What to count while you are there
Cups an hour, in the peak and in the trough. Coffee is 59% of revenue in this industry, so count the actual cups, not the vibe.
How many customers are regulars. Watch whether staff start the order before it is given. That is the goodwill, visible.
Staff on the floor against customers served, and the food going in the bin at close. Food is the wasteful 21%.
The seats outside, and whether the permit for them is on the wall. Also: who else sells coffee within 200 metres, and how good it is.
What to ask the owner, face to face
Years left on the lease, including options?
Is the coffee machine yours, or on a supply agreement? If beans come with the machine, you are buying a contract as well as a café.
Who makes the coffee, and are they staying?
What is your food cost and your wastage? If nobody measures it, that is the answer.
What has changed in the last twelve months: rent, a new competitor, a lost office block, road works? And why this price?
Score them side by side. The café you remember most fondly is rarely the one that stacks up strongest on paper, so fill the comparison in the same day you visit, while the numbers are still fresh in your notes.
The screening register
One is a negotiation. Three is a walk.
In an industry this thin, walking away costs you almost nothing at this stage. These are the recurring twelve, and the remedy for each.
Price and earnings
Goodwill above build cost. Price it against what a fit-out would cost. Anything above needs a reason.
PEBITDA taken at face value. Rebuild it, then price and borrow on that number.
A royalty that outruns the margin. At 4% of revenue a royalty is around $22,900 on industry-average turnover; at 6%, around $34,300. Average profit before the owner’s wage is about $18,900. Do that arithmetic before signing anything.
The lease and the site
A lease shorter than the loan. Fix the term before contract. It sets the funding.
Occupancy cost eating a 3.3% margin. Model the next review. Reprice, renegotiate, or walk.
Outdoor seating you cannot rely on. Footpath permits are council-granted, conditional, and not automatically transferable. Confirm with council and condition the contract on it.
Equipment and people
The coffee machine that is not yours. A machine tied to a bean supply agreement at a set price for years. Read the supply contract before the sale contract.
Equipment on finance. Run a PPSR search on the vendor entity and by serial number for machine, grinder and refrigeration. Payouts at settlement.
The barista is the business. Secure them before settlement, or reprice the risk. And no restraint, no deal.
Anything touching the lease counts double
A café is a fit-out bolted to a floor with a customer base built on convenience. Everything you pay for location assumes the business keeps trading from that address, so a lease problem is not one finding among twelve. It is the finding.
The funding
Funding is decided on the submission, not only the deal.
Cafés are small-ticket and lease-dependent, which makes presentation matter more, not less. What is achievable turns on the rebuilt earnings, the lease and options against the loan term, the security position, and whether any property sits behind the transaction.
Get your capacity assessed first
Before you negotiate, not after. Deposit workings are set out on our business deposit guide.
Equity behind you changes the answer
Where there is property equity, the structure available is materially different from an unsecured small-business facility. Worth establishing before you offer.
The lease sets the loan
Lenders generally want the lease, options included, to run at least as long as the facility. One question, asked early, screens out sites before you fall for them.
Subject to lender criteria, security position and eligibility. We arrange credit; we do not provide legal, tax or accounting advice.
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Fair questions
Straight answers.
How much does it cost to buy a café in Australia?
It depends far more on the fit-out and the lease than on the takings. Industry-average revenue is about $571,000 a year with roughly $18,900 of profit before the owner’s wage, and asking prices commonly sit somewhere between a modest fit-out cost and several hundred thousand dollars once goodwill is added. The useful discipline is to price the goodwill against what building an equivalent shop nearby would cost you, because in an industry with low barriers to entry that figure is the ceiling.
Is buying a café profitable in Australia?
It can be, but the published numbers set expectations honestly. Industry margin is 3.3% and has held there for five years, and average profit per business is about $18,900 a year before the owner’s own wage is counted. That means most cafés are buying yourself a job plus a small return, unless the site, the lease or the systems make it something more. The businesses that do better are usually the ones where coffee volume is high and the owner is not the barista.
What is PEBITDA and why does it matter when buying a café?
PEBITDA is proprietor’s earnings before interest, tax, depreciation and amortisation. The word doing the work is proprietor’s: it adds back what the owner pays themselves, on the assumption that the buyer works in the business. It is a definition, not a trick, but in a 3.3% margin industry it can be most of the advertised profit. Ask for PEBITDA and EBITDA. The gap between them is the wage of the person doing the work.
Does the coffee machine come with the café?
Often not, and this is a common and expensive surprise. Machines are frequently supplied free or cheaply under a bean supply agreement that locks you into a price for years, or they are financed and secured to a lender. Read the supply contract before the sale contract, and run a PPSR search on the vendor entity and by serial number for the machine, grinder and refrigeration.
Do outdoor seating permits transfer when you buy a café?
Not automatically. Footpath trading permits are granted by the council, are conditional, and generally do not transfer with the business as of right. If the outdoor seats are a meaningful part of the takings, confirm the position with the council and make the contract conditional on the permit being granted to you.
Can you get finance to buy a café?
Yes. What is achievable depends on the rebuilt earnings, the lease and option terms against the loan term, the security position, and whether property equity sits behind the transaction. Small-ticket hospitality is lease-dependent, so the lease is usually the first question a lender asks. Get your borrowing capacity assessed before you negotiate. Subject to lender criteria, security position and eligibility.
The 5-page guide covers the rebuild test that should decide the price, the PEBITDA add-back, the 12 deal-killers, the franchise royalty arithmetic and the documents to ask for. Download it here → No email required.