“Cafe owners past and present say lack of experience and poor planning, along with manpower issues because of the tight labour market, have been the biggest challenges in keeping their business running” (Running Cafes No Piece Of Cake, Joanna Seow).
I enjoyed the report on the realities for cafés in Singapore (ST, Dec. 28). That only 55 per cent of cafés, coffee houses, and snack bars started in 2011 remain open should not be surprising, and is a good contrast to feel-good stories of wide-eyed, enthusiastic new entrants trying to carve a niche or appeal with new selling propositions. It is also interesting that the successful establishments cited possess not only business acumen or experience, but pragmatism too: keeping hot food off their menus, recognising the value of staff members through conversations or training courses, and choosing the right locations.
Yet these statistics – closure rates of 38 and 23 per cent for cafés which were registered in 2012 and 2013 respectively – could be benchmarked against other industries in Singapore as well as the food and beverage (F&B) industry around the world. Since F&B establishments are notoriously difficult to maintain, the financial performance of these cafés, coffee houses, and snack bars could be compared with restaurants for instance. It could also be determined if the smaller businesses, usually sole proprietorships, are priced out of competition by franchises and chains, and whether they are doing well vis-à-vis startups in general. In 2013 Forbes cited a finding by the National Restaurant Association in the United States, that 30 per cent of new restaurants do not make it past their first year, and another 30 per cent of the survivors pull down their shutters in the next two years. These figures were contrasted with data from the Small Business Administration Office of Advocacy, that the two-year failure rate for small businesses across the country is 31 per cent.
Failures are good lessons, but they can be expensive. As we celebrate the successes of our businesses – including cafés – knowing more about the failures will prepare business owners and aspiring entrepreneurs more adequately for the future.
A version of this article was published in The Straits Times.