Pop-up restaurants flourish as cafés get creative on covering costs

It can feel impossible to find a café serving coffee after 3pm in most Australian cities, but increasingly, you might be able to buy a taco from one instead.

With a large chunk of small business owners continuing to grapple with soaring rents, utilities and wage bills at a time when customers are feeling the ever greater cost of living pinch, a growing number of cafés and daytime eateries in Sydney and Melbourne have begun subletting their shopfronts and kitchens.

Beyond sharing the burden of rent, the trend has paved the way for a wave of 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, instead taking over a café’s physical location, sometimes for just a handful of nights a week.

Luxe Cafe in Roseberry, Sydney, is a cafe by day before transforming into a popular Mexican restaurant by night.Credit: Steven Siewert

One such business responding to the mounting pressures is the Rosebery location of Sydney café group Luxe.

Damian Burcher, who has owned Luxe Rosebery since August 2023, was acutely aware of difficulties that lay ahead, having seen several branches of the brand across Sydney shut in recent years. Last year, when the 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, seeing a lack of authentic, casual Mexican eateries in the area.

Arana had migrated from Mexico to work as a 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 just Friday and Saturday nights, within months it had added Thursdays to cope with demand.

Arana said sharing a location made the barriers to entry were far more manageable than the costs and regulations associated with a food truck, which he and his partner Andrea Tenorio had earlier explored. All the couple needed was an ABN, insurance and an EFTPOS terminal. Luxe’s kitchen, liquor license, and over time, customers, would be shared.

“We didn’t have to take out a loan or go into debt, our only investment was $500, and we were out of the negative after our first week.”

Like with any sharing agreements, some ground rules were laid out.

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, only pay a share of the rent and utilities on the three days they’re open. The couple arrive in the afternoon to begin prep work 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, I remember thinking ‘where did that kilogram of avocados I had go?’ but we moved past those problems early on,” Arana said. Now, the rewards far outweigh the 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. Now, I have a life, time for my kids, and because our expenses are low, we can charge less,” Arana said.

The arrangement is proving successful. When the couple return from a trip back to Mexico in coming months, they are contemplating opening for a fourth night each week.

The fruits have been shared with Burcher too, the head tenant and owner of Luxe Rosebery.

“Rising costs come at you from all angles and need to be met. Price increases can only go so far before they become too much for customers to bear,” Burcher said. “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 subletting their space to separately owned pop-ups, it has also reported some café 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.

“With rising costs and overheads, the profitability of a lot of small businesses is under threat”

Though the trend is in its infancy, New South Wales government data shows an increase of 366 additional food, drink and leisure businesses open between 6pm-6am in the 12 months to the end of the December quarter last year.

Meanwhile, rents have been steadily rising. Average annual retail rental rates for neighbourhood locations – a bracket which excludes CBDs – rose in Sydney from $1,088 per square metre in June 2022 to $1,175 this June, a spike of about 8%, according to data from CBRE. In Melbourne, the rate rose from $685 per square metre in June 2022 to $729 this June, a jump of 6.4%.

Luke Achterstraat, CEO of the Council of Small Business Organisations Australia, said “with rising costs and overheads, the profitability of a lot of small businesses is under threat”.

“Owners are having to get creative.”

Mick Gibb, CEO of the Night Time Industries Association, said the creativity trend from café 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 cafés were also hosting live music at night as an extra offering, but warned higher public liability insurance costs can punish such attempts at innovation. Zoning and building codes also posed 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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