Limerick coffee shop owner asks government to ‘support retailers on hidden tax’

A LIMERICK coffee shop owner has called on government to support businesses over what he feels are “hidden taxes” related to payroll.

Alan Andrews, who founded Old Barracks Coffee at Birdhill, Dock Road in the city, and Guji coffee shops in O’Connell Street, Cork and Nenagh pointed out that these extra taxes for him leave him counting the cost.

“For the opportunity to pay someone €500 a week, I’d pay a tax on top of that. I’m also paying a tax on top of sick pay. So if somebody is out sick, and we pay them sick pay, we are also being taxed on top of that,” he explained.

He pointed out there are other hidden costs such electricity bills, insurance costs and rents, all of which have gone up in the last year.

As a result of this, he has had to increase his prices from the start of February.

“We did a good analysis of our expected costs for the year coming into 2024. When we looked at our breakdown of everything, it seemed to me that in five key areas, everything is going up in price, and if we didn’t change anything, the cost of running our business would increase by €40,000 from 2023 to 2024,” he explained.

“These costs relate to, in simple terms, the increase in VAT last September, the increase in labour costs coming in this year, the new statutory sick pay, the employers’ taxation and the pension contribution.

“While these items individually aren’t massive, combined they are huge,” explained Mr Andrews.

Margins in the hospitality sector are very small, he said, pointing out that on a €4 cup of coffee, he makes just 20c.

The businessman wants to continue his investment in the city where he has 40 people on his books.

A total of €100,000 was spent converting the former Timberland store in O’Connell Street into a branch of the Old Barracks Coffee’s cafe operation Guji coffee.

“We are looking to open up two more sites by the end of this year. We’ll probably employ 55 people by then. We want to focus on our core values we have established our business on which is buying from really good farmers across the world, importing the coffee ourselves, roasting the coffee ourselves and creating a great quality coffee drink. We don’t want to compromise on that,” Mr Andrews said.

To this end, it is important to the firm that when coffee farmers across the world request increases, Mr Andrews is able to accede to this.

“We spend years building up relationships with farmers to make better coffee. You cannot, six years later, if they charge you more, say we will go and buy from somebody else. It defeats the whole purpose,” he explained.

Despite the price increase, Mr Andrews still believes his coffee shop and others - offer better value than the multi-nationals.

“We have to be able to provide great value. We don’t think what we put on the table compared to a Starbucks or a Costa is expensive. You can look at these companies, their average cost per cup is €4. Independents are a whole euro behind this,” he told Business Leader.

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Mr Andrews has described the support he has received from customers since having to implement price rises as “overwhelming”.

“You will always find there are people who do not like the fact prices have to go up and that’s understandable. But at the end of the day, we are trying to run a business where we can be profitable, and reinvest that money back into our projects, such as opening Guji in O’Connell Street which is a beautiful building.”

“Our business is coffee education, so this is just another way to explain to people, if you are paying €4 a cup and your local cafe is making a 2% or 3% margin, in terms of profit, they are making 20c a cup. If they can’t make 20c a cup on a €4 cup, then we need to support them more,” he added.

Labour costs alone have risen by 8%, year-on-year, Mr Andrews said.

He has also called on the government to support a new tiered apprenticeship scheme, where people are pay-graded based on their level of experience and skill.

“We are finding people who come in who have no experience of coffee-making, hospitality or retail. Many students will not have worked before, and they will expect to get €15 per hour,” he pointed out.

Unlike a lot of hospitality firms, the coffee firm owner says he has not struggled to fill roles.

He thinks this is because of the educational bursaries, on-the-job learning and other supports Old Barracks provides.

Something that also separates independent coffee firms from the chains is a willingness to back local causes. Old Barracks supports the annual Pig ‘n’ Porter event, Tidy Towns and a number of sports clubs.