Going head to head against Starbuck?

askthecoffeeguy

What's your break even point? How many cups of coffee do you need to sell per day, and per hour, just to cover your overheads? And what's your anticipated turnaround time to recover your setup costs? If your're confident in the products and services that you offer then a lessor known location with lower overheads should work equally as we'll for you Look at Gwilym Davies setting up coffee carts in London - and having queues for coffee around the block! (I suppose it helps that he's a former world barista champion) I've owned three coffee focused cafes now, and my current one is in a relatively obscure residential location - and I still regularly go through 45kgs of coffee per week Yes, location is definitely important - but not if excessive overheads are eating up all your available capital. Thats unless you've got financial backers who are willing to burn through the cash until the business becomes established It used to be conventional wisdom here in Melbourne that you needed to allow for running at a financial loss for the first 12 months of operation - now the accepted wisdom as I understand it as that you need to be prepared to run at a financial loss for the first TWO years, before the business starts to show a profit. Hopefully this will not be the case, but winter is coming, and the global financial crisis still looms large for many, who are wary of how they spend their money My experience of they last few years has been that folks want the complete package: amazing coffee, and great food matched by great service - as well as value for money If all these are not aligned the customer will just take their hard eared dollar elsewhere Also, what's your unique angle in the market place? Roasting your own coffee on site is not enough in my opinion to lure customers away from Starbucks And what if someone else pops up right across the road from you and they're roasting their own coffee in-store as well? How then do you go head-to-head with that? In short what is your competitive angle in the marketplace? Not trying to dissuade you - but all these questions and more need to be answered before you can open your doors to the public Cheers, ACg

askthecoffeeguy

Dogsbe wrote:

One has to understand that regardless of the model, each coffee culture is different. I know that I simply can not take the Bay Area Model and blob it in the middle of England and for it to be a success. For one, we like our coffee rather dark and complex, but Brits will not be very keen on it. I guess one thing that I can look at is the difference between the Aussie Model in the Australia vs the UK, to see how they tweaked it.

I think that one of the reasons that the Australian business model has worked well abroad is that, in Melbourne at least, we have a proud history of espresso based cafes that goes back 60 years or more, which might not be much compared to the Italians, but due to our high migrant intake after the war, our cafe culture has been very coffee (and when I say coffee I mean espresso) focused for a long time compared to other countries Also Aussies have been on the cutting edge of defining fourth wave coffee culture, which for better or worse, has pushed the envelope in terms of determining what is acceptable and possible in terms of tweaking and refining coffee roasting and brewing methods - and we've had considerable success and recognition on the world stage for our efforts Also boutique small batch roasting is pretty well intrenched in our culture now, whereas it still appears to be an emerging trend in other developing markets I'm not saying that its possible to superimpose an Aussie business model in a foreign market, but we do seem to have particular expertise in this field Besides everyone knows that kiwis make better coffee, right?

Kelsey

At the end of the day, the quality of your coffee will have little to do with your success provided it meets minimum standards of taste. Even the decor, while allowing you to set the scene for your customers, doesn't matter that much - provided it still says 'cafe' and not 'cheap bain-marie eatery' it'll be fine. It's the personality of the people who are customer facing that counts and the commitment to customer service that they hold. I'll accept less than a godshot from a cafe. I won't accept poor service of surly staff. I'll be a loyal customer for life for very little - an bikkie added to the side of an order because the staff noticed I've been in three days in a row. A friendly chat with the owner. Quick rectification of mistakes in a polite way. Those things are the bits that really count.

UNM

Location has a role to play. Heard about a butcher looking for a place to set up shop. One possible location was a busy shopping street with no butcher, another was a quiet suburb, again with no existing butcher and cheap rent, third was a busy street, high rent and an existing butchers shop next door. Naturally he chose the third as having best prospects and thrived as a result. Why? Because people already went to that location to buy their meat. As long as the business plan is good, knowing the market is already there is a great start.

Dogsbe

A lot of good stuff coming through. I have not done a break even analysis for the shop across from Starbucks yet, but it will be roughly around 150 customers on average a day. The location that I really want and put in an offer requires 81 customers a day. The location is better suited to target a very large office complex, college and just at the edge of the shopping traffic, but still in a highly visible location. I put in an offer a couple weeks ago and the landlord still had not made decision, so I think I am getting a bit nervous. The vision that I have working in my head is simply to provide the skill, time, equipment and premise that enables the local community to define their own coffee culture. What I believe that I am imposing on them is that the Brits have very limited access and exposure to world class coffee. Shockingly, my wife, like 90% of Brits, drink instant coffee and like it. I personally think instant coffee is only good for space travel. However, telling them that it is S*%T simply a direct insult. So, what I can do is give them access and exposure to world class coffee and allow them to find what they like and dislike. Given that the average Brit spends

Hildy

UNM wrote:

Naturally he chose the third as having best prospects and thrived as a result. Why? Because people already went to that location to buy their meat. As long as the business plan is good, knowing the market is already there is a great start.

http://en.wikipedia.org/wiki/Hotelling's_law

Dogsbe

Hildy wrote:

http://en.wikipedia.org/wiki/Hotelling's_law

Thanks, this was actually really helpful and sparked reading a lot more about competition and location. My initial strategy was to find a place slightly off the high street and let them come to me. In reading a number of locations, this strategy tends to be flawed. Regardless on how much effort goes into product quality, price and promotion they are minor compared to location. One interesting strategy was to assume that the big corporate giants had a research team to check out the demographics and footfall for their locations. By parking up next to them, you are basically pinching their research. So, what you know is that the location is viable. I did manage to go see a property today that is a stone throw away from Starbucks. It is in a historical landmark building that is featured postcards. It is an old Tudor house and absolutely wonderful inside. I crunched the numbers and I need to turn over 120 customers per day. My consultant initially thought that I would do an easy 200 customers. Looking into Starbucks at 4:30pm, they had 50 customers, which seems to be their average every time I check. I like this premise a lot better than the one next door, because of the character and it will naturally attract tourist. I will sleep on it, but most likely I will make a move to get it tomorrow.

Lacehim

Just do your home work first regarding operating a roaster in a historical landmark building. It just occured to me that they are usually listed, and there might be restrictions in place for certain equipment that generate heat in a fire hazzard sense. They do love listing things and keeping things as they used to be in the old days there. Sometimes it's works in your favour, sometimes it's a PITA. It will be different to Starbucks, but you will still get people who want to order a juguccino! On my last visit to the UK I couldn't find a decent coffee anywhere. Once place I went to sold only beans, but no coffee machine? WTF? A hole in the wall serving takeaways would have had the punters queuing up.

FreshCoffee2

[quote author=Dogsbe link=topic=3909.msg37137#msg37137 date=1360548085] A lot of good stuff coming through..... ....Brit spends

Dogsbe

Lacehim wrote:

Just do your home work first regarding operating a roaster in a historical landmark building. It just occured to me that they are usually listed, and there might be restrictions in place for certain equipment that generate heat in a fire hazzard sense. They do love listing things and keeping things as they used to be in the old days there. Sometimes it's works in your favour, sometimes it's a PITA. It will be different to Starbucks, but you will still get people who want to order a juguccino! On my last visit to the UK I couldn't find a decent coffee anywhere. Once place I went to sold only beans, but no coffee machine? WTF? A hole in the wall serving takeaways would have had the punters queuing up.

Yes, I have already talk to the planning office about another historical building and was "pre-approved". This Tudor building actually has a modern extension on the back. The roaster will need to go in this section. UK coffee is horrible, I stopped drinking coffee and went to tea. I don't think takeway business would really work. I did a count of takeway coffee on the high street, it was a very low number. I do think Brits like sitting down and drinking their coffee. They are not a strong "commuter mug" nation.

Lacehim

Dogsbe wrote:

Yes, I have already talk to the planning office about another historical building and was "pre-approved". This Tudor building actually has a modern extension on the back. The roaster will need to go in this section. UK coffee is horrible, I stopped drinking coffee and went to tea. I don't think takeway business would really work. I did a count of takeway coffee on the high street, it was a very low number. I do think Brits like sitting down and drinking their coffee. They are not a strong "commuter mug" nation.

Sounds great, and I agree, apart from service station coffee (which is really bad), I didn't see many take away places like they do here. Where's the shop going to be? Some of us might like to pop in and say hello when you get it up and running. 🙂

UNM

Just because the display shows all sorts of whiz bang stuff, is no reason your clients need to leave with a substandard product. I visited a chocolate factory once where you can 'make your own chocolate bar'. Quite obviously, there was a touch of theatrical misdirection about it (here's one I prepared earlier). Kept the kiddies happy though. Limit the options so they ultimately produce one of your standard offerings, everyone is happy. Last time I was back home (Fife) the local cafe my mum went to had an espresso machine, but most coffee drinkers went for the standard form of coffee - long black from filter drip machine, dash of milk then fill the cup with sugar. Place is always busy as the scones are good. You may want to offer good quality drip coffee as an option, better profits too as it is faster to prepare. Espresso is but one way to make coffee in a commercial setting. Aussies sometimes forget that as relatively few places here offer an alternative and those that do are a bit precious about it with their thermometers, scales, pouring kettles etc - no wonder filter coffee is expensive here. Also, you might well be right about takeaway. Need to offer it, but it will be a lower portion of your business than is normal in Aus, unless you are at a train station

Lacehim

UNM wrote:

Also, you might well be right about takeaway. Need to offer it, but it will be a lower portion of your business than is normal in Aus, unless you are at a train station

Your not wrong there. Went to Clandestino's today. They have some amazing cold drip equipment about 6 or 7 big set ups. But $7 a coffee for cold drip, a syphon is $12 for 2 cups (bit expensive if I'm there on my own), and they have clover, and something else at $6. The espresso machine is churning out drinks at $3.5 a pop, and they only made one pour over while I was there.

UNM

Lacehim wrote:

Your not wrong there. Went to Clandestino's today. They have some amazing cold drip equipment about 6 or 7 big set ups. But $7 a coffee for cold drip, a syphon is $12 for 2 cups (bit expensive if I'm there on my own), and they have clover, and something else at $6. The espresso machine is churning out drinks at $3.5 a pop, and they only made one pour over while I was there.

Its crazy - a Cona D size and reasonable throughput would be cheaper and easier than espresso. Some of the commercial automatic filter systems used in USA are quite capable of making good coffee, if you feed them good fresh beans ground less than the usual 6 months ago. I suspect double the price of an espresso puts people off somewhat. The place I bought my fresh roasted beans yesterday, staff hadn't ever heard of siphon and they are a boutique roaster/cafe (afternoon staff, probably not their highest trained). Even so, it just goes to show everything here revolves around espresso but that is not the case everywhere else.

askthecoffeeguy

Lacehim wrote:

Your not wrong there. Went to Clandestino's today. They have some amazing cold drip equipment about 6 or 7 big set ups. But $7 a coffee for cold drip, a syphon is $12 for 2 cups (bit expensive if I'm there on my own), and they have clover, and something else at $6. The espresso machine is churning out drinks at $3.5 a pop, and they only made one pour over while I was there.

I charge $4.50 for a cold filer coffee served over ice and $4.50 for a pourover made from a clever coffee dripper and we calculated that we'd sold well over 4000 cold coffees in the last 12 months alone! Better to keep the prices down and drive sales than to keep them up but no dice sunshine!

Dogsbe

Fresh Coffee wrote:

Forever pragmatic.... Realistically, I think you are going to go broke doing that. Time is money, and there is not much future in spending an unbelievable amount of time with clients to sell them a small quantity of beans. The real money IS in the cafe side selling many cups of coffee, and of course, that's saying nothing about allowing clients to guess how to drive the profile through the roast. I am an experienced roaster and even I was bamboozled the first time an equipment manufacturer took me through an automated PLC programme on a roaster. He said......look, you can programme anything you like into this and the plant will follow. It did, but it was just to exemplify that whatever value I plugged into the PLC, it would faithfully follow. To allow a retail client to do that and roast their own with absolutely no idea what they are doing is madness, detrimental to the end product, and as already stated, the time spent VS profit gained will drive you out the back door pronto. There is no money selling beans unless you have a large turnover. Large turnover is at the wholesale / commercial end of bean selling, not retail. My best advice, if you really want to go into retail coffee, is to find out what the market wants in a cafe in your area and give it to them. You will then work 7 days a week with the monkey on your back BUT, you will have a chance of earning a living in what you have chosen to do, instead of killing it in a short space of time and losing your investment. .....Unless of course, you're sold on the idea that the above will build you the "image" that will bring you a large number of people that will buy many many many cups of coffee, so in essence the "lost leader" will bring clients to the real source of income in your business. Its a common enough concept. OR.... Stay with the security of your current profession. Hope that helps. Attilio very first Crema site sponsor.

Sorry, a point got lost somewhere. I am not trying to generate a profit by working with customers and the roaster. I am actually not thinking the bean sales is going to turn a profit for a couple of years. I am in an odd situation where there is a huge demand for coffee, a strong desire for a better cup, but the locals have very little experience with quality coffee and very limited exposure to beans. I need to find innovative ways to have the customers engage in the coffee experience. I am very keen on showboating the lengths and passion that I put into the product. I believe it is my job to set standards, but it is the customer's job to determine what is good coffee to them. So inviting them to cupping sessions and learning about how little tweaks in the entire chain can make a difference to the finally product will help me build local ambassadors. If we had sophisticated coffee culture, I would not consider kind of participative approach. As this is the start of the "third wave" , believe it needs to grassroots and I can't just take a top down approach or I would just be like all the other corporate giants that are producing coffees that are the most profitable. I want to act like a vehicle to allow the locals to develop their own coffee culture.

Dogsbe

Lacehim wrote:

Sounds great, and I agree, apart from service station coffee (which is really bad), I didn't see many take away places like they do here. Where's the shop going to be? Some of us might like to pop in and say hello when you get it up and running. 🙂

In Stafford. I submitted a Letter of Intent today for the premise.

Brett_H

Great news Dogsbe! Thanks for a great thread. I hope you'll post some photos so we can share your journey.

Dogsbe

Brett H wrote:

Great news Dogsbe! Thanks for a great thread. I hope you'll post some photos so we can share your journey.

Here is the building: https://www.google.co.uk/search?q=stafford+ancient+high+house&hl=en&tbo=d&source=lnms&tbm=isch&sa=X&ei=Ny4bUeCyAoWq0QWJioCwBA&ved=0CAcQ_AUoAQ&biw=1280&bih=667#imgrc=YZ0mn3LEr3-buM%3A%3B2Ajycs-sZtuCDM%3Bhttp%253A%252F%252F4.bp.blogspot.com%252F-D3wZ4cXvQfQ%252FT-vstdo814I%252FAAAAAAAAEKo%252FcbbdzKsXzU8%252Fs1600%252F014_800x600.JPG%3Bhttp%253A%252F%252Flovegrovesonpetroc.blogspot.com%252F2012_06_01_archive.html%3B800%3B600 It is wicked inside and multi-leveled. So you walk in and the front section is only 8 paces deep and you come to a short stack of stairs to the next level or you go down to crypt. The roaster, kitchen and WCs are all in the new extension. The Starbuck on the other side of the street. https://www.google.co.uk/search?q=stafford+ancient+high+house&hl=en&tbo=d&source=lnms&tbm=isch&sa=X&ei=Ny4bUeCyAoWq0QWJioCwBA&ved=0CAcQ_AUoAQ&biw=1280&bih=667#hl=en&tbo=d&tbm=isch&sa=1&q=starbucks+stafford&oq=starbucks+stafford&gs_l=img.3..0i24l8.1013589.1017959.0.1018420.18.15.0.3.3.0.314.1838.9j3j2j1.15.0...0.0...1c.1.2.img.xXdPU27gSqM&bav=on.2,or.r_gc.r_pw.r_qf.&bvm=bv.42261806,d.d2k&fp=5488f5555470bdf9&biw=1280&bih=667&imgrc=HhsJCXgqhFDqaM%3A%3BnjUJhRAGemD81M%3Bhttp%253A%252F%252Fstatics.192.com%252Festreet%252Foriginal%252Flarge%252F1098%252F10987669.jpg%3Bhttp%253A%252F%252Fwww.192.com%252Fatoz%252Fbusiness%252Fstafford-st16%252Fsc%252Fstarbucks-coffee%252Fa2f72243a4d962d421746d216e7a03c330144b07%252Fldc%252F%3B400%3B300

mycuppa

Playing devil's advocate. If your local coffee scene is actually as bad as the numerous reports and articles I have read over the many years, then looking to introduce such elaborate innovation as described is largely a risky prospect as noted by Fresh Coffee. Even in a mature, developed market like Aus with some of the world's most demanding expectations of quality coffee, doing the dog-and-pony show would struggle to commercially sustain any operation without other portfolio income streams that help cross-subsidize - e.g. moving kilos of bean or cups of coffee. I've been there and tried that - lot of elbow grease for not much return - except of course the limited-attention-span mob who quickly move onto the next 15 seconds of "entertain me" - they are always up for a show and a chance to improve their own levels of hipster snobbery. Are they really the bread-and-butter that will support your business ? Getting the basic product right is beyond many players here in Australia where the standard is exceptionally high and of course when I've drank coffee in the dozen or so countries visited over the last decade. Adding more layers of variability and complexity will tie you in knots for not much else than a few self-indulgent headlines claiming you are a revolutionary and coffee visionary. We offer a vast array of coffees. Like all humans, half my customers stay with the same coffee order after order and the other half like to search for their mythical holy grail - trying something new all the time. For those that are perpetual samplers I consider their loyalty ranking about a 50/50 as they could be easily distracted by just about anything. This situation of course is not isolated to the coffee market - it affects beer, wine, food, fashion, etc. and just about any other discretionary spend. When I go into a liquor store (all too often it seems) I have no beer or wine loyalty at all - I grab what I think is value. Obviously when it comes to liquor, we have a subliminal trust that it is fine because there is no last-step human element involved called a barista that could turn a nice beer into toilet cleaner. I would give my left arm and left leg to be exposed to the UK coffee market. The very first thing in my plan would involve preparing a quality coffee that suits the local palate and styles of brewing. Then I would focus on marketing and distribution of that "local" product. This may require 3+ years of hard work and little returns. It's only after the market matures would I look at innovation and customisation. Considering the state of coffee in the UK, it would be innovative to just have a fresh, quality product that is consistent and attractively priced produced with a reasonable margin so you could survive and grow. Whether this is in bean or cup sales is largely irrelevant.