March 2003

Mom, Apple Pie and a Mocha Cappuccino

by Nancy Rathbun Scott

Americans seem to love the smell of percolating coffee at the breakfast table or at midmorning or with dessert after a meal. They relish the scintillating brew with a good book, a laptop computer or a dash of politics. And, true to form, franchises are capitalizing on the ascendancy of coffee consumption in American iconography.

According to the National Coffee Association, in 2002 more than 52 percent of the adult population was drinking coffee every day. More and more, coffee has become an out-of-home experience.

Stimulated by a caffeine kick from the ever-present, Seattle-based Starbucks Coffee Company, franchised coffee companies are sniffing out a pay-off in this rich market. But with Starbucks established as the market leader, aspiring franchises must be nimble, innovative and doggedly determined as they attempt to drip away at Starbucks' lead and capture market share.

Coffee, Tea and the Art of the Kiosk

Just as a first-time customer walking into Chock Café must be struck by the variety of products on display, to a prospective franchise owner, Chock Café offers a menu of options to suit any ownership goal. Looking for a sit-down store? A drive-thru? A mall kiosk? The company works with franchise owners to determine which single store or combination of units will best serve their objectives and their customers. Owners go through an intensive training program, followed by operational and marketing support to perk-up their stores. Chock Café owners also can rely on the purchasing power of Sara Lee, the company's parent and the second largest coffee roaster in the world.

Coffee goes well with anything, but there's something about a bagel and a fresh java that seems just right. Over at Big Apple Bagels & Brewster's Coffee, the bagels, pastries and other goodies are made from scratch. The majority of these restaurants contains both manufacturing and retail units. The company prides itself on providing intensive training and support in both areas-which means that franchise owners don't necessarily need food service experience to own and operate a store. A reasonable investment level and market positioning as a low-cost producer makes Big Apple Bagels & Brewster's Coffee an ideal route into the business.

Seattle may be the commercial hub of American coffee, but New York's Greenwich Village is arguably the spiritual center of the American coffee house-and also the home of New World Coffee. This franchise company is founded on customer satisfaction served up with high-quality beverages in a clean, casual, fun and convenient environment. The New World group of restaurants-which includes Manhattan Bagel, Chesapeake Bagel Bakery, and Willoughby's Coffee and Tea-consists of 377 stores in 26 states, where New World Coffee serves a winning combination of coffee and franchise opportunity.

Coffee, Coffee Everywhere

With more than 200 locations in malls, airports, office buildings, hospitals, college campuses, kiosks and carts throughout the country, The Coffee Beanery is one of the larger franchises of its kind. To visit the 45,000 sq. ft. Michigan headquarters and distribution center is to enter an aromatic paradise of coffees from all over the world. One of the early entrants into the specialty-coffee market, The Coffee Beanery has been in business since 1976. JoAnne Shaw, co-founder and CEO, sees more growth ahead. "The over-40 demographic is strong for coffee houses and is growing. That's expected to continue until 2010. At the same time, the popularity of cappuccino and latte is increasing, even among young teens. People also are looking for an alternative place to go beyond the bars and alcoholic beverage-type places. We afford a wonderful opportunity after the theater or for an evening of quiet music. It's a place where people can stop with friends on the way home from a movie-a wonderful atmosphere. So, we're in the middle of a growing market."

At Java Dave's the world really does amount to a hill of beans -as in Kenyan, Jamaican, Costa Rican, Guatemalan, Brazilian and Colombian beans of every persuasion. The Tulsa, Oklahoma-based company conjures up award-winning blends that are sold by franchise owners in the Southwest, as the company looks to expand its reach nationally. With whole beans accounting for the bulk of sales, this is a niche franchise that seems to have struck a chord with coffee aficionados.

The husband and wife team of Marty Cox and Louise Montgomery believes coffee should be a personal, neighborhood experience-and that's the impetus behind their aggressive growth plan for It's A Grind. The couple hopes to open 75 locations by the end of 2003 and twice that in the next two years. They intend to be the anti-Starbucks, ensuring that franchises are locally-owned, while maintaining the overall identifiable store theme-neighborhood coffee houses with a blues and jazz motif.

Other franchises also are relying on a mix of local flavor and national strategies to promote their distinctive concepts. The folks behind Café Ala Carte are franchising the concept of rental gourmet coffee carts. Currently, the company is working with full-service caterers in major Florida hotels.

Latte Slingshots and Kona Bean Pebbles

Prior to the outpouring of gourmet coffee, we might have thought Espresso Romano was a member of the Italian bobsled team. Now investors realize that coffee drinkers are adventurous types, willing to indulge in exotic flavors, developing preferences for specific preparation and serving methods and-most importantly-willing to pay a premium for boutique blends.

Over the past five years, the number of people drinking gourmet coffees rose from 7 million to 27 million. In 2001 alone, some 18 million bags of coffee were roasted. In 2002, the number of weekly drinkers increased by 9.5 million over the prior year.

Far from being at a competitive disadvantage to the dominant market player, franchised coffee shops are well positioned to take advantage of every individual taster's choice in the coffee industry.