Starbucks Coffee
I have established and managed more than 15 coffee shops with varying degrees of success. While there may be hundreds of reasons why a coffee shop might succeed (including luck), here are the ones that I pursued in Australia that lead to successful outcomes for me.
Consistently serving the finest espresso
- It is rare in business to discover a product where consistently offering 100% quality is the best commercial decision you can make. In fact I am the greatest advocate for the 80% is perfect model. But espresso coffee is one of those rare products where consistent 100% quality matters. Customers will walk past 10 other competitors to get the best espresso which is why this factor alone means you don't need the highly visible most expensive location. So buy the best espresso coffee machine (3/4 group Italian made with e61 groupheads and set to the right pump and temperature levels) install it with a water purifier and demineralizer, use a conical grinder, and only buy top quality Arabica or Arabica 90%/Robusta 10% freshly roasted beans and make sure every cup is made by a fully trained barista who is continually seeking the 'god shot'.
Ergonomics is vital
- Make sure the coffee workstation and layout is such that the barista hardly moves their feet in performing all their coffee making duties and they are not competing for the space with other staff members. High volume coffee sales are the foundation stone of every coffee shop so make sure this workstation is perfectly laid out with easy access to underneath bins, bean storage and bar fridge milk, having the right height benchtop with easy access to cups, grinder, accessories and reachable overhead storage of supplies. The best setups also have a small inbuilt sink to allow for quick and easy ongoing cleaning. Also, place the cash register on the front counter in close proximity to the barista's workstation. This allows the barista to hear the customer orders and get a head start on making them in the busy times while allowing the barista to work alone in an efficient way in the very slow times.
Use loyalty cards
- I resisted using these for a long time ... but they really do work. Make sure it is a quality card that will last the wear and tear and look good in a customer's wallet. Nothing better than seeing a new customer's face light up when you give them a buy 7 get the 8th one free loyalty card but tick off 6 of them so that on their very next purchase they get a free one. Cheapest customer acquisition ever.
Promote multiple sales
- A coffee shop will never make enough money to pay the bills from coffee sales alone. Coffee may be the prime motivator for customers coming to the business, but they must leave with multiple sales if you are going to be successful. As a target, coffee should be no more than 40% of your weekly sales and 2 item sales per customer transaction means you are getting it about right. So make sure the traditional coffee accompaniments (muffins, cookies, cakes) are close by at the point of sale and the coffee shop offers cold food, cold drinks and hot food to ensure the best chance of multiple sales.
Limit the assortment
- Many newbies in the coffee shop game think that wide assortments and extensive product offers are a key competitive advantage. They forget that the customer is simply hungry or thirsty or both and that a wide choices for most people creates anguish. So cover the necessary categories but with limited and strategic offers. (e.g. three flavors are enough, three sizes are enough, three types of food/drink are enough). Every item you add to the assortment creates many multiples of management effort (costs) and mostly without adding anything to the revenue streams or customer experience.
Merchandise your margins
- Price according to perceived customer value not according to accounting determined markups. For some well known items (coke can) you will need to be at or even below market price and this loss should be made up with high margins on other items that are exclusive to you or in the 'don't-care and addictive' mindset of your customers. So don't add a blanket markup to your entire assortment, but price line by line according to customer expectations and what the market will bear.
Get your beachhead strategies right
- Getting traction in a competitive marketplace like coffee shops is vital and you will need to have a clear understanding of how to get customers to initially give you a go and a plan for keeping them returning and referring you to their friends. This is a whole other topic that I have now written about here ... What are some Biz Dev best practices for startups?.
Counter service - Counter service is the cheapest most efficient and effective service system for a coffee shop and it is now fully accepted by customers thanks to the global success of McDonalds. Counter service is hassle free for both you and your customer and it significantly reduces your wages bill. So get the customers to order and pay upfront, give them a number on a stand with their drinks and deliver the food or better still give them a buzzer that calls them up to the counter when the food is ready. Counter service means that you can handle the peak demands that occur in coffee shops at breakfast and lunch and it is a lot less stressful on everyone ensuring the friendly banter can remain an important part of your offer.
Counter service - Counter service is the cheapest most efficient and effective service system for a coffee shop and it is now fully accepted by customers thanks to the global success of McDonalds. Counter service is hassle free for both you and your customer and it significantly reduces your wages bill. So get the customers to order and pay upfront, give them a number on a stand with their drinks and deliver the food or better still give them a buzzer that calls them up to the counter when the food is ready. Counter service means that you can handle the peak demands that occur in coffee shops at breakfast and lunch and it is a lot less stressful on everyone ensuring the friendly banter can remain an important part of your offer.
Pre-make as much as possible
- Custom-made assortments assume that the customers know precisely what they want. They don't. Customers see you as the expert and are hoping that you will suggest to them what combination of food/drinks they should be trying. In a coffee shop context I found it best to pre-make the food and leave the custom making to the coffee. Custom food is also a high cost option for you because you can't get the economies of scale making-to-order and it limits your turnover in those peak periods where you should be busy pumping out the sales as quickly as possible not spending the time making custom orders.
Understand what you are really selling - Too many businesses, including coffee shop owners, don't fully understand the need they are really satisfying for their customers and so they often concentrate on the wrong parts of their offer. Customers frequent a coffee shop for many more reasons than just hunger and thirst. There is the escape from a stressful office, the chance to maintain or grow a relationship, a place to get away to do some reflective work, a chance to engage with familiar coffee shop staff at a particularly lonely time or as a place to do business and reach an agreement. Understanding the needs you are really catering to, will help you better construct your offer and make decisions that keep your customers returning and so maintaining the coffee shop's success.
Target takeaways
- I know all your friends will tell you to get comfortable lounges, free Wi-Fi, table service and lots of in-house entertainment ... but customers sitting on one cup of coffee for hours enjoying all these benefits won't pay your rent. My most financially successful coffee shops had a limited number of not-so-comfortable bench & bar stools to make the coffee shop look lived in and loved, but I concentrated on building the takeaway business. Takeaway customers pay the same price as the sit-down customer but without any of the occupancy costs and you will serve 10 of them by the time your sit down customer has finished sipping on their first cup of coffee as they enjoy a chat with their friends on Facebook using your free Wi-Fi.
Serve on the front line -
Thanks to Jason Chen for reminding me of this other important aspect of building a sucessful coffee shop. Coffee shops, like restaurants, are much more a people/service busines than they are a goods/transactional one. While a goods/transactional business can still succeed with a non-present owner, a coffee shop needs the owners care, attention and engagement. Customers expect it and staff are far more enlivened when the owner in on hand taking orders or making coffee or is generally hovering in active care of the business.
Coffee Bean & Tea Leaf
Place
First and foremost the reason that why many customers head down to the Coffee Bean stall is due to the placement of the stalls whereby they are mostly placed in shopping malls and crowd centered locations. As gained from a customer of Coffee Bean & Tea Leaf her opinion would be "due to the fact that it's convenient and easy for her and her family to shop while having a cup of to-go coffee, on the go while strolling in the mall and sipping hot coffee or any other beverages is just fun for them. And if they would want to stop by a good café to rest and chatter all day with friends and family it is convenient for them as well, since with the good ambience generated from the environment there and the great coffee smell it is nice and comfortable to be in Coffee Bean". As the statement given by the customer, the placement of the Coffee Bean store is perceived as a convenience to the customer. Besides that, they enjoy coffee there as well because of the environment that the Coffee Bean provides is attractive and serene.
Pricing
Another reason why some customers would choose to purchase coffee from Coffee Bean & Tea Leaf is because of the pricing itself. The price of the beverage in Coffee Bean & Tea Leaf is affordable or to some it is rather cheap and nice. From asking a few customers who goes to Coffee Bean & Tea Leaf and purchase their coffee or other beverages, two perception has been found whereby the people who would go to purchase their coffee there is categorized into two group. A side whereby the customers to them the price is affordable as they would really much want to have high quality coffee made perfectly by using a barista's skill and as well as the finest coffee bean from around the world, hence to them obtaining such great coffee with a decent price it is affordable to them since they consume coffee on a average basis. On the other hand the customers who describe the price of the coffee and other beverages as cheap are mostly people who are regulars and would head to Coffee Bean & Tea Leaf almost every day, as well as foreigners who purchases coffee there. The reason that the coffee there is cheaper for some customers is because of their own perceived social status and high income, hence with that they would want to go to purchase higher or finer quality coffee at a well known place such as the Coffee Bean & Tea Leaf. But as a feedback from a foreign customer, he stated that "it is cheap and great coffee that they are paying for." It is cheap because for $4.50 you can already purchase a large sized beverage there. By asking the customers at Coffee Bean & Tea Leaf about the price they have already gave a clear reason why that they would pay more to purchase the coffee there rather than having it at a normal coffee shop.
Promotion
Another factor that influences a customer in paying more for coffee at Coffee Bean rather than a local coffee shop is because of the variety of promotions which are available; varying from the promotional food and beverages or limited edition whole beans. The best examples are the seasonal drinks that are being offered on different festivals, E.g. Orange Cranberry Latte or Tea during the Chinese New Year season or the limited edition Sumatra Sidakaling coffee beans. Other than that their smart promotions such as topping up the coffee bean card with RM 50 and get a ready-to-drink coffee free while stock lasts or providing cakes-to-go or their own party packs which consist of different varieties to choose from. And lastly not to forget the promotions such as the coffee bean cardholders are entitled to a RM2 off or the online shopping at the coffee bean website which is on 24-7, is also something to enhance the Coffee Bean & Tea Leaf service to because they are promoting in terms that Coffee Bean & Tea Leaf has speedy and 24-7 services if anyone is to order any products.
Packaging
As for some customers the packaging of the products attracts them to purchase at the Coffee Bean & Tea Leaf. No doubt that a product with a very attractive feature from its packaging will get the attention of customers and in this case products of Coffee Bean & Tea Leaf has that attribute of having nicely packaged products such as the ready-to-go drinks in bottles, or even their merchandise line of whole coffee beans and their finest tea leafs offered. It is not a surprise that there are a lot of different people who would want to go for a product due to the beautiful and attractive package and worry about the content later, therefore the packaging can also be another reason for customers to pay the extras rather than doing it at a normal coffee shop.
First and foremost the reason that why many customers head down to the Coffee Bean stall is due to the placement of the stalls whereby they are mostly placed in shopping malls and crowd centered locations. As gained from a customer of Coffee Bean & Tea Leaf her opinion would be "due to the fact that it's convenient and easy for her and her family to shop while having a cup of to-go coffee, on the go while strolling in the mall and sipping hot coffee or any other beverages is just fun for them. And if they would want to stop by a good café to rest and chatter all day with friends and family it is convenient for them as well, since with the good ambience generated from the environment there and the great coffee smell it is nice and comfortable to be in Coffee Bean". As the statement given by the customer, the placement of the Coffee Bean store is perceived as a convenience to the customer. Besides that, they enjoy coffee there as well because of the environment that the Coffee Bean provides is attractive and serene.
Pricing
Another reason why some customers would choose to purchase coffee from Coffee Bean & Tea Leaf is because of the pricing itself. The price of the beverage in Coffee Bean & Tea Leaf is affordable or to some it is rather cheap and nice. From asking a few customers who goes to Coffee Bean & Tea Leaf and purchase their coffee or other beverages, two perception has been found whereby the people who would go to purchase their coffee there is categorized into two group. A side whereby the customers to them the price is affordable as they would really much want to have high quality coffee made perfectly by using a barista's skill and as well as the finest coffee bean from around the world, hence to them obtaining such great coffee with a decent price it is affordable to them since they consume coffee on a average basis. On the other hand the customers who describe the price of the coffee and other beverages as cheap are mostly people who are regulars and would head to Coffee Bean & Tea Leaf almost every day, as well as foreigners who purchases coffee there. The reason that the coffee there is cheaper for some customers is because of their own perceived social status and high income, hence with that they would want to go to purchase higher or finer quality coffee at a well known place such as the Coffee Bean & Tea Leaf. But as a feedback from a foreign customer, he stated that "it is cheap and great coffee that they are paying for." It is cheap because for $4.50 you can already purchase a large sized beverage there. By asking the customers at Coffee Bean & Tea Leaf about the price they have already gave a clear reason why that they would pay more to purchase the coffee there rather than having it at a normal coffee shop.
Promotion
Another factor that influences a customer in paying more for coffee at Coffee Bean rather than a local coffee shop is because of the variety of promotions which are available; varying from the promotional food and beverages or limited edition whole beans. The best examples are the seasonal drinks that are being offered on different festivals, E.g. Orange Cranberry Latte or Tea during the Chinese New Year season or the limited edition Sumatra Sidakaling coffee beans. Other than that their smart promotions such as topping up the coffee bean card with RM 50 and get a ready-to-drink coffee free while stock lasts or providing cakes-to-go or their own party packs which consist of different varieties to choose from. And lastly not to forget the promotions such as the coffee bean cardholders are entitled to a RM2 off or the online shopping at the coffee bean website which is on 24-7, is also something to enhance the Coffee Bean & Tea Leaf service to because they are promoting in terms that Coffee Bean & Tea Leaf has speedy and 24-7 services if anyone is to order any products.
Packaging
As for some customers the packaging of the products attracts them to purchase at the Coffee Bean & Tea Leaf. No doubt that a product with a very attractive feature from its packaging will get the attention of customers and in this case products of Coffee Bean & Tea Leaf has that attribute of having nicely packaged products such as the ready-to-go drinks in bottles, or even their merchandise line of whole coffee beans and their finest tea leafs offered. It is not a surprise that there are a lot of different people who would want to go for a product due to the beautiful and attractive package and worry about the content later, therefore the packaging can also be another reason for customers to pay the extras rather than doing it at a normal coffee shop.
awesome
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