Coffee Franchise Industry Report
The coffee franchise industry is very diverse. Depending on how much capital a person has to invest, a prospective business person can operate one of a wide range of coffee businesses. A coffee drive thru franchise can be owned and operated for less than a stand alone coffee house. For example Cuppy’s Coffee and More Inc. offers franchises for a Cart Unit, Mobile Unit, Kiosk Unit, Drive-up, and Full Service Unit. The initial franchise fee can vary from $2,500 for a Cart Unit up to $25,000 for the Full Service Unit. This makes it possible for someone with low capital to start up and run a successful coffee business. The estimated initial investment for a Cart Unit is between $27,700 and $56,900 which includes the purchase of the actual cart.
There are many different aspects that need to be considered and researched before opening a coffee business. They will have a great impact on how successful the store is going to be. A sound business plan, marketing and location are a few examples of the things that will need to be researched before the opening of a new store.
Being part of a franchise system lets the franchisee bypass many of the initial hurdles associated with starting a business. The franchisee is provided access to a well-known and trusted brand name, trademarks, a proven operating system, on-going support, purchasing power and extensive training programs.
Here are some of the top points that will need to be considered when opening a coffee house:
75% of business success is based on where the coffee business is situated. Finding the right location is a time consuming process and it involves patience and persistence. Before a location is chosen a prospective business operator will need to decide on a concept for the business, what type of coffee house they wish to operate. For example a different type of location will be needed for a drive-thru business than an up-scale coffee store.
The idea behind a good location is to provide a product where and when people might want it. By locating a coffee house near a business centre, the business is making a product accessible to people who might want it. One factor common to all desirable locations is the proximity of a large population of potential coffee drinkers.
Captive audience locations are those which customers are drawn to for more than a cup of coffee. An example of captive audiences locations are hospitals, college campuses or office buildings. The draw back for these locations is that the success of the coffee house is tied to the ebb and flow of the people that frequent the area. A coffee house that is situated in an office building might do good business between 9 and 5 but will probably not do any business at the weekends as the customer base will not be working at the weekend.
Once a concept for the coffee house has been decided, the next step is to look at the practicalities of a location, such as, the purchase price or lease terms for the site and other commercial characteristics, the size of the premises, appearance, the demographic characteristics, traffic patterns, parking and competition from other businesses providing similar services. A franchisor will have experience and knowledge in this area and would be able to assist in the selection and approval of a site.
Different trends will also affect the viability of a location. Research shows that 65% of coffee is consumed during breakfast hours so a coffee business needs to be in a convenient place to meet the demands of the customers to maximise sales. It has also been shown that consumers, when buying a take away coffee, do not want to go more then a few blocks out of their way. Therefore a good location would be near or on the way to a business area as this will provide a product where and when people might want it.
When a location has been decided on for the coffee business, it is important to then research the market in that area and also the potential competition. Who are they? What do they sell? How much market share do they have? Why will customers choose a new product or service instead of theirs? Style, design and setting will help a new coffee house stand out from the competition.
All coffee houses have their own unique layout and ambiance. The Brasil Coffee House décor is designed to evoke the spirit, history and ambience of Brazilian coffee growing whereas Seeker’s Coffee House offers the opportunity to franchise a “Live” Seekers store that offers weekly live music and regularly features prominent national artists. The best way for a prospective coffee house owner to understand the coffee business and to realize what environment in which they would like to operate, is to actually visit the coffee stores that are similar to their ideal and get a feel for the mood of the store and how the operation works.
The ergonomic design and layout of a store will vary depending on the concept. Ergonomics or human engineering is the concept of shaping the work environment. By using good ergonomics a business can provide a work environment so that the employees can complete their tasks with the least amount of steps and reaching. It leads to a more efficient, hazard free working environment that will benefit both the customer and the employee. Another aspect of ergonomics is the design of tables, chairs and signs to maximize the experience of the customer. A franchisor will have a lot of experience and knowledge of good ergonomics and a will be able to supply a franchisee with a tried and tested system ergonomic design.
Training, Employees and Customer Service:
One of the key factors to the success of any business is well trained employees.
The employees are the face of the company, they are the first thing that the customer sees when they walk in the door, are responsible for the customer’s experience and whether the customer will return. When hiring staff, the business owner should keep in mind the perception that they want to create. Not all qualified people will fit in to the concept of the store.
Well trained staff is the biggest asset a business can have, but only if they are properly trained and are offered a continuous support system. By continuously offering additional and ongoing training, the staff will be able to renew and perfect the skills that they learned in the initial training. By doing this a business owner will be able to build a good relationship with their staff, which will in turn open up the lines of communication between staff and management. As the staff are always involved in the day to day operations of the coffee house their input, ideas and suggestions should be listened to and considered in order to run a successful business.
Training staff in the operational procedures of a business is not enough. Good customer service is essential. Customers expect good service as well as a good product for the money that they are spending. Good customer service might be the reason that a customer will choose one coffee house over the coffee house next door. The Coffee Bean and Tea Leaf, for example, train all their employees in their value system, FROTH. This stands for Friendly, Respect, Ownership, Teamwork and Honesty. By training their employees in this way they are able to provide their customers with a Total Quality Experience.
Training may be the most important job for a business owner and it is a never ending process. For this reason a franchisor will provide additional and on-going training at the franchisee’s location after the opening of their business. A franchise offers the support and direction that is needed to build a successful coffee store through training and passing on years of business experience.
All franchises offer an extensive training course that not only covers all aspects of the actually running of the business, such as product marketing, product making, ordering, stocking, profits and margins, filing, accounting and register reports but also provides training and advice on how to hire, train and instruct staff. The training programs can consist of both classroom and on-site training and can last from anything from 3 days to 8 weeks. They will usually take place at the franchisor’s headquarters and at a store location. Paradise Bakery & Café Inc.’s training program runs for 8 weeks at their headquarters in Arizona and 8 weeks on-site at a Paradise Bakery and Café. To aid in the training of employees Paradise Bakery & Café Inc. will provide training for one employee by a certified training manager so that they may take up the role of training officer within the franchise.
A challenge that faces any start-up business is recognition within the market. The purpose of market research is to provide relevant information that will help solve marketing problems a business will encounter. Market research and marketing should be done as early as possible to ensure that the coffee house gains as much market exposure as possible. Good marketing will help a business owner keep the customers that they already have and will also help in gaining new customers.
No single marketing campaign will work for every business, so it is important to vary the marketing tactics and to try new approaches.
The four main goals that the marketing for a coffee house should hope to achieve are:
• Acquiring more customers
• Getting each customer to buy more products
• Getting each customer to buy more expensive products
• Getting each customer to buy more profitable products
Many coffee stores are offering promotions at this time in an effort to boost sales and increase their customer base. This tactic works well in recessionary times as consumers are wary of why and where they spend their hard earned cash. By offering people more for their money, a coffee house is increasing the chance of repeat business. Seattle’s Best Coffee has a buy one get one free offer in a bid to entice more customers.
Market research and marketing can be very expensive. A franchise offers a well-known, trusted and strong brand name. A certain percentage of the gross weekly sales will go towards a national and regional advertisement fund. For example Cafe Zupas Franchising, LLC, looks for 2% of gross weekly sales which will be used for national and regional advertising programs. The franchisee is also obliged to spend 1% of their gross sales weekly on local advertising.
A Good Business Plan.
Creating a sound business plan is one of the first obstacles facing any start-up business and also the first hurdle where people fall. A good business plan will set out the goals that are to be achieved and can also prepare the new business owner by detailing all the expenses that will be faced during the business, projected sales and expenses and what will be needed to be done in order to turn a profit. Preparing a good business plan takes time, money and effort. “If you farm out the writing, the price tag could run from $5,000 to $40,000, including market research, legal and financial expertise”, says Jim Casparie, chief executive of The Venture Alliance, which gives fledgling companies advice on venture funding.
Coffee franchises offer a tried, tested and proven business plan and the benefit of their experience to new business owners. This is invaluable to a start up business owner as they might not have the business experience to foresee or plan for certain eventualities. Business plans can be very specific about certain things, such as ensuring the franchisee is using the corporate logo in a precise manner. Therefore, if someone wants to invest in a coffee franchise, they must make sure that they are in agreement with the franchisor’s business plan. The prospective franchisee will need to decide what type of coffee house they would like to operate and then research the franchises that suit their needs.
Coffee Industry Outlook:
In an economically challenging year, the coffee industry has proved resilient. Even through a recession the amount of coffee drinkers has remained stable, with 54% of the overall American adult population drinking coffee. Coffee consumers still see coffee as an integral part of their everyday lives and are willing to spend money on it. However because of the recession consumers are more willing to shop around and find the best deal. Coffee stores are looking for new ways to entice the consumer into their coffee store over their rivals. This is being done through promotions, retraining of staff and a review of the layout of many stores.
Franchising allows a person to be in business for themselves, but not by themselves. A coffee franchise can offer a new business person the support, knowledge and expertise needed to succeed. The easiest and safest way to access the coffee business is through a well-established, solidly branded franchise that will provide both regional and national marketing and advertising.
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