Fresh Cup Magazine

The Micro-Chain Link
Branding, Community & Quality
By Mike Ferguson

How many? It's a question as deeply imbedded in American definitions of success as "how much?" If you own a single coffeehouse, you've probably been asked numerous times when you plan to open your second location. If you already own multiple shops, you're probably asked regularly when you plan to open the next one. After all, Starbucks has nearly 5000 stores in North America and everyone wants to know when you're going to catch up. But the harsh reality is that success with one coffeehouse does not guarantee success with multiple stores. That's because beyond the basic operational and financial issues of opening additional stores lie more subtle questions related to identity, image and branding.
According to the research group Mintel, approximately 48 percent of all coffeehouses in the United States currently belong to multiple-store operators. That's an increase of nearly 10 percent since 1999. Although the continued expansion of Starbucks accounts for a significant portion of these numbers, one-third of coffeehouse owners-independents and chains-plan to open an additional location in the near future. But in doing so, these entrepreneurs must resolve a number of complicated issues. Perhaps the most critical question is whether or not a new location should emulate the look and feel of the original store in order to duplicate its success. The answer is, not necessarily. Success stories can be found throughout the entire business spectrum, from traditional brand discipline to somewhat looser strategies that amount to recreating a "vibe."
The mini-chain, Joe Muggs, exemplifies classic brand discipline. In fact, the seven-store chain was born on the power of branding in 1998 when Joe Muggs moved beyond its presence as a café concept in approximately 200 Books-A-Million stores to open its first free-standing coffeehouse location. According to Vice President, Terrance Finley, opening the first coffeehouse stemmed from finding a location the company couldn't pass up. "The space didn't allow for a full-fledged bookstore project, so we decided to try the [independent] Joe Muggs concept." The company has continued this strategy of repeating a successful branding formula in optimal locations. "We have set strong design standards and we are aggressive in their application," says Finley. "Our cups, condiments, candies, baked goods, and specialty drinks all carry the Joe Muggs imprint. We even sell Joe Muggs artesian water alongside the national brands." The only variance between stores is how display mechanisms accommodate each unique space.

   This level of brand discipline is typical of larger chains, but it's worth noting that Starbucks, the world's largest coffeehouse chain, uses a variety of color schemes, fixture designs and seating options while maintaining strict branding standards related to the company's product, menu, display, and beverage preparation. Starbucks spokesperson, Lara Wyss, says, "We want the stores to have a similar look and feel, but we work very hard to incorporate design elements that will make each location unique and locally relevant. It is important to find a balance between overall consistency and subtle differences to make it relevant to a particular community."
   While most independents scoff at the homogenous approach of corporate chains, many micro-chains have found success in branding uniformity. "As we have expanded our retail locations, it has become beneficial to brand new stores as extension or satellite locations for our existing locations," says Dirk Nord, chief operating officer of Friedrichs Coffee, which operates five retail locations in and around Des Moines, Iowa. "While new locations may have a somewhat distinct identity as a result of the neighborhood they serve, we feel that a unique identity would detract from the image we want to present." Nord says that Friedrichs was the first specialty coffeehouse in the Des Moines area, and it has a reputation for quality and integrity. He believes if a new store is too different, customers may not know what to expect. "We would expect a longer timeline before customers would patronize us and trust us to provide quality products and above average service."
   Dany McCourt, owner of Surf City Coffee Company in Santa Cruz, Calif., operates two coffeehouses with two more opening soon, also within Santa Cruz County. Like Nord, he does not attempt to make each store different simply because the original concept works well, and he see no reason to change. "We attempt to keep within our mission statement of fast, friendly, upscale, and beachy," he says, adding that his stores all incorporate bright colors, an unmistakable surf and sand feel, and a design that expedites customer flow, even during peak business hours.
   But striking a balance between branding consistency and connectedness to the immediate community has posed a challenge to many micro-chains. Jeff Laramie, co-president of Beans & Brews in Salt Lake City, operates six coffeehouses and prefers to tip the scale toward variety, an approach he considers his company's niche. "We strive to make every retail location different from the others," he says. Each store looks distinct, from layout to interior design. Laramie feels that this approach allows each store to offer a sense of community and a non-corporate feel.
   But while every Beans & Brews location has a distinct personality, Laramie does offer the consistency of a known brand to coffee lovers throughout Salt Lake City. "The menu, the drinks, cups, product mix, prices, signage, and logos are all the same," he says. "That way, our customers know what to expect, and they have a comfortable level of familiarity at any Beans & Brews. But every location looks and feels different. The design, decor and atmosphere at each store are diverse. There may be recognizable similarities between locations, but overall, each location is unique. This gives our customers a ma-and-pa feel while affording us a competitive edge over the corporate giants."
   Laramie also gives his store managers an unusual amount of freedom with decorating choices. "The store managers can decorate their store with art, knick-knacks, plants, etc., as they see fit. It's rare that we do not approve of a manager's decor, even if we don't like it personally."

   Freedom of self-expression among staff and identifying with the community has also proved to be a successful strategy for INK! Coffee Company, which operates five coffeehouses throughout Colorado. President Keith Herbert encourages baristi to wear what they want and to choose music that's appropriate for the customer mix in each store. He believes the key to successful multiple locations is giving each store a distinct identity while cultivating a sense of community and maintaining quality, a formula he calls a blend of art and science.
   But blending the art and science of multiple locations can sometimes be complicated by local municipalities. Janet and Dean McAthie own Carmel Valley Coffee Roasting Company, which operates five coffeehouses in and around Carmel, Calif., a city that carefully regulates "chain" stores. In the section of the city known as Carmel by the Sea, no two locations can have the same name. As a result, the McAthies own three coffeehouses in the Carmel area named Carmel Valley Coffee Roasting Company, one called Carmel Coffee & Cocoa Bar, and another called Dakota Coffeehouse. Janet admits that this does not help them build a brand name around town, but it is the local ordinance. Still, her company has turned this challenge into an advantage-echoing what is clearly a theme among successful micro-chains-by celebrating the individuality of each store. "The size and demographics of the community dictate the identity of each store," she says.
   In response to the diversity of their customers, the McAthies have added unique amenities to help stamp each store with its own identity. "Since our clientele varies so much, our stores are not cookie-cutter in appearance," Janet says. In Carmel Valley, for example, the McAthie's store is frequented by 40- to 65-year-old locals with families, so it features larger tables to accommodate groups of people. Another of their Carmel stores is located near a district that does a lot of mid-week business. This store has two entrances and was designed to streamline customer flow so people can enter and exit quickly. Yet another location relies on a retired local clientele and tourists. With a couch and several lounge chairs, this store is designed for comfort and lingering.
   But what about branding? "Consistency, quality and cleanliness," says Janet. "These factors are the common link that our customers know they can rely on when they drop in on one store or another."
   There is clearly an inclination when opening an additional store to "dance with him that brung ya,"-a kind of loyalty to the first space that is part nostalgia and part the safety of familiar ground. At the same time, there is an entrepreneurial excitement about engaging in a new experience and creative process. How coffeehouse operators navigate these extremes depends largely on the personality of the owners. But regardless of whether additional stores are viewed as extensions of existing locations or unique entities, successful micro-chains share some common traits.
   The most obvious commonality is a strategic effort to build and benefit from brand equity. In other words, despite the fact that some independent coffeehouse owners eschew branding as corporate speak, they all follow its tenants to some degree. The desire to simply be known for quality is a branding strategy. But in the case of micro-chains, branding should be deliberate if additional stores are to capitalize on the success of the first. Branding can be a demanding science, but in broad terms, it simply means increasing the consumer awareness of your business while emphasizing how and why it is different. Any effort to grow market share and strengthen the loyalty of existing customers is branding. Technically, opening an additional location is, in itself, brand extension.
   One of the hallmarks of a coffeehouse-and a point of pride for independents-is its ability to connect with the community.

   A coffeehouse owner's desire to become a larger part of the local community can actually spur the decision to grow, but ironically, expanding can often distance the owner from customers. This may be why micro-chain operators repeatedly return to the theme of community for fear of being viewed as "corporate" or "cookie-cutter." Many donate time and money to local causes, while others hang paintings by local artists, provide free coffee to a senior center or food bank, or simply remain attentive to the coffeehouse's environment as it relates to customers throughout the day. In addition to designing its stores around the needs of neighborhood customers, Carmel Valley Coffee Roasters connects to the larger community by providing coffee for local events, such as the "Taste of Carmel," and by supporting local charities, such as the Monterey County AIDS Project.
   A final recurring theme among micro-chain owners is quality. A random sampling of micro-chains with fewer than 20 stores reveals that most roast their own coffee and began doing so when they operated only one store. And those successful micro-chains that do not roast have usually been buying from the same roaster for an extended period. The reason? Quality control. Opening multiple locations is not easy, and many of those who succeed at the micro-chain level are zealous in their commitment to quality. At the same time, quality is more easily compromised as retailers expand and owners move further away from the hands-on operation. Quality control becomes less a question of how much they know and more a question of how well they can pass on what they know. Owners are faced with the challenge of institutionalizing quality standards while making a passion for quality an integral part of the company culture. This would explain why retailers with more than 20 employees overwhelmingly identify staffing/training as their number one concern.
   Herbert says that one of the simplest tools to maintain quality as his company grew was to create an employee handbook that details quality standards. But for Herbert, the key to preserving quality is ongoing training. "We don't just train our employees once," he says. "We provide ongoing and increasingly advanced training. For the baristi, training gets more technical, but also includes more in-depth knowledge of coffee history and coffee origins." He and his management team also spot check quality regularly at all locations by ordering drinks.
   Today, thousands of coffeehouse owners are planning to open additional locations, and there is a great deal to be learned from those who have paved the way. Successful micro-chains teach us that it doesn't matter whether you choose the uniformity of a Joe Muggs or the ever-changing diversity of a Carmel Valley Coffee-the fundamentals remain the same. Celebrate the differentiation of your product, remain attentive to the needs of your customers, participate in the immediate and larger communities, and never compromise the quality of your product. Good branding might lure people in once, but great coffee will keep them coming back for more.

Mike Ferguson is the marketing and communications director for the Specialty Coffee Association of America. He can be reached at 562/624-4100.