A Tale of Two Cafes
Midwest retailers follow distinct paths
by Marshall King

Four years ago, we brought you “A Tale of Two Cafés,” showcasing two divergent but equally successful business models in Portland, Ore. This time, we take you to neighboring towns in Indiana, where 10 years ago, some ambitious self-starters set out to establish local coffee culture.

On April 4, 1996, the first night the Electric Brew was open in Goshen, Ind., there was a line of customers for four solid hours. Students from nearby Goshen College had heard that a coffeehouse was coming to the small Midwestern city, and they were thirsty for lattes and mochas. “That thrill for them lasted about two weeks,” says Brenda Hostetler, who owns the Brew with her husband, Tony Kauffman.

College graduation and the end of the school year scattered the students, and Hostetler and Kauffman were left to build a business in a city that then had about 25,000 people. “I thought it sounded like a fun idea,” says Kauffman. “Again, we didn’t know what we were getting into.”

Most of their customers didn’t, either. The students had lined up that first night, but the shop generally wasn’t busy. “People would walk in, and they would ask, ‘Is it OK if we’re here, or is it just for college students?’” says Kauffman.

Ten years ago, in non-urban areas of the Midwest, what most people knew of coffee and the culture that went with it came from “Friends” or what they’d experienced on visits to Chicago or other cities. There weren’t coffeehouses in most strip malls or Starbucks counters in grocery stores. “We were Goshen’s original,” said Kauffman.

A 1996 article in the satirical newspaper The Onion was headlined, “‘Midwest’ Discovered between East, West Coasts.” A fictitious person in the story poked fun at Midwesterners who were bewildered by urban culture, including coffeehouses.

A year later, Tanya Bleiler and her husband, Pat, opened the Daily Grind in Elkhart, Ind., a city about 10 miles from Goshen and twice its size. Goshen’s the Brew and Elkhart’s the Grind, two downtown shops, were starting to bring coffee culture, with its language and the whir of espresso machines, to small cities in northern Indiana.

Tanya Bleiler, co-owner of the Daily Grind in Elkhart, Ind., and Brenda Hostetler, co-owner of the Electric Brew in Goshen, Ind.

FROM ARBY'S TO BREVES
“If we opened now, we couldn’t do it the way we did it,” says Hostetler. Her husband adds, “Now there’s an expectation level of what a coffeehouse is around here.”

Hostetler grew up near Salem, Ore. When she attended Western Oregon State University in Monmouth, Ore., she worked at one of the locally owned coffeehouses. She bought a home espresso machine in 1990. After transferring to Goshen College, she worked on a dairy farm and made food for the family. “I made cinnamon rolls,” she says. “They said I needed a café.”

After deciding during her senior year that she didn’t want to be a teacher, she looked at other options. Kauffman, then her fiancée, was on board for trying to open a coffeehouse, and their parents urged them to do it. They considered Oregon, where coffee culture was already established, but opted for Goshen, where Kauffman had grown up and where they both had gone to college. “We felt like there was more of a need for it in Goshen,” says Hostetler. “It seemed like less of a risk.”

In May 1995, an Arby’s fast food restaurant closed on Main Street, a block from the county courthouse. Kauffman’s father, Charles, co-signed a loan, but Kauffman and Hostetler used their own money and money from the family rather than accumulating a large bank debt.

They took over the lease in June and began renovations, which started with cleaning. “I don’t think Arby’s ever cleaned,” says Hostetler. “It was just gross,” adds Kauffman. With Kauffman’s father, they used 1.5 tons of sand to blast layers of paint of the high tin ceiling. They purchased used equipment, including some from Arby’s. But preparing to open took 10 months because they changed their minds on what they wanted for the new business. The front counter setup alone was changed three times to make it more customer-friendly.

Kauffman and Hostetler married in September and asked for kitchen items as gifts. The items were used in their new venture, which opened in April. They were newlyweds, and as they put it, naive 25-year-olds. Hostetler, who had no previous management experience, was the manager. Kauffman worked behind the scenes and shared the stress.

During the day, when they had few customers, they experimented with recipes. And that first summer, they had enough free time that they were able to watch the summer Olympics in Atlanta on television in the shop’s kitchen.

Meanwhile, customers were getting accustomed to the place. People didn’t know what espresso was. Cappuccino was a buzzword that new customers had heard, or maybe they’d tried the syrupy-sweet, gas-station variety. Kauffman, Hostetler and their four employees would ask whether it was a customer’s first time so that they could recommend lattes or mochas. “We figured if you ease them in with mild or sweet, that was the way to go,” says Hostetler. They put together a beverage guide to help customers learn about coffee and pave the way to being regulars. “Now it’s 90 percent regulars,” says Kauffman.

Back then, it was 98 percent college students. “We had unlimited refills [on brewed coffee] then. That had to stop,” says Hostetler.

Tanya (second from left) and Pat Bleiler (far right) chat with a customer and an employee.

THE GRIND WHIRS
In Elkhart, Tanya Bleiler was building her own retail coffee business. “Originally, we sold a lot of brewed coffee, which is what they were familiar with,” she says. She had opened the shop in a historic building called the Green Block. Bleiler—who was Elkhart’s first female firefighter—had experienced European coffeehouses while visiting her sister in Prague and wanted to open one in Elkhart.

She was encouraged not to serve food by a representative at her coffee supplier, Paramount Coffee in Lansing, Mich. But Bleiler didn’t feel Elkhart was ready for a straight coffeehouse. “Downtown Elkhart was looking for a new café,” she says. “They needed something else.”

She opened with coffee and espresso drinks and baked items. “We have just slowly added,” she says. While building the business took time, Bleiler found customers thirsty for her products. “There was a segment of our population who were well-traveled who were waiting for the first coffeehouse to hit Elkhart,” she says.

When someone orders a cappuccino, she or her staff asks if the customer wants it wet or dry. If the person is accustomed to gas-station cappuccino, there’s a Grind drink for them: Their olé contains coffee, milk and syrup to approximate the flavor of the more familiar product. The customer often winces at paying twice as much for the drink, but some come back. For Bleiler, the key is helping the customer find a drink they’ll enjoy. “If they walk out with a drink they hate, that’s a customer I’ve just lost,” she says.
About 18 months after she opened the business, she looked at the crowd that had gathered one afternoon. There were people on their way to a second-shift job, students looking for a pick-me-up and senior citizens. “To me, the moment just clicked,” she says. “It was this cross-section of everyone, and everyone was comfortable.”

THE RIGHT BLEND
In Elkhart, people who don’t smoke or drink were looking for a community gathering spot, and customers looking for connections interacted with Grind employees. “The people you hire have to share your same passion and vision,” says Bleiler. Employees have left the Grind because they weren’t comfortable with customers wanting to get to know them, but others have attracted a following. When one popular staffer left, an open house was held to wish her well.

Bleiler looks for overachievers—multitaskers who have an attention to detail and an ability to relate well to others. “There’s a certain sparkle about a person and a tendency to open their heart,” she says.

For Hostetler, managing people was the hardest thing to learn. “I had no idea how difficult scheduling would be,” she says. She wanted everyone to be happy and at times sacrificed her own schedule. According to Kauffman, you have to make it as convenient for part-timers as you can. They have 15 employees, including a long-term daytime manager, Jude Barger, who opens the shop most days.

Both shop owners say their employees come to feel like family members. Bleiler has gone camping with her crew. Hostetler puts friendly letters in their paychecks.

THE SALES PITCH

While both places have a nearly identical amount of square footage, the Grind has a larger kitchen than the Brew. That first summer the Brew was open, it added lunch, including sandwiches made to order. “That kitchen is not big enough for sandwiches made to order,” says Kauffman. Initially, it sold a dozen lunches a day, but it now sells more. They plan a weekly menu and fax it to businesses, as well as posting it next to the counter. “The only constant is the same sandwich on certain days,” says Kauffman. Hostetler adds that they are “not a restaurant,” but they do a lot of catering and special orders, and their baked goods and lunches make up about 40 percent of the business.

Ten percent of sales at the Brew are from merchandise, including gift baskets put together last holiday season. Even before Starbucks entered the music business, the Brew had artistic gifts items, pottery, cards and Putamayo CDs. They continue to offer these things, though Hostetler learned long ago that jewelry must be kept in a locked case to prevent theft. The Brew also no longer uses stem mugs embossed with its logo. It had 100 when it opened and lost most of them the first year to theft.

Hostetler tries to offer items not available elsewhere, and she has learned that saying yes to a sales representative can lead to having merchandise you don’t want to sell and will struggle to be able to. “Unless it’s something you want to sell, don’t get it,” she says.

Bleiler has found herself excited about new drink products. She has become a distributor for Sambazon acaí and uses the juice in smoothies at the Grind. She also uses and sells an array of Guayaki’s yerba mate. “I’m as excited about these new products as I was about coffee nine years ago,” she says.

FINDING THEIR STRIDE
At the Brew, what the shop lacks in kitchen space, it makes up for in seating. It feels larger than the Grind, but both have music events. The Brew was the first venue in Goshen for performing folk musicians and singer-songwriters, and it was one of the first places in town to sell world music.

“When it first came here, it was the only game in town for singer-songwriters, acoustic music and regional acts,” says Thomas Bona, a customer of both places and a regular at the Brew. The Brew is now one of four downtown arts or music venues, including another café, a new bar and a nearby church that is using a former movie theater as a music venue on weekends.

The Grind has music events, but they’re less prominent than the ones at the Brew. Bona arrived at Goshen College in 1995—a year before the Brew opened—after growing up in the Bronx and being exposed to coffee culture there. “I can’t believe I lasted almost a year without a coffee shop,” he says.

At that time, college students hung out at Steak ’n Shake or a family restaurant called Town Haus. Now, when he’s planning to meet someone to chat, it’s most often at the Brew. It’s the first place that comes to mind for him other than home or work.

THIRD PLACES
Sociologists call it a “third place”: a location that’s neither home nor work but is important to how people interact. Bona stops by the Grind at least three days a week and sometimes twice that. Sometimes it’s to greet the staff, other times it’s to see which friends are there. Either way, he gets coffee. “I need my caffeine fix,” he says.

While the new bar down the street, which is non-smoking, attracts friends to gather over drinks, even months after it opened, Bona hadn’t been there. Perhaps that’s evidence that coffeehouses now fill the role bars once did on their own. “It’s kind of the ‘Cheers’ of our generation,” says Bleiler.

What’s clear at the Grind and the Brew is that they’re meeting places where all sorts of people feel comfortable. People rarely ask anymore if the Grind is a place for college students. Kauffman and Hostetler learned that you make more money from the professors than the students, and a variety of adults have become regulars.

HANDLING EXPANSION
As they became established, both sets of owners pursued expansion. The biggest difference between Bleiler and Kauffman and Hostetler is how they handled it.

After looking for a second location for several years, Hostetler and Kauffman purchased equipment and opened a second shop in March 2002 in the downstairs of a collection of shops known as The Old Bag Factory. It wasn’t much work to start it and they enjoyed creating it, but the location lost money daily for two years before they closed it. It took another year for them to recover, and Hostetler said it was the biggest mistake of their decade in business. “You can sure look back now and say it’d be so much nicer if we hadn’t [done it],” says Kauffman. They wish they had focused on building up the single location.

Bleiler has pursued expansion with gusto. After turning a profit at her flagship location in its third year, she incorporated and added a second shop in a small strip mall, where the customers prefer brewed coffee to espresso drinks.

Bleiler has since helped a large church open a café and is looking for other spots, including one amid the emerging development along a busy highway. She added a small location inside an eye doctor’s office, but most recently added Stirred, a sushi and martini bar alongside her coffeehouse. Customers rave about her espresso martini.

Hostetler says she doesn’t know where Bleiler gets her energy. Maybe it’s the shots of espresso. “I can sleep when I’m in the box,” says Bleiler.

TIPS FROM THE BREW AND THE GRIND

• If possible, buy your property. The business will be easier to sell in the future.
• Start the week with payroll in the bank. For years, the Electric Brew owners hoped not all of their employees would cash their checks at the same time.
• Find employees who can model the values of the business and relate to customers.
• Be cautious about merchandise. “The reps will try to sell you anything,” says Brenda Hostetler. “Unless it’s something you want to sell, don’t get it.”
• Be flexible but decisive. “Never be rooted in indecision,” said Tony Kauffman.
• Find an ally. The owners of the two shops talk regularly and offer ideas and counsel to each other.
• Start small and add on. Though not having enough baked items in the case or enough events can be a detriment to a new shop, trying to do too much too soon can strain resources.
  

PHOTO CREDITS: Mark Shephard, Shephard Imageworks

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