Look What Happened to a "Cup of Joe"

Me: I’d like a caramel macchiato—double shot—grande. And a slice of chocolate swirl pound cake, please.

Cashier: Thank you, that will be $7.85. Please step down the counter to pick-up your order.

Me: Ah, is there an ATM nearby or a loan officer on premise?

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When I was a kid working at my family’s restaurant, we charged a dime for a cup of coffee. Pastries were not something that generally accompanied a cup of coffee (the donut as a side was a 60s and 70s thing). In the United States coffee was, for many years, a pretty standard item. If you added anything to the basic “cup of Joe,” it was cream and/or sugar.

The world has changed. Coffee is now one of the most visible and common of the “designer drinks.” It is also one of the most profitable retail programs at many onsite locations—despite the economic climate and perceived high prices. Customers keep coming back and the ROI is usually outstanding.

The Starbucks phenomenon—reportedly inspired by the CEO’s experience in the coffee bars of Italy/Europe—changed coffee's business model into something entirely different in this country.

In Europe, coffee is usually a small “shot” of highly concentrated essence, generally 2.0 ounces. Turkish coffee, replete with grounds at the bottom of the cup and a healthy dose of sugar, might be 3.0 ounces. In Europe and many other parts of the world, a coffee house is one place and a bakery is a totally different and distinct place. The Starbucks model fused the two categories together and demonstrated the value of doing so.

Just recently, that company made a $100 million acquisition of Bay Bakery so it could expand its pastry and bread offerings to attract new customers and increase revenue. What can we learn from this vision of the coffee business?

Four Key Lessons

First, Starbucks’ potential customers are “preconditioned” to the higher selling price through its promotion of larger sizes and exotic descriptions of coffee beans and blended coffee drinks.

Second, it has shown that automatic coffee drink machines are acceptable to customers as long as it’s not too obvious the “barista” is just pushing a button on a computerized machine. The personality of the barista and other service personnel is critical. (Given the prices that are charged, that interpersonal buying experience had better be positive!) Staff training should focus on this aspect of service because of its significant impact.

The essentials

Third, the old adage holds true. The three most important issues are location, location, location. Make it easy for the customer to find you. If possible, select a location that allows you to intercept customers along main travel paths.

Fourth, coffee is just the “hook.” Signage, suggestive selling and other techniques should focus on enticing customers to move up to more costly and more profitable items. Provide other food and drink items to extend a coffee/bakery units’ appeal in other dayparts (lunch, dinner and late night feeding).

A more fully equipped unit (e.g. Concept 2) can serve as a labor-efficient foodservice location for the 2nd and 3rd shifts, a real bonus in some onsite situations.

Essential Equipment

The essential, or minimum, equipment list includes an espresso machine, standard coffee brewer, coffee grinder, refrigerator, hand-sink, cash register, and a pastry display. If the unit is in a fixed location you may need, based on local code, a three compartment sink or proximity to a dishwashing facility.

Pastry display units can be either ambient temperature (non-refrigerated) or refrigerated—or split model, offering both. Ordinary pastry and bread items should not be refrigerated. The refrigerated section provides an opportunity for custard-filled items in the morning and pre-made gourmet sandwiches and salads in lunch and dinner periods.

Whether ambient or refrigerated, high-intensity lighting in the display area is a must to bring out the color and contrast of the food items.

Concepts 1, 2 & 3

Concept One represents a baseline station and is outfitted only with essential equipment.

Concept Two represents an expanded menu unit similar to the kind of station companies like Starbucks are moving to in order to extend their peak selling times. Drinks are prepared in the units, but food items like sandwiches (both those served cold and those that can be heated in a “rapid cook” oven) are premade, as are salads and pastries.

Concept Three integrates the coffee/bakery operation into a cafeteria setting to enhance customer service, efficiency and profitability. Customers can order a specialty coffee drink and also select other food items in the cafeteria. Alternately, from the station's other side, they can place drink orders and/or obtain a quick pastry or gelato snack without actually entering the cafeteria.

The fact that the unit services both sides provides an option to the customer, saves labor, offers another cashier location during peak periods and promotes add-on sales.

Leave it to Americans to meld Southern and Northern European customs — coffee and a Danish (pastry that is) and we are off to the races. Although Au bon Pain, Panera Bread, The Corner Bakery and others are not as well known for their coffee and specialty drinks, these items help create a check average that is significant. Menu extension, combo deals and other techniques add to the bottom line. Bread and croissant based items extend the attraction into other dayparts, again providing revenue and spreading fixed costs over a greater period of time.

Paul Hysen, FACHE, FAAHC, is president of The Hysen Group and has been a professional onsite foodservice consultant for over 40 years. His firm has provided services to clients in 46 states and numerous foreign countries on projects ranging from high volume coffee kiosks to 100,000-sq.-ft. food production centers.