Your Choices
For The Specialty Coffee Business
The ever growing Specialty Coffee Business offers you a wide variety of choices between companies that want to help you go into business for yourself. These companies are divided into three main categories and a fourth category that does not offer entrepreneurs a way to enter the business. Let us examine all four.
1. Companies that do not offer any type of program for entrepreneurs;
The two largest chains in our business fall into this category. Of course #1 is the 10 million pound Gorilla, Starbucks. This 17 year old company has almost 12,000 company owned stores and intends on staying company owned. All 12,000 of these stores have been financed from the profits of the stores that came before them. Twelve Thousand stores, all self financed: that figure, alone, should give you a good idea of the profitability of specialty coffee. If you have a billion dollars, you can not buy a Starbucks Store.
Of course, having this many stores brings with it a unique set of problems. How many of you have noticed the bitter taste of Starbucks Coffee? This bitter taste is caused by the over-roasting of Starbucks Coffee Beans. Why does Starbucks over-roast?
When you have 12,000 stores, you must constantly buy millions of pounds of coffee beans from all over the world. It is impossible, in that volume, to get a constant blend of beans. Brazil may be short while Costa Rica has a glut. With 12,000 stores you are forced to buy beans where you can get them. The only way that you can get a constant taste in all of your stores is to roast the beans longer than normal. This forced over-roasting creates the bitter taste. Being a much smaller company,JavaGrande does not have this problem. Our blend is constant and you will love the mellow taste.
Another factor, that makes Starbucks ripe for good competition, is the "back-lash" that many consumers are experiencing and participating in. Lots of folks think that Starbucks has just gotten too big and is beginning to experience the major problem that affects giant companies: that is arrogance. Is Exxon arrogant? Are the major drug companies arrogant? Of course! Is Star bucks arrogant? Well, that's for the market-place to decide and the market place is beginning to be heard from.
Let me relate a recent incident that I personally had at Star bucks. Two months ago the Annual Specialty Coffee Convention, "Coffee Fest" was held in Las Vegas. Early Saturday morning I was at the Las Vegas Airport preparing to fly home. I was tired and badly needed a cup of Espresso and something to munch on. As is the case so often, the only place to go wasa Starbucks. After getting my double Late ($5.00), I asked the Bari sta for a Muffin, ($3.00). She reaches in the display case and hands me a muffin. I asked her for some "butter please." She answered that she had no butter. I asked her how she could serve a dry muffin for $3 without any butter. Her answer was, "because weare Starbucks!" Was that arrogant? You tell me.
The #2 company in the business also does not have an entrepreneurial program. Caribou Coffee has almost 200 locations and again, they are all company owned; another testimony for the profitability of specialty coffee. Caribou has a very interesting pedigree. They are owned by a company from Saudi Arabia and operate their business according to "Shiria Law". Sharia Law is the Muslim way of doing business that precludes borrowing or lending money with interest; an interesting but difficult concept to grasp. Whatever their ownership, you can not buy a Caribou Coffee Store.
2. Companies that will sell you buildings, fixtures or equipment but offer very little help with training, permitting, site selection, product and the other items necessary for a successful business.
If you have had experience in coffee or other food service business and don't have to be concerned with losing money when you operate your business, this might be a way for you to consider. You will probably save 20% to 30% on your "going in" costs but what about all the other things that factor into your successful business. How about training, grand opening assistance, on-going support, a great coffee blend, knowing what equipment is best, name recognition, help with the bureaucrats in permitting, the advantage of 10 years experience in specialty coffee, and, above all, consulting work for your site selection. Yes, you may save some money going in, but how about all that money you may lose after you get open and don't have the right mix of equipment and fixtures, or your store is ergonomically inefficient or maybe you just don't know enough about the business.
Want proof? The US department of labor says that 90% of new businesses that "go it on their own" are out of business in 3 years or less. The labor department also states that 95% of all franchises or licenses are still in business after 5 years. It's your choice;cheaper on the front and a quick "out of business" or a little more money up front and a thriving enterprise.
3. The Franchise:
Most Specialty Coffee "Turn Key" offerings fall under the heading of a franchise. This particular business form offers all of the help that we spoke of above and sometimes even more. But, you are going to pay for that help "up front" and probably pay forever and ever. "How will I pay, you ask?"
A. First you are going to pay "with control". Your franchise company is going to tell you that you have to comply with a myriad of rules and regulations and can not deviate from these directives. They will tell you what time to open and close. They will tell you exactly what déCO you must have. (Think Holiday Inn or Red Roof). And they might even try to sell you their salt, pepper and toilet paper.
B. Next, you are going to pay "up front" with an outrageous "Franchise Fee". In specialty coffee that franchise fee can range from a low of $15,000 to $50,000. And, this figure does not get you 1 extra pound of coffee. It is "air," "blue sky," "boiler plate," or whatever you want to call it. It is just part of the Franchise company's profit and commission for the guyswith Cadilacs and big gold chains.
C. And finally, we come to the Royalties. Royalties are paid to the Franchise Company on a weekly/monthly basis and in Specialty Coffee industry will usually be between 5% and 10% of your gross business. In other words, if your coffee business grosses $300,000 in a year, you are going to pay somewhere between $15,000 and $30,000 each and every year to your franchise company. And that is all before taxes and a few bucks for you. Scary? You bet it is.
4 . The Java Grandee License Program:
There is a better way to give you, the licensee, the all important help that you will need to be successful in Specialty Coffee. That way is theJava Grande Specialty Coffee License Program. This is a complete "turn key" program which offers all of the help that a franchise does but without the rigid control, the outrageous franchise fees and the "pocket draining royalties." And becauseJava Grande is a smaller, leaner and more efficient company than the big "Franchise Boys," we can save you lots of money. Let's examine the differences between TheJava Grande License Program and The Specialty Coffee Franchises.
A. Control: With a license, you can pick and choose the parts of the program that will be most beneficial to you. YOU HAVE CONTROL. Maybe you just want a Drive Thru Building and Training. Unlike the Building Manufacturers and Franchises, WE CAN DO THAT. Maybe you have a spot for your coffee shop and just need a product supplier, name recognition, training and permitting help. Unlike the Franchise, WE CAN DO THAT. Or, maybe you need the entire "turn key" package. WE CERTAINLY CAN DO THAT. The "turn key" program is a Java Grandee favorite and is similar to a franchise as there are some "up front" fees and license fees.
B. First year License Fee: As part of the Java Grandee "turn key" program, you will receive a license to use all Java Grandee Trademarks, signs and identification. You will use Java Grandee Approved Coffee, Smoothie Mix, Syrups and imprinted cups. You will be a Java Grandee Store but without the rigid restrictions of a franchise. For example, you can sell any type of food that you desire from Muffins, Bagels, and Cookies to Ice Cream and/or Chocolate. For this valuable license, you will pay a first year fee, at the end of the first year, of $4500. In other words, your business does $200,000, $300,000 or "whatever" and you only pay $4500. (Compared to a franchise at $300,000, that $4500 is 1˝ % as opposed to a franchise fee of $15,000 to $50,000. And theJava Grande $4500 is paid at the end of the first year while the franchise fee is paid up front.
C. Continuing License Fee as Opposed to Franchise Royalties
With Java Grande and most Specialty Coffee Franchises, you will receive continuing support. But, at what cost? With Java Grande, you will pay a license fee of just $1800 per year, no matter how much volume that your store does. (At $300,000 volume, that is ˝ of 1% a year. Compare that miniscule figure to the 5% to 10% you will pay the Coffee franchise Boys. With the Java Grande License Program there is much more money left for you.
To top off all of this exciting good news, Java Grande Guarantees in writing that when you come into Java Grande as a license, you are grandfathered in, in perpetuity. Yes, Java Grande will probably become a franchise some time soon. But, no matter how long you are a Java Grande owner and no matter how many stores that you open over the years, once you are a licensee, you always have the right and option to be a licensee.
In Specialty Coffee There is Only One Way to Go!
The Java Grande License Program
The foregoing information has been delivered in the spirit of helping to educate the business buying consumer and is based on questions received by The Java Grande Sales Department every day. If you have other questions or just want to talk about your future in Specialty Coffee, call Marsha Price, who can answer all of your techincial and business questions at 803-238-0268.
