Case Studies of Coffee Business

                            Case Studies of Coffee Business Failures and Mistakes or
                              "How to Turn a Great Opportunity into a Disaster"

Why should you read this? Because it may make the difference between fulfilling your dream of being in business for yourself and making a good living - or wasting all your money and your time!

What are the seven biggest mistakes?

1. Starting to spend your money and your time without first determining if your project makes any business sense in the first place. You won't learn that from your friends, relatives or your coffee/equipment dealer!

2. Choosing the wrong location - if you are not visible, hard to get to, or in the wrong demographic area, you do not exist and probably will have very little business! The main reason for Starbucks success is the locations!

3. Naming your shop with a name unrelated to your business - you are driving along and notice a shop called Dottie's. Would you stop there for a cup of coffee if you did not know what it was?

4. Not knowing how to design your work environment for speed and efficiency of operation - unless you design the shop properly, employees will be    running around like a chicken without a head, slowing down the service time and your customers patience!

5. Having a menu that is too long and confusing, not focusing on items that matter the most. While the average independent coffee shop manages to serve only 31% of espresso based drinks, our clients average is over 80%! Just think how much more money you will make if instead of selling 200 cups of brewed coffee at $1.25, you sell 200 espresso based drinks at an average price of $2.97! That is a difference of $244! Over $80,000 a year!

5. Mixing coffee with food items (soups, sandwiches and salads) - people don't go to Starbucks to eat, and they don't go to Subway to drink espresso based drinks!

6. Poorly trained employees with no clue on how to MARKET and prepare espresso based drinks properly and promptly.

7. Having your espresso machine operated by people that do not drink espresso
    based drinks themselves.

If you make any of the above mistakes, in the worst case you will be out of business and lose all your money, or your business won't reach its full potential and you won't make as much as you could!

All of the above mistakes are PREVENTABLE! You don't have to make them because we already made them for you!!!

As Alex and Michael traveled all over the country on consulting assignments, he saw many coffee business disasters that were created by owners that believed that "there is no big deal" in opening a coffee shop or a drive-thru. Many of them were influenced or misguided by coffee roasters, equipment salespeople, design architects that never worked a day in a coffee shop, or by "experienced employees" hired away from a competing shop. Due to these and some other reasons, they ended up with far less efficient and profitable shops, after having wasted needlessly thousands of extra dollars.

If you were investing $100,000 to open a coffee business, how much would you pay to prevent the above mistakes?

$1000? $5000? How much?
Wouldn't it be better to start right from the beginning than try to fix it later? After having wasted thousands of dollars and losing countless customers because you did not understand this business?
The following actual cases illustrate what happens when people start this business without fully understanding of what makes it "tick". Compared to any other food related business, the espresso business is more lucrative and the work environment more pleasant. However, as with any business, the owner/operator must understand it in order to maximize it's potential. To expect the coffee or equipment supplier to teach you the coffee shop business, is like to expect a restaurant equipment salesman to teach you the restaurant business and how to be a great chef!
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Case One: Clueless in PA
Some time ago Alex received a call from a man in PA who opened a coffee shop six months before. Prior to that, he found Alex on the internet and "read every page" of it. Unfortunately, though he understood somewhat "what" had to be done, he really did not know "how to" do it. He considered ordering Alex's "Espresso Business Success Program" to educate himself, but one of the "experienced" employees that he hired away from another coffee shop talked him out of it. She said that it "would be a waste of money", and she knew "how to make the drinks". She simply did not think that he would benefit from it to any degree.
He called Alex because he was concerned about the slow sales. He was barely breaking even. He wondered if by introducing sandwiches he could do better. We talked a bit about the location, which seemed to be in a good area, and should be doing at least $750 a day, instead of it's present sales of only $400-$500. Alex asked him several questions and realized that his slow sales were due to the following reasons:

The name of his shop was not obvious to a "coffee" concept.

His menu was wrong in every respect - too long and confusing, "not espresso friendly".

He did not understand how to "market" espresso based drinks, and was selling mainly brewed and flavored coffees.

The equipment layout was designed by an architect who never worked a day of his life in a coffee shop. It was not designed with efficiency in mind, therefore making customers wait longer to be served.

He wasted about $3000 more than needed in less efficient equipment

He had no clue on how to properly prepare espresso based drinks, he left it to the "experienced" employee he hired from the other coffee shop. Alex could only imagine what the drinks tasted like!

He invested about $97,000, which at this rate of sales he would never get back.
All of the above mistakes cost him thousands of dollars in sales and customers satisfaction, and could have been prevented had he educated himself properly about the business!
Here is what he would have done differently, had he applied the principles that are covered in my "Espresso Business Success Program":

He would have chosen a name for his shop that made "coffee sense"

He would know how to "jump start" his business, instead of waiting weeks for it to take off.

He would have an "espresso friendly and focused menu" that would allow him to sell mostly espresso based drinks instead of brewed coffee, earning him thousands of dollars more per month.

He would have an efficient design and equipment layout that would make a big difference in the speed of service

He would have saved at least $3000 in all of his equipment

He would know how to prepare properly, faster served, better tasting drinks that would bring the customers back for more!

All of this would translate in higher sales, more customers satisfaction, and more money in his pocket!
But then, he got the "training for free", didn't he?
Start-Up Coffee Business Advice

Case Two "Non Functional Great Location

About a year ago we got a call from a man who found me on the internet. He liked what we had to say and asked us to help him to find three or four locations on the East Coast, the only criteria being that they must do at least $600,000 a year in sales each. Money was no object, as he had as much as one million dollars to develop those locations. Alex spent with him about five days looking at some prospective locations, and unfortunately we could not find any that were available. But he was not disappointed, as during that time he got a much better idea of what to look for. Alex did not hear from him for about four months, when all of a sudden he called him and asked to come over and help him open his shop. Surprised, Alex asked him why didn't he call him before, to design his shop and provide him with my full consulting services, for surely money was no problem. He claimed that he did not need Alex's services at that time, as he "hired a nationally renowned" design architect to design his $375,000 shop, and an "experienced barista" from a competing coffee shop to help him with the set up and opening of the business.
Unfortunately, the "experienced barista" proved to be completely inept when dealing with anything but his area of "expertise", and probably cost him an extra $40,000 in superfluous equipment and shop design elements, so after a big argument, the day before the planned opening, he walked out on him. So he was there ready to open his $375,000 investment and without experienced people to work it!
Indeed, the shop was in an excellent location, and it LOOKED like $375,000! However, the way it was SET-UP, that is, the counter and equipment layout, the menu, the register system, customer order and pick-up areas and the massive six person wooden booths along the wall, was absolutely not conducive for an efficient operation in that busy location.
He was convinced, however, that it could be operated in its present state, and asked Alex to open for business against his advise. Needless, to say, it turned out to be an absolute disaster, and they had to close after about an hour, for there was no way they could handle the resulting confusion about the menu, the ordering, or prepare the drinks fast enough with the awkward espresso equipment set up.
This disaster proved to be very costly to the owner not only in the money lost due to faulty and superfluous design, but in the good will of his prospective customers. It took another week and $17,000 to redo the counter, reposition the equipment, change the seating, cash system and menu, but by that time the owner was so disgusted with the whole process that he put the shop for sale and canceled his plans for any additional openings.
Here we have a case of a perfect location, with a $375,000 opening investment, with a potential of grossing at least $650,000 a year. With proper expertise in designing, marketing and running of that business the owner could have put in his pocket around $200,000 a year and fulfilled his dream of being self employed. Instead, his dream turned into a nightmare.
He was influenced by:

An architect who has never spent a day of his life working behind a busy counter of a coffee shop and who designed a work environment that was awkward to work in

By an espresso machine salesman that convinced him that the machine was "it", that by having it he would make the best drinks

By a coffee roaster who praised the purity and freshness of his coffee, who pushed on him dozens of his bean varieties, creating a menu that did not make any sense except to the roaster

By an "expert barista" who did not have a clue on how to prepare drinks properly and efficiently and who did not have any "espresso marketing" sense.

All of these people told him in so many words that "he would be crazy" to hire and pay for a consultant, that they would teach him the business for free!

Though that was an extreme example, this happens on a minor scale all the time, as we can see by the following cases:
Case Three: Excellent Location, High Investment Shop, Poor Marketing and Layout

Some time ago, while scouting for a location for a client in the Midwest, Alex came across a very attractive, expensively designed coffee shop in an affluent suburb of a large city. The shop was located on an older street that has undergone some cosmetic improvements in the last few years and was populated with great restaurants, art galleries, boutiques, a performance theater and an array of small businesses catering to affluent patrons.
An expensive, brass and copper espresso machine occupied the center stage of the back counter, with a wall menu that featured every espresso drink in the Universe. The place was busy, with four people behind the counter stepping on each others toes. The prices were out of sight, starting at $2.75 for a small "latte" and 1.45 for brewed coffee. Alex ordered a "cap" and watched in fascination as the "barista" proceeded to "murder" his order by doing most of the preparation steps wrong. Because of the awkward equipment lay-out, seemingly without any consideration for speed or efficiency of the operation, it took twice as long to prepare it. Though it was one of the best looking cappuccinos that Alex ever had, served in an elaborate and expensive cup, it was also one of the worst, with no relation to what a properly cap should taste like!
Alex stayed for about 45 minutes watching the action, and was not surprised to see that only five more espresso based drinks were ordered during that time, while most of the coffee sold was brewed.
Despite of all that, the shop seemed to be doing very well. Of course, the reason for their relative success was the excellent location and the absence of expert competition, which came a few months later and took a great chunk of their customers and probably cut very deeply into their revenue.
The moral of this story: You won't be able to prevent competition, but you could keep it at bay by creating a loyal customer base. But you won't be able to do that by serving lousy, overpriced drinks with slow service, no matter how much money you paid the architect/designer to build a monument to his ego. With proper functional design, menu and common sense marketing combined with expert training and drink preparation techniques, such shops could become true "jewels", providing the customers with better product and service, and awarding the owner greater income and satisfaction.
Case Four: Excellent Location, Poor Shop With No Clue.

Some time ago, while consulting for "Border's Books & Coffee", Alex stayed in a hotel near the Union Square in San Francisco. It was an early Sunday morning and Borders would not be open for another two hours. He had to have my morning "latte" fix to get me going, so he took a walk looking for a coffee bar. He came across a small shop with a big window "ESPRESSO" sign. As soon as he came in, he realized my mistake, for it was a bake/sandwich shop that happened to serve espresso. As all Alex's previous "espresso experiences" in such places were disasters, he was about to walk out but ordered a "latte" against his better judgment. And sure enough, he got what he deserved: A thin, overheated, brownish and tasteless milk! When you combined that with a complete lack of any kind of "espresso image", a confusing menu and unrealistic prices for such a set-up, this shop qualified in every sense as an "espresso disaster zone". Such a wasted location, on a "demographically correct" street, with thousands of prospective customers passing by!
With some repositioning of equipment, change of menu, a few cosmetic decorations and an open and receptive mind set, this location (as thousands of other similar across the country) could become a gold mine, selling hundreds of espresso based drinks a day, with half the cost and labor of the present operation. Obviously, the owner does not realize that, or does not know how to extract that gold. Alex wondered why his coffee supplier or the espresso equipment dealer did not show him the opportunity?
Case Five: Poor Location, Satisfactory Operation.

Last summer, while on vacation as a family in the San Diego area, we pulled of I-5 to a strip mall for a burger lunch. Among the other stores, Alex noticed a shop with an "espresso" sign on the window. As he needed my daily fix, he went over there prepared to be disappointed. But to his pleasant surprise, he had a much better espresso than he expected. he introduced himself to the owner, congratulated her on the drink and asked how was business. From her less than enthusiastic response, he deduced that it wasn't too good, and it obviously had nothing to do with her products, which were prepared properly as I had a chance to observe.
Her location, though right off the freeway, could be as well on the moon! The only prospective customers that noticed the store were people that came to the parking lot for some other purpose than coffee, as her sign could not possibly be noticed by cars zooming by at 60 miles an hour. Unfortunately, strip malls may be good locations for destination type stores, but coffee for the most part is an impulse item, and for most people the act of pulling off the road, even if they noticed the sign, is not worth the effort. Of course there are exceptions to this, when you have great visibility and very easy access. And they happen to see you when they need their "latte" fix. Some months later she had to close her business.
Case Six: "I Can Get Free Training From My Supplier"

Some time ago Alex had a call from a woman who found a location. Having read his "Espresso Report", she felt that Alex was the person to help her start on the right track. As she had the necessary capital to remodel the shop (about $90,000) Alex started my consulting by evaluating her location, which turned out to be excellent. A couple of weeks went by without any communication from her, so Alex gave her a call. She told him that she found a large "national coffee wholesaler" that would provide her with "free training", a banner and some promotional material if she purchased the espresso equipment and coffee from them. She "more or less" copied the design of another coffee shop and proceeded to build out her shop. She also talked to one of the "experienced" employees of that coffee shop, who wasn't happy in her present job, and she agreed to work for her.
In other words, our services were no longer required, as she "had everything under control".
A couple of months later we happened to be in her area on a consulting assignment and paid her coffee shop a visit. Indeed it was in a good location, by a medium size college. We ordered a "latte" and got "an overpriced, thin, overheated, tasteless brownish milk". The layout of the equipment was not conducive for speed and efficiency of the operation, the menu was not "espresso friendly" and most of the drinks sold while I was there were "regular" coffee. Obviously, she wasn't making it on coffee drinks alone, as we noticed a blackboard menu with soup and a few sandwiches.
As she wasn't present at the time of our visit, we could not ask her how business was. But from the taste of the "latte", by observing the "barista" preparing other drinks, by the equipment layout, by the menu and by noticing what customers were ordering, we can say that this wasn't a "coffee shop"; it was a "deli" that happened to serve poor tasting espresso.
How many customers did she fail to attract to the espresso drinks due to lack of effective initial marketing? How many customers did she turn-off due to poor taste of her drinks? How many customers walked out because of slow service due to poor equipment layout? How much bigger is her payroll, her food costs, and how much smaller are her profits due to food preparation? How many tens of thousands of dollars will she loose due to her inability of positioning the business as a viable "coffee shop" in this excellent location? And how long will she last in business should expert competition open nearby?
But of course, her training was for "free".
Case Seven - "Franchise Coffee Concept"

Some time ago Alex received a call from a man that was considering buying a failed single unit coffee shop that opened eight month ago as a coffee franchise. The owner of the franchise invested a total of $310,000 by the time he was ready to open the doors. He was losing his shirt, and was trying to get out, offering to sell his shop for whatever he could get.

Had that owner asked Alex for advice before buying the franchise, he would have told him:

The shop was twice the size of what he needed. He would be paying rent on space that he could not possibly use.

The extra decor and equipment that the franchise company required him to install would be a waste in that location, as most of his sales would be take out as there was a drive-thru window.

The menu did not make any sense, as it was focused on brewed and flavored coffee and coffee bean sales, instead of espresso based drinks.

Alex advised his client to pass, as the franchise company would not release him to become an independent.

We could tell you countless other "disaster" stories, but all of them have some similarities:

The owners did not understand the nature of this business. They though that if you had a good machine and expensive coffee beans, you would make it. Equipment and coffee have very little to do with the success of this business. Just look at some bagel, sandwich or so called "gourmet coffee shops" in the malls: Some of them have $12,000 brass and copper decorated machines and use $8.00 a LB coffee, and they only manage to sell dozens of cups per day instead of hundreds.

Most of them got "free" training either from the coffee supplier or the espresso machine distributor, who assured them that they would be wasting their money paying for a consultant. Though preparing drinks properly is important for better taste, barista training is only a small part of the whole picture. An experienced consultant would prevent all of the above mistakes, saving you tens of thousands of dollars, start you on the right track on the first day, and shorten the time it would take you to finally start making money for yourself.

They hired some "experienced" help from a competing coffee shop. Because the owner did not understand the business himself, he could not tell that the "experienced" employee was doing a good job or not.

They had no "espresso marketing" sense, did not know how to introduce espresso based drinks into a new area and the menus were not "espresso friendly".

Their shop working areas were either copied from other shops without any sense or reason, or designed by architects who never worked behind a busy espresso counter and had no clue on how to layout the equipment for speed and efficiency of the operation.

Espresso/coffee by the cup is a great business, with unlimited potential across the country. It may provide you with a substantial income and personal satisfaction - but only if you get enough education to conduct it properly!
Sooner or later, if you plan to be in any business, you will have to start investing some money. By the time you complete your project you may have invested from $40,000 - $300,000 and several months of your time. How you invest that money and time will make a huge difference in the outcome of your business.
One of the most effective ways to prevent the above mistakes and start on the right track is by working with experienced people that "done that and been there".
Alex's "Espresso Business Success Program," together with Oksana's or Michael's over the phone or by e-mail consulting, will provide you with all the basics on how to design, open and operate a coffee by the cup business and prevent those mistakes. The cost of this Program is a tiny amount of your total investment, but it may be the most important one, as it may prevent you from wasting thousands of dollars on something that may not work.
At the same time it may make you tens of thousands of extra dollars because it will show you how to maximize your investment by creating a concept that will return that investment in the shortest time.

Start-Up Coffee Business Advice

You may order it here: "Espresso Business Success Program"
One Day Barista Boot Camp
Coffee Shop Business School. Three Day Class will Teach "What to Do and How to Do it!"
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If you want to do more "research", our FREE 30 page e-mail report "How to Make Real Money with Espresso" will show you what you must do to start up a profitable coffee retail concept.
Here are some of the contents:

Is it Worth to go in the Coffee Bar Business? What earnings can you expect?
Proper Location: The Key to your Success.
Proper Store Work-Station Design: For speed & efficiency of service
Effective Marketing of Espresso: Why it is Important to your Success
Proper Drink Preparation Techniques: For Better Taste and Speed
Who we are and why should you take our advise.

We send it by e-mail only. Please click here and request it.

The following links will contribute to more understanding of this business:
"Turn Key Coffee Shop Consulting"
Coffee Shop Business Q & A site.
Before you call us about a drive-thru, PLEASE do your home-work that we suggest on my Drive-Thru site.

Alex Fisenko & Assoc.
6107 SW Murray Blvd. PMB 297
Beaverton, OR 97008
Phone & Fax 503-590 9423 Pacific time 9 am-6 pm

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