8 ms·

My coffeehouse nightmare

82 points by ca98am79 16y ago

hugh3 16y ago
Interesting article about a failed business, marred only slightly by the way the author wants to write off his own bad business decisions as an inevitable problem with the coffeehouse business model. Of course it must be possible to make a lot of money with a coffeehouse; Starbucks frinstance does just great, and plenty of non-chain places must be making a lot of money too. Many of the problems he had just sound like he didn't have enough time to optimize his business model... if he was throwing half his croissants away then maybe he should have been buying fewer croissants? And do you really need a guy in the kitchen getting paid to whip up the occasional crepe when coffee is where you're gonna make the big bucks?
- vl 16y ago
  He obviously tried to create not a standard a-la starbucks coffee shop, but a more luxury experience. It seems he had to revert to non-cozy and fast or to charge premium prices and try to become "fashionable" place.
  - frossie 16y ago
    The real issue seems to be that he tried to create a "family restaurant" operation without the "family" (in this case him and his wife) wanting to work in the business: My wife Lily and I could work there, full-time, save on the payroll, and gerrymander the rest of the budget to allow for lower sales. Guess what, dear dreamers? The psychological gap between working in a cafe because it's fun and romantic and doing the exact same thing because you have to is enormous In other words, he had the luxury of choice. And he chose not to.
    - jaxn 16y ago
      I wish I could upvote this more than once.
  - ahoyhere 16y ago
    That's a false dichotomy. There are many spots between those two extremes where he could have made a lot more money.
showerst 16y ago
Although the author barely touched on it, I used to have a friend who owned a coffee shop and told that there's always an interesting push-pull. People like a coffee shop for two reasons: Great atmosphere (most important), and great coffee. Great atmosphere encourages people to linger on that $5 ticket for hours, which is a black hole for money, but if your atmosphere sucks you'll never get the buzz and reputation to keep the long lines of to-go in the mornings that you need to survive. Great coffee is hard to find, and requires competent baristas, which are a hard to find/train outside of big cities. I'm a huge coffee shop nut, but from a business perspective it seems crazy. As an interesting aside, another slate article noted once that indie coffee shops that have a starbucks open nearby actually do _better_ afterwards on average.
- patio11 16y ago
  I think location is likely to be more important than either. My possible bias is that my father works in real estate and he thinks Starbucks shares the crown with Wallgreens as being to real estate siting what Wikipedia is to SEO. I have about five coffee shops I frequent in my small town. The best location in town is in the station, and it is physically impossible for them to avoid selling $1k every weekday morning. The best coffee was at my favorite Sunday hangout and they were about as easy to get to as Customer Service at Google. Three coffee shops have thought they could make that location work.
  - jamesbritt 16y ago
    " ... and they were about as easy to get to as Customer Service at Google." :) Thank you for that.
  - kngspook 16y ago
    "...as easy to get to as Customer Service at Google." I love that analogy. =) (And I've tried to get to Google Customer Support before on a couple of occasions too.)
- thaumaturgy 16y ago
  > Great atmosphere encourages people to linger on that $5 ticket for hours, which is a black hole for money... This is a problem that restaurants and other places solved a long time ago. I don't get why coffee shops never seem to do this: train your staff to make the rounds when they're not busy. Stop by any table with an empty cup, pick it up quietly, smile, gently ask the customer if they'd like anything else. (Don't nag or harangue the customer or ask the same one more than once an hour.) Coffee shops have a problem with customers coming in and making themselves at home because they aren't being run like a business: there's very little staff-customer interaction. People come in, order (maybe), find a corner, and park there on the wifi for two hours. Shops respond to this by making customers come up to the counter to get a wep key, but that's the wrong way to do it. Instead, invite people in, invite them to stay, and ask them once in a while if you can bring them anything. And as an added bonus, your staff will make a little extra in tips, too.
tokenadult 16y ago
2005.
- algorias 16y ago
  So What? Does that make it obsolete? I guess indicating the year is important for older tech articles, but definitely irrelevant in this case.
  - prawn 16y ago
    Doesn't bother me much, but it might be helpful for people who can remember reading an article on this topic a few years back, but assumed this might be another take on the same topic?
  - die_sekte 16y ago
    This particular articles pops up every couple of months. Sure, it's quite interesting, but it's time-saving if you know that it's older and you don't have to reread it.
karzeem 16y ago
As one of the maligned "people with laptops", I often wonder how much I'm expected to spend. What's the expected $/hour you should drop if you spend all day working in a cafe?
- hugh3 16y ago
  My logic is that I can stay as long as it takes me to finish what I'm eating and drinking, and maybe a few minutes longer. If I'm working on my laptop or reading a book then I'll stretch it out a bit, but it's not really possible to make a cup of coffee last more than twenty minutes. I can't possibly imagine eating and drinking enough to justify my presence in a cafe for an entire day.
  - drunkpotato 16y ago
    What leads you to that logic? Why do you need to justify your presence?
    - charleso 16y ago
      Because Hugh would be denying the café revenue if he occupied the table without a purchase or 'nursed' a coffee for an unreasonably long period of time. Each table needs to earn $n each hour to keep the place in business. If you enjoy your neighbourhood café, you should do your part to add to that revenue as much as possible while you enjoy their services.
      - matwood 16y ago
        A coffee shop isn't a sit down restaurant so $/table/hour isn't a very good metric. A friend of mine owns a coffee shop and he's told me that most of his business is walk in and outs. He doesn't mind if people buy a single drink and hang out for a few hours (IIRC he said 1 drink/2 hours and he comes out ahead). He even has one room that groups can 'reserve' for an hour or two if they want to meet in a more private setting. Keep in mind this is a very local shop with great coffee, and he runs it with 2 other employees. His biggest complaint/cost/profit issue is the price of milk and how much is used in a latte.
ancornwell 16y ago
"The most dangerous species of owner ... is the one who gets into the business for love." That is a powerful quote.
- jkahn 16y ago
  I think that's the real message of the article. I don't think it's about the coffee market in NY, or in general - it's about making sure you think and measure before you leap. Starting a business is a huge deal and consumes huge amounts of your time. If the sums don't add up - that is, you're not going to be profitable unless you work as slave-labour in your own business - maybe you shouldn't do it. I think this is a trap that many educated people fall into that don't have direct business (or time billing) experience. This is applicable to tech as well - if you build a product, sell it super cheap (say, software @ $20 per year), and it takes around 1 hour per year in technical support per user (per year), you need to consider that when pricing. It may not be worth it. Or you may just have your pricing or business model wrong.
- ahoyhere 16y ago
  "The most dangerous species of owner ... is the one who gets into the business for love... and pretends that love means total ignorance is okay... who refuses to confront the reality of business, and when he/she can no longer ignore that reality, refuses to come up with problem-solving approaches other than whining or shutting down." There, I fixed that for him.
al3x 16y ago
Most coffee shops fail at their primary function: serving a quality cup of coffee. In years and years of being cafe-obsessed, I've never seen shop fail that went the extra mile with their drinks, whether by roasting their own beans, training their baristas to competitive levels, or simply buying good beans, milk, and machines. I read this article some time ago, and didn't see the obsession with coffee shine through. Without that passion, a cafe will be replaced by the next hip or quaint establishment that pops up to cater to idling customers.
- davidmurphy 16y ago
  Intelligensia (http://www.intelligentsiacoffee.com/ http://www.intelligentsiacoffee.com/) seems to put all the focus on the product.
  - zaphar 16y ago
    That focus shows too, I literally can't walk past them without stopping in for a cup. The baristas know me by name. Even after a two week absence due to traveling they still had my order brewing as I walked through the door and ready immediately after I paid.
- stephencelis 16y ago
  Most businesses "fail" at their primary function if "quality" is the measure. The exceptions are there, but the widespread rule is surprising. I've unfortunately seen shops fail that went the extra mile, but it's always been a matter of location and marketing.
- happybuy 16y ago
  Actually I think the primary function of most coffee shops would be, to create a 'third place' - http://en.wikipedia.org/wiki/Third_place http://en.wikipedia.org/wiki/Third_place This is the strategy that the Apple Stores, Starbucks and lots of other organisations attempt to create. If this is successfully achieved, the actual quality of the cup of coffee would be less important. I think the majority of us, as consumers, like to think that we are completely rational and would frequent a coffee shop based upon the quality of the coffee. However the environment/branding of the shop, locality and the type of customers who are present - is in my opinion - more likely to increase sales once a minimum standard of coffee is achieved.
wyclif 16y ago
This is an old dupe, but I think it's worth revisiting for the "cautionary tale" aspect: this is the link I send to friends who mention wanting to "open a little coffee shop somewhere."
lars512 16y ago
No doubt New York's a very different beast, but in Melbourne it seems cafes are still bursting out everywhere (and have been for years). This is even more amazing given how many still serve bad coffee. It seems to remain profitable here, whereas the dream of running a restaurant is what seems to drive more people to ruin. A local celebrity chef started a new restaurant with another talented chef partner. Six months later, the partner left to run a cafe, since the work and stress involved in making paninis and light meals for people was far less than a gourmet restaurant, and the payoff better.
- com 16y ago
  Um, you need to get out of Melbourne. I am always amazed at how universally excellent espresso is there: beautifully roasted, excellently barista'd and absolutely no milk or sugar required while still being dark, thick and tasty. Compare to Sydney or most of Europe (or much of North America). Cafés in North America often run to chocolate muffins and energy bars, but the whole Australian café provision of light warm meals is fairly alien there (see the success of Pret in NYC as a business with a very different value proposition to most other chains). I would imagine that the additional profitability from this cultural difference might be one of the reasons of the success of cafés where you are; that and the fact that the inner core of Melbourne has 2m+ residents and is fairly walkable which leads to a different kind of use of these kinds of spaces.
brudgers 16y ago
$18k a month in revenue with 15% takehome is only $2700 a month. For a couple. On the Lower East Side. The problem was not people with laptops. It was a business without a pro forma.

82 points by ca98am79 16y ago

hugh3 16y ago

Interesting article about a failed business, marred only slightly by the way the author wants to write off his own bad business decisions as an inevitable problem with the coffeehouse business model. Of course it must be possible to make a lot of money with a coffeehouse; Starbucks frinstance does just great, and plenty of non-chain places must be making a lot of money too. Many of the problems he had just sound like he didn't have enough time to optimize his business model... if he was throwing half his croissants away then maybe he should have been buying fewer croissants? And do you really need a guy in the kitchen getting paid to whip up the occasional crepe when coffee is where you're gonna make the big bucks?

vl 16y ago
He obviously tried to create not a standard a-la starbucks coffee shop, but a more luxury experience. It seems he had to revert to non-cozy and fast or to charge premium prices and try to become "fashionable" place.
- frossie 16y ago
  The real issue seems to be that he tried to create a "family restaurant" operation without the "family" (in this case him and his wife) wanting to work in the business: My wife Lily and I could work there, full-time, save on the payroll, and gerrymander the rest of the budget to allow for lower sales. Guess what, dear dreamers? The psychological gap between working in a cafe because it's fun and romantic and doing the exact same thing because you have to is enormous In other words, he had the luxury of choice. And he chose not to.
  - jaxn 16y ago
    I wish I could upvote this more than once.
- ahoyhere 16y ago
  That's a false dichotomy. There are many spots between those two extremes where he could have made a lot more money.

showerst 16y ago

Although the author barely touched on it, I used to have a friend who owned a coffee shop and told that there's always an interesting push-pull. People like a coffee shop for two reasons: Great atmosphere (most important), and great coffee. Great atmosphere encourages people to linger on that $5 ticket for hours, which is a black hole for money, but if your atmosphere sucks you'll never get the buzz and reputation to keep the long lines of to-go in the mornings that you need to survive. Great coffee is hard to find, and requires competent baristas, which are a hard to find/train outside of big cities. I'm a huge coffee shop nut, but from a business perspective it seems crazy. As an interesting aside, another slate article noted once that indie coffee shops that have a starbucks open nearby actually do _better_ afterwards on average.

patio11 16y ago
I think location is likely to be more important than either. My possible bias is that my father works in real estate and he thinks Starbucks shares the crown with Wallgreens as being to real estate siting what Wikipedia is to SEO. I have about five coffee shops I frequent in my small town. The best location in town is in the station, and it is physically impossible for them to avoid selling $1k every weekday morning. The best coffee was at my favorite Sunday hangout and they were about as easy to get to as Customer Service at Google. Three coffee shops have thought they could make that location work.
- jamesbritt 16y ago
  " ... and they were about as easy to get to as Customer Service at Google." :) Thank you for that.
- kngspook 16y ago
  "...as easy to get to as Customer Service at Google." I love that analogy. =) (And I've tried to get to Google Customer Support before on a couple of occasions too.)
thaumaturgy 16y ago
> Great atmosphere encourages people to linger on that $5 ticket for hours, which is a black hole for money... This is a problem that restaurants and other places solved a long time ago. I don't get why coffee shops never seem to do this: train your staff to make the rounds when they're not busy. Stop by any table with an empty cup, pick it up quietly, smile, gently ask the customer if they'd like anything else. (Don't nag or harangue the customer or ask the same one more than once an hour.) Coffee shops have a problem with customers coming in and making themselves at home because they aren't being run like a business: there's very little staff-customer interaction. People come in, order (maybe), find a corner, and park there on the wifi for two hours. Shops respond to this by making customers come up to the counter to get a wep key, but that's the wrong way to do it. Instead, invite people in, invite them to stay, and ask them once in a while if you can bring them anything. And as an added bonus, your staff will make a little extra in tips, too.

tokenadult 16y ago

2005.

algorias 16y ago
So What? Does that make it obsolete? I guess indicating the year is important for older tech articles, but definitely irrelevant in this case.
- prawn 16y ago
  Doesn't bother me much, but it might be helpful for people who can remember reading an article on this topic a few years back, but assumed this might be another take on the same topic?
- die_sekte 16y ago
  This particular articles pops up every couple of months. Sure, it's quite interesting, but it's time-saving if you know that it's older and you don't have to reread it.

karzeem 16y ago

As one of the maligned "people with laptops", I often wonder how much I'm expected to spend. What's the expected $/hour you should drop if you spend all day working in a cafe?

hugh3 16y ago
My logic is that I can stay as long as it takes me to finish what I'm eating and drinking, and maybe a few minutes longer. If I'm working on my laptop or reading a book then I'll stretch it out a bit, but it's not really possible to make a cup of coffee last more than twenty minutes. I can't possibly imagine eating and drinking enough to justify my presence in a cafe for an entire day.
- drunkpotato 16y ago
  What leads you to that logic? Why do you need to justify your presence?
  - charleso 16y ago
    Because Hugh would be denying the café revenue if he occupied the table without a purchase or 'nursed' a coffee for an unreasonably long period of time. Each table needs to earn $n each hour to keep the place in business. If you enjoy your neighbourhood café, you should do your part to add to that revenue as much as possible while you enjoy their services.
    - matwood 16y ago
      A coffee shop isn't a sit down restaurant so $/table/hour isn't a very good metric. A friend of mine owns a coffee shop and he's told me that most of his business is walk in and outs. He doesn't mind if people buy a single drink and hang out for a few hours (IIRC he said 1 drink/2 hours and he comes out ahead). He even has one room that groups can 'reserve' for an hour or two if they want to meet in a more private setting. Keep in mind this is a very local shop with great coffee, and he runs it with 2 other employees. His biggest complaint/cost/profit issue is the price of milk and how much is used in a latte.

ancornwell 16y ago

"The most dangerous species of owner ... is the one who gets into the business for love." That is a powerful quote.

jkahn 16y ago
I think that's the real message of the article. I don't think it's about the coffee market in NY, or in general - it's about making sure you think and measure before you leap. Starting a business is a huge deal and consumes huge amounts of your time. If the sums don't add up - that is, you're not going to be profitable unless you work as slave-labour in your own business - maybe you shouldn't do it. I think this is a trap that many educated people fall into that don't have direct business (or time billing) experience. This is applicable to tech as well - if you build a product, sell it super cheap (say, software @ $20 per year), and it takes around 1 hour per year in technical support per user (per year), you need to consider that when pricing. It may not be worth it. Or you may just have your pricing or business model wrong.
ahoyhere 16y ago
"The most dangerous species of owner ... is the one who gets into the business for love... and pretends that love means total ignorance is okay... who refuses to confront the reality of business, and when he/she can no longer ignore that reality, refuses to come up with problem-solving approaches other than whining or shutting down." There, I fixed that for him.

al3x 16y ago

Most coffee shops fail at their primary function: serving a quality cup of coffee. In years and years of being cafe-obsessed, I've never seen shop fail that went the extra mile with their drinks, whether by roasting their own beans, training their baristas to competitive levels, or simply buying good beans, milk, and machines. I read this article some time ago, and didn't see the obsession with coffee shine through. Without that passion, a cafe will be replaced by the next hip or quaint establishment that pops up to cater to idling customers.

davidmurphy 16y ago
Intelligensia (http://www.intelligentsiacoffee.com/ http://www.intelligentsiacoffee.com/) seems to put all the focus on the product.
- zaphar 16y ago
  That focus shows too, I literally can't walk past them without stopping in for a cup. The baristas know me by name. Even after a two week absence due to traveling they still had my order brewing as I walked through the door and ready immediately after I paid.
stephencelis 16y ago
Most businesses "fail" at their primary function if "quality" is the measure. The exceptions are there, but the widespread rule is surprising. I've unfortunately seen shops fail that went the extra mile, but it's always been a matter of location and marketing.
happybuy 16y ago
Actually I think the primary function of most coffee shops would be, to create a 'third place' - http://en.wikipedia.org/wiki/Third_place http://en.wikipedia.org/wiki/Third_place This is the strategy that the Apple Stores, Starbucks and lots of other organisations attempt to create. If this is successfully achieved, the actual quality of the cup of coffee would be less important. I think the majority of us, as consumers, like to think that we are completely rational and would frequent a coffee shop based upon the quality of the coffee. However the environment/branding of the shop, locality and the type of customers who are present - is in my opinion - more likely to increase sales once a minimum standard of coffee is achieved.

wyclif 16y ago

This is an old dupe, but I think it's worth revisiting for the "cautionary tale" aspect: this is the link I send to friends who mention wanting to "open a little coffee shop somewhere."

lars512 16y ago

No doubt New York's a very different beast, but in Melbourne it seems cafes are still bursting out everywhere (and have been for years). This is even more amazing given how many still serve bad coffee. It seems to remain profitable here, whereas the dream of running a restaurant is what seems to drive more people to ruin. A local celebrity chef started a new restaurant with another talented chef partner. Six months later, the partner left to run a cafe, since the work and stress involved in making paninis and light meals for people was far less than a gourmet restaurant, and the payoff better.

com 16y ago
Um, you need to get out of Melbourne. I am always amazed at how universally excellent espresso is there: beautifully roasted, excellently barista'd and absolutely no milk or sugar required while still being dark, thick and tasty. Compare to Sydney or most of Europe (or much of North America). Cafés in North America often run to chocolate muffins and energy bars, but the whole Australian café provision of light warm meals is fairly alien there (see the success of Pret in NYC as a business with a very different value proposition to most other chains). I would imagine that the additional profitability from this cultural difference might be one of the reasons of the success of cafés where you are; that and the fact that the inner core of Melbourne has 2m+ residents and is fairly walkable which leads to a different kind of use of these kinds of spaces.

brudgers 16y ago

$18k a month in revenue with 15% takehome is only $2700 a month. For a couple. On the Lower East Side. The problem was not people with laptops. It was a business without a pro forma.