(Anyone who is here was there – Atlantic City Coffee Fest), so
e-mail me with questions or call me
at 800-652-5282. I have lots of experience at multiple stores and
will gladly spend the time with you at no charge.) If you want a word
document, e-mail me and I will send it to you.
Bob Johnson
Good
Morning All, Thank David Heilbraun for a good show again.
(For those who wrote down the notes on the wall: Tinstaafl means: there
is no such thing as a free lunch. ETDBW means: easy to do business
with.)
Hope you all had a great cup of coffee this morning.
See David’s Story in the local paper:
As David is quoted in the paper, the East Coast is tough…. Not just for
shows, but for finding a better cup of coffee.
As background, I have been in the coffee business:
Since 1990 at the Seattle Show
Really since 1950 with parents at A and P where my job was to get the
Eight O'clock Coffee and grind it. I have a vivid memory of the
grinder by the check out count. The aroma is still in my memory
banks.
I have been very serious about the coffee business since 1988: I walked
into a Barnies Coffee and Tea franchise in the Galleria Mall in
Philadelphia and knew instantly that this was a business for me.
The aroma, and the role coffee plays in American like were instantly
apparent.
Since then the Specialty Coffee business has continued to get better.
More stores, more coffee, more quality, and more conversions from the
old commercial grades to the new specialty grades.
Our challenge (Kaffe Magnum Opus and you are retailers) is to make
East Coast as good as the West Coast. (More sites, more
conversions and better quality.)
You are all here:
Atlantic City
9:10 AM
Topic is Second Store or Multi Store
You must be serious or you would be in bed sleeping In.
(At this point the audience was polled and there were more people
just going into the business than with existing stores, so I changed the
tone of my remarks a bit. Latter, as more people arrived, the mix
returned to more people interested in second stores – so I changed the
tone back).
For those of you with existing successful stores, you know how to do
it. You have done it, so by all means please do it again. If
you can repeat your success you will learn the management techniques I
will speak about latter (that are necessary to be successful in a second
and multi store operation). So, by any and all means, get to it –
open the second store.
Expand, have fun – bring good coffee to the east coast.
Lets take on Starbucks, WaWa (explain WaWa – they are a local company
that has a broad appeal to the largely blue collar market that dominates
the New Jersey, Maryland, Delaware and Pennsylvania area)
It’s not that big a deal. You have a successful first store.
Repeat it.
Get to it. Go do it.
Reminder: (No matter where I go or what I speak about I like to
remind the audience that brewing strong coffee at or near the SCAA
recommended weights will hasten there success and build body memory in
customers. Brew Strong Coffee - 3 or more ounces to a pot.
To be successful in Business
You have to know yourself
You have to have your own balance sheet
-
Personal Assets, Personal Liabilities
-
Energy, emotional currency, time, money
Know who you are (the question is: do you have the
assets needed to open and operate successfully a second store.
Second stores add measurably to the complexity of business management)
Do a Woody Allen: he was 17 years in psychoanalysis.
Are You:
- Hippies or old hippies
- Entertainers
- Good with people?
- Financially sound?
- Risk takers?
- Work hard?
Go home and write a one-page analysis of yourself.
Can you, or, do you want to go for Gold Ring-
Expand?
What keeps you awake at night?
What are you afraid of?
Can you tame these tigers? Can you harness the energy to build a
better coffee business?
I bet you can. If you are here this morning, and you have a
successful first store, then you have basis to bring good things to the
coffee business.
You are here, so I would think that many of you are concerned –
trying to decide to open a second store or not. (Concern or anxiety)
- I remember 1991 and my
first store
- Signed a lease on Nov 4th – opened on November 14.
- Anxious – Fearful
- Are they going to like me, like the store?
- Will they buy? Lattees? (make a joke mispronounce)
- California Visitor – told us how to make drinks.
- Frank Amari – Hey you got brown sugar?
You must have your own stories about worry in retail.
And now you are going to do it again? You must be courageous.
No doubt you are successful and you love the business.
I love this business, I work at it all the time, and I love not just the
coffee aspect, but also the business aspect. I love business.
It is what I do, and if you have this ingredient, go to it. Open.
Just so you know: in my opinion the second store is harder than
the first. But the third to the 20th are easy. The 50th you
may not know actually opened if that is where you want to go.
I am proud to be here with you entrepreneurs.
- Distinguished
- Accomplished Group
- Successful stores opened
- Now adding more
- Movers
- Shakers
- Builders
- Creators
CEO’s – owners- you make today an easier task for me because in a
sense you only have to repeat what you have done.
All have different styles:
- Some are type A’s - Some are type B’s
- Some are delegator’s – some are do it yourselfers
- Some are take charge people – some are passive
These different styles make my job a bit harder:
Why? You will hear what I say in the context of your style.
I ask that you listen today. Become a student. Contribute.
Break some of your habits. Listen.
Talk with:
- Vendors
- Suppliers
- Sales People
- Teachers
Examples:
- Bubble Milk Tea? What the heck is that?
Stay current.
- Fair Trade Coffee? Stay current, expand your line or not.
- Bird Friendly Coffee? Stay current.
- Organic Coffee? Stay current.
- All Social Spending – yes it goes on:
DINKS (double income no kids – demographic)
\Web sites? Have one yet? The world has changed
enormously.
Business strategy – ever change it?
In my case:
Banker for 23 years – decided to change.
Then my plan was:
- In one mall: both an ice cream store and a
coffee store so I could move people around seasonally.
- Then I moved to coffee franchisers
-
Beanery for 8 stores
-
Barnies for 8 stores
Then retail on my own
Then wholesale Stay current and be flexible. Change will
happen naturally.
Must be flexible
Old customers we met at the Beanery just Friday Evening.
Swivel Hips – dancing – moving – changing with the demands and the
business environment. Must be flexible.
1. Help you think about opening multiple stores.
Just Think about it
2. Raise some questions that you may want to consider before you open or
move on your plan.
3. Create a short list of things or items you need to be successful.
We already have a couple on the list.
a. Know yourself
b. Embrace fear
c. Be flexible and open to change
4. If we have time I will also just through out
some ideas on the different roles we have to play as leaders and
organizers of work and people.
And
no matter where I am or what I am talking about:
Rule #1: The
unwritten and unstated purpose of business is to stay in business.
Rule #2: Cash is
king. The way to stay in business is to keep cash growing.
Is your cash account growing or falling. Is it level? Are
you making money? Are you paying your bills on time? Are you
paying yourself enough?
Are you spending more than you make? Or, do you make more than you
spend?
Which brings us to growth.
Why Grow?
- Uncle Bob in the
Woodstock Flea Market at age 65. He was done growing and satisfied
with his life.
- Some people like small – manageable
- Other people like large – driven, build, create
I think growth in a natural event. It leads to good health.
Growth is healthy in people and in business.
Life Cycles
Birth
Maturity
Pass A Long
Growth extends life. Complacency – inactivity shortens it and
hastens the end of the cycle.
Before you open the second store: or continue opening more
stores – lets examine briefly your existing operation.
1. Are you happy?
2. Are you smiling?
3. Are you coping
a. With tasks? Do time cards bother you?
b. With the people?
4. Paying your bills on time?
5. Building cash account?
6. Do you cringe when the telephone rings?
7. Do you panic when you get a registered certified letter?
8. Did you pick a good location?
a. If not, you can improve this: are the
other aspects of your business still ok? If so, keep going.
9. Are your customers returning?
10. Are your sales increasing?
11. Are you building a base of customer information? Central
information file? (Mailing or direct marketing list)
12. Do you get returns?
13. Do you get complaints? A lot?
14. Are your vendors happy?
15. Is your staff happy?
16. How’s the turnover?
17. Are you happy with your hours?
Do you have excess Energy?
Do you want a bigger car? A bigger house?
Which brings us to the biggest question of all?????
- For you
- For your store
- Will your income support a second store
-
If you need $50,000 personally, and you need
$50,000 per year for the second store, it is generally better to
rely only on the existing operation to financially support the
second. Banks look at you like that for good reason: is it is
a measure of strength and far less risky if the existing operation
can pay the bills even if the second hiccups.
The net of this
is make sure you are making enough money because:
Expansion requires a strong home base.
1. Operationally
2. People wise
3. And you – can you handle more responsibility and work?
If your current store or operation is successful or is doing ok –
then I would urge you to move on and add to it. Grow.
Expand.
If you have issues with the first store, then I recommend that you fix
the things that need work, and then move to the next store.
The exception to this is that the existing store is not living up to
your expectations for uncontrollable reasons. A big employer
closes for example. This is not you or your operation. It
may be your location picking, though, so don’t ignore it, but on to the
next site. (For example, did you miss something in the press that may
have given you a heads up on the closing of the plant. I.E. in
1982 IBM introduced the PC – it was the beginning of the end of the main
frame, and the 5,000 jobs in Kingston New York where main frames were
manufactured.)
Make sure you are making enough money in store one to support store 2.
Each store may be the same.
But the big difference is the size, the intensity of your new operation.
So you will have to learn how to cope with a longer span of control –
and to manage your business through other people.
Everything is bigger:
- Payroll- taxes- over 10 people more regulation
- Things take longer to communicate, to change, to implement, so you
have to plan over longer horizons.
-
Lets say you want to change the espresso by a
few seconds, or make the compaction tighter.
-
Now you go out and do it.
-
With more stores you need to communicate with
more people and it may not get done.
- Turnover is more by
shear numbers and therefore you need to hire more
- Accounting is different and you may have a few sets of books.
- You need more money – so your relations with the banks are different.
- Quality is threatened because your supervision is different.
Sales: if a court stenographer comes in today to order 100 baskets
for all the attorneys in your market – you come out and take the order.
With two stores that person may be told you are in the other store!
Or – oh she’s not here.
You have to find a way to deal with these things.
For Sales: cell phones for easy contact. Fast cars.
Supplies: some people deliver the supplies to each store every day as a
method of keeping in contact with each store daily. So be the
delivery person.
This way you have contact, and you manage by walking around. Stay
in touch. Observe. This gives you a better feel for the
quality of the operation and the staff and it gives the staff an
opportunity to speak with you.
Size can bring economy of scale: this means lower costs because
they are spread over larger volume. But you may incur more
overheads (for example – you need a vehicle to carry supplies – so make
it your SUV).
Key elements so far:
1. Know yourself
2. Back up
3. Embrace fear
4. Be Flexible: become a student
5. Cash: make sure it is growing
6. Management by staying in contact.
More items to add to the list:
1. Set goals: repeat them daily. (more on
this in a minute)
a. For example: In three years I will have 5
stores each doing $400,000 in sales.
2. Focus your attention on a few things at a
time. Stay organized.
3. Get good bankers. There aren’t many.
Most are pretty bad today. Do your best.
4. Develop your real estate skills and take your
time. Pick you spots well.
5. Let people solve their own problems.
Don’t be a fireperson. If you let them work they will eventually
get it.
6. Pay yourself enough. Take time off.
Rest. Your business needs you rested and making good
sound
decisions.
7. Develop good coffee skills.
8. Look for allies.
9. Habits: Break the bad ones develop the good
ones. If you have a knack for picking good sites,
keep going.
If you don’t – get a good realtor.
a. If you hire well – keep hiring. If not,
get a good person who can hire.
The following sections are the ones we did not get to cover in the
session.
Set Goals – next section on this.
Write out your strategy - more
Write out your plan to implement the strategy
Have enough money
Keep it simple
Fun – Fame – or Fortune
Goals work to focus your attention on what you want to achieve. No
more than one page triple spaced. Keep it short. Cover only
1 year.
Goals help you organize the work and organize the staff to achieve the
goal.
If you set goals you will also help yourself develop the strategy to
reach the goals and plans to implement the strategy will follow
naturally.
Examples:
I will have a man on the moon by 1970. John F. Kennedy.
Simple straightforward, but incredibly bold.
I will have five stores each doing $400,000 by 2005.
My profits will be 10% to 15% of sales, after taxes.
I want to have $100,000 in personal income in three years and enough
income to support my stores. Probably need four stores.
For Kaffe Magnum Opus our goals stated in 2001.
1. To be doing 1,000,000 pounds of specialty coffee in
four years.
2. To be the specialty coffee roaster of choice to the specialty coffee
trade. This is tough to measure.
What we are trying to do is come up with items to consider when you are
considering opening more stores.
We now have a set of goals and we need to develop a strategy or a method
that will enable you to reach the goals.
Lets pick the first goal:
I will have five stores doing $400,000 by 2005
Decisions to make:
Independent or Franchise?
If Franchising to others
If Buying a franchise think about it. Are you
What kind of locations
Hub and spoke
My Home Town - saturate it, force others out
-
Mall
-
Downtown
-
Carts in Hospitals
-
Carts in Colleges
Distance from home - do you want to run a company with far flung sites?
Will we manufacture? Roast? Grow eggs?
David Bell, Harvard Professor
-
If you retail, retail
-
If you manufacture, manufacture
-
The job of the retailer is to figure out how to get the product into the
hands of the lady in the red house on the corner of Main Street.
-
Mixing retail and manufacturing invites trouble
Decide if you are going to be retail or wholesale.
1. If you don’t like sales people
2. If you don’t like to sell
3. Stay retail
Elements to consider: Delivery, timing, service
In wholesale: you go to them. You seek them out for sales; deliver
to them, so distribution is important, as is quality and production
expertise.
In retail: they come to you, your sales growth following the timing of
opening new stores. In wholesale, sales growth is very time
sensitive. It can take a long time. If you don’t take calls
from sales people, you probably won’t like wholesale.
Nothing happens unless you sell something.
A last word on growth strategies:
We have assumed that more locations are the path to follow. There
are many more options:
1. More sales to existing customers
2. More products in existing operations
3. New methods of selling – web
4. Different Price strategy to expand customer base
5. Higher volumes from existing stores.
6. Web, web, web, web, web
Example of Strategy: 2001/2002 Kaffe Magnum Opus Strategy to reach
1,000,000 pounds.
1. Move to new plant (done 9/15/2001)
2. Install new larger batch roaster enabling roast to
order (done 9-15-2001)
3. Trademark Europe (underway)
4. Expand the sales force and customer service staff
(done 2-2002)
5. Expand web presence to support the sales force
(registered 1000 domain names 2-2002)
6. Expand product line to include Chai, Fair Trade Coffee, Organics and
Natural Flavors
(done Feb through May – 2002
The two key elements of planning are arranging the tasks:
- Sequentially – which
is easier since you do one at a time. Could also be less expensive
since you
have more time to accomplish.
- Or, concurrently –
which can be maddening since it puts more demands on you – but things
happen
faster. And they are definitely more expensive.
Business plans are for you. Not for the bank.
So keep it short and sweet. No more than a page or two. You
have to do the implementation, not the bank. A couple of key items
will suffice.
I have to admit that I do most of my planning in my head, and I
constantly change it. Times change. Events change. So
I try to keep it simple.
A single line: I will open a new store on September 1, 2002 is a simple
plan (also a goal), but you know what it means. It involves a ton
of work.
So keep it simple.
Practice Planning: (all of the following activities require good
planning. Set the goal, visual the future, and put the things in
place or acquire the goods needed to reach the goal).
- Chess
- Golf
- Sailing
Commerce Bank: in our area this bank has grown to very large size very
fast. Buildings are identical. Great concept. They
have coin-counting machines in the lobby!!!!
WaWa – I mentioned before. Great concept. The stores are
identical and colorful, bright, with lots of parking. They are
good locations. Lousy coffee.
Starbucks vs Manhattan Bagel (two stores with $700,000 my friend has two
Manhattan Bagel stores each doing about $700,000, but he still worries
about the headquarter problems)
Wal Mart vs. K-mart
You can see plenty of examples of good look, fit and feel.
Visualize your own.
Develop your concept either in advance or as you go. Remember
flexibility. If you like what you do, keep it. If not – get
rid of it.
In a single community
Hub and spoke
Distance is easier
Saturation
In State – will you drive?
Find DINKS = double
income no kids buy specialty coffee
Distance
Malls
In targeted communities
Demographics dictate
10 richest communities in
America
Type of stores you want
Drinks
Beans
Food/café
Coffee Houses
Mall gift stores and
drink bars
Target sales volume
If $250,000
$500,000
$1,000,000
Take your time. Take care. This is the most important thing
you will ever do in business. Pick you spot well. Make sure
it fits your personal goals.
I can’t believe I have gotten this far and not talked about money.
Have enough. Don’t skimp. If you are disciplined, then stick
to the budget. If you are not disciplined, make sure you double
what you think you need.
Cash is king. If you run out of cash, you are in deep water.
More on money.
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