Dairy Queen, Orange Julius and Cinnabon DESTROYING my business.

[RenaMariesCoffees]

Hey guys...
I am just looking for some advice.

I inherited a coffee shop, I have been running it for 4 months now.
It is in a mall, and we have HORRIBLE competition.

As the Title suggest, we have a Cinnabon next to us and a DQ/OJ across from us.
For example; We will be dead for 2 hours but DQ/OJ will be busy the whole time.

I know it is about adverting but I do not have a lot of working capital.
We have smoothies and all... but I guess it has a lot to do with name recognition as well.

Our prices are moderate, cheaper than most coffee shop (on top of it all we are an organic shop), cheaper than SB, which is on the other side of the mall.

Should I price match our frappe's against DQ and Cinnabon and price match OJ smoothies?


Thanks,
a seriously discouraged cafe owner.

 

[eldub]

How did you inherit the shop?

How long has it not been doing well?

Maybe start giving out free samples in front of your shop so the folks walking the mall can see what they are missing?

 

[PinkRose]

Hello RenaMariesCoffees,

Welcome to the Coffee Forums!

Try to picture yourself in the shoes of a potential customer who is craving something cold and delicious and who has a limited amount of money to spend.

Would you be drawn into a name-brand place, or would you tempt fate and walk into a lesser known place (yours)? Would you risk spending your money on a possible disappointment, or go with a tried and true old favorite?

I like the free sample idea (little 1 ounce cups). If the mall allows it, you could set up a table in front of your shop and give out free samples and maybe a coupon for 50% off their next drink. Or you could have someone stand outside your shop with a tray of samples. If your prices are competitive with the other places, and if your product is just as good, you'll have a fighting chance of snagging some new customers.

Rose

 

[CoffeeJunky]

This actually happened to my friend. And I agree with Rose about giving samples and letting people try your product. That should have been done way before.

This is the story; My friend(Steve) purchased small coffee shop in very large mall location doing about 300,000 dollars in sales. The price of the shop was way lower then normal sale price. He actually did very good business for about 6 months until two business came into the mall. Chickfilet and Cinnabon. His sales dropped about 30 percent in first few weeks. Lost most of the his breakfast business since Chickfilet offered cheap combo breakfast to mall employee.

I guess his previous owner knew this was coming and sold the business at price you could not resist. Steve has two options, close up and move on or invest more cash and try to fight it.
He decided to take on about 100,000 dollars loan from the bank and about 30,000 from his life saving and decided to fight. He brought different product to try and sell. He tried the onsight roasting. He even purchased deep fryer and oven to offer freshly baked goods. And none of them worked. And as a independent coffee shop owner, he didn't have any chance to compete with national brand. Now he is in even deeper hole since he has loan he took on that needed monthly payment he didn't have. So he decided to try his final option. BE THE NATIONAL BRAND. He talk to his landlord and started to offer Starbucks coffee. I guess you can purchase the beans from Startbucks and offer with big starbucks sign. This has been about 3 years and now Cinnabon has closed and his sales rose around 45 percent to about 420,000 dollars. His COG is about 30 percent to 32 percent because of the higher coffee price but he is doing ok now. I don't know how long this will last since there is no Starbucks coffee in this mall and I think its just matter of time before they open one and take most of his business but as of now he is paying down his loan.

Good luck with your venture.

 

[PinkRose]

Was the shop not doing well when you inherited it? Did something (in the past) happen to give it a not-so-good reputation? For example a grumpy owner or employees, or less than quality products?

Are your drink prices considerably higher than Dairy Queen, Orange Julius and Cinnabon? They each have their own flair...ice cream, cinnamon buns, etc. Have you paid attention to what people have in their hands when they're walking out of those places? Do you offer anything that's different?

You may want to consider having an "Under New Management" special promotion to get people's attention, even if it's just a huge sign and balloons along with the free samples and coupons.

 

[CoffeeJunky]

There is a coffee chain in Michigan called "BigBee Coffee" (they used to be called "Beaners" and they changed their name couple of years ago) and they serve one of the worst coffee in State of Michigan.
But they are growing faster then any coffee shop in Michigan.
They just opened about 5 different locations in last few months. When they open new location, they send out 50% off coupon for their biggest size espresso base drinks which cost around 5 dollars. When I was there to use their internet to check my email, and they served over 40 customers around 4 pm on Wednesdays afternoon. Of course they all had some type of coupon or discount card.

 

[RenaMariesCoffees]

How did you inherit the shop?

How long has it not been doing well?

Maybe start giving out free samples in front of your shop so the folks walking the mall can see what they are missing?

Apparently 15 years.
It had been a Gloria Jeans for 15 years, switched owners 7 times.... So desperate need of serious change, so I went non-franchise, all organic. Maybe my niche is in the wrong place, for crying out loud all we sell is sugar loaded abominations to coffee-frappes. We even have people who ask us what flavor is organic.
My mom had had it for 4 months, came down with Leukemia, handed me the keys and said, have fun.

We have tried samples ONCE, we saw no return. People take and go never come back, we even have people who come in the store and ask if we have sample today of a Particular item (are you doing sample of so and so today), just so they do not have to buy it. People got spoiled on GJ's every weekend sample and expect our product to be GJS, even with the name decor change ect.
Also we had tried coupons, B1G1, handed out over 300, saw 2 (on a b1g1?!)

I guess everyone has a point with the safety net purchasing.
But how do I over come the catty ladies who work at the department stores who talk trash to everyone about how my coffee is no good compared to GJ's?
Which is untrue non the less, I have had critical "connoisseurs" of the sorts try out products to make sure on quality. But it is all relative to what you get used to.

Just to give you guys a better example of the issues I faced with the human psych; When I first took over, I continued to used all the GJ products, same recipes, same employees ect., until we ran out of the products. If anyone is familiar with GJs products they have these frappes in which they called chillers, the first weekend I took over we made it all the same, same ingredients, verbatim. We let the customers know of the name change and soon to come product change. We had over a 35% return rate that one Saturday, all claiming it did not taste the same and it was not right, when nothing had actually changed except the name of the store thus far.

Not quite sure where these lost customers went, except SBs at that point.
I had even been yelled at several times about how I ruined their day, that they hope we fail so GJs could come back. Plus more unmentionables.
It has really be a rough ride.

We have the market for the hot drinks, no one else but SB has specialty espresso in the mall. But we do not own the market of cold, blended drinks, and it is becoming summer.
I had added smoothies to our menu to help counter OJ, but no help really, people do not read our advertisements. I mean we even ran a day special, EVERYONE coupon or not, could B1G1 on any drinks, we had an advertisement and all visible for all walking traffic to see. No improvement on sales, only about 3 inquiries about it all day.

I am in a very difficult place, and by location I mean the south.

 

[RenaMariesCoffees]

Yes yes and yes.
It has changed hands 7 times.

And the recent change from Gjs upstairs to Gjs downstairs, quality went down.
When downstairs they actually had to close due to complications for cutting with costco coffees.
Also not being owner operated, the store was ran by employees and a mess, which some really BAD employees, (whom are no longer with us).

I watch like a hawk. Cinnabon honestly is not the issue, people getting cinnbon are NOT gunna consider a muffin. The only issue I have with Cinnabon is there free coffee refills which took away almost all my mall employee traffic, even cinnbon workers wont drink it because it is that bad, but dollars ad up. I cant offer free refills, cinnabon has there cinnabons to sell, but coffee is my bread and butter.
DQ has the ice cream, which we do not offer. And OJ has well... Orange Julises and smoothie things.

Like in the earlier post, I have tried to battle the OJ with smoothies and the advertisements of all frappes available coffee free, but again, NO ONE READS.

I feel as if we are short of needing to have some accost people outside our store like a Jehovah witness. Do you have a minuet to talk about coffee free options in coffee shops?


Also how does everyone else handle the snide use of Tall Venti and Grande?
In all honestly im tired of it, I understand people think SB is the only cafe in existence and that anything you learn there is apparently correct... but wtf? Venti means 20 in Italian... but their venti is 24oz?

 

[eldub]

Seven owners in 15 years? No offense, but it sounds like your mom made a serious mistake when she bought the place.

 

[John P]

First: Is it salvageable? Yes. With a VERY strong injection of cash, strategic marketing, positioning, and patience over a 6 month to 1 year period minimum. And all facets must be understood clearly and executed perfectly. But it can be done.

A quick breakdown of an example of the minimum you would need to do.

Limit your choices. Have less sizes, be more focused. Raise the quality of what you are doing.
Be at least .25 to .50 more per drink on avg than the competitors.
No bulk auto brewed coffee. Use a full immersion brew method and brew "Press" in quantity.
Highlight coffees, farms, and educate. Showcase roast dates, freshness, etc.
Have beans for sale. NEVER sell ground coffee.
S-L-O-W customers down, it's not about the speed, it's about the wait.
Be the best within a ten mile radius. Know this as a certainty, not as an opinion.

_______________________________________________________________________

A more likely reality is a little less rosy.

The blunt truth is you made a poor decision. Cut your losses.

Unless you are a national chain OR have built a very solid reputation first, you cannot compete with them on their turf. Mall people are not looking for something of quality, and this leads to a host of problems. For coffee seeking mall patrons, their choice is more likely to come from: Name Recognition......Convenience................Price...............Quality (sometimes, as a false assumption, this is connected to Name Recognition).


Name Recognition? Probably not.

Convenience? Maybe. But I would venture to guess based both on specific location in the mall, potential customer familiarity with the menu and training/efficiency of staff, that while you are convenient, the others are more convenient.

Price? To actually be seen as better you have to charge more. Price is rarely a factor. If you charge less, you are seen as inferior, not as a better deal. And you can't afford to charge the same or less because you are not buying the quantity the chains are therefore you cannot maintain healthy margins at their price point. The only way you can is to use a decidedly inferior product.

Quality? Certainly you can compete on quality, but in that setting, especially as a quick service model where it's paper over ceramic and latte over macchiatto (the real one) and espresso, again, in that setting it's a moot asset.

What I can tell you is that from what you've written, you did not understand the dynamics of everything before choosing this location. So before you make any further decisions, do your homework. This is something you failed to do the first time. If it stings a little, that's ok. Lesson learned. Like I mentioned first, it is a redeemable situation, but you need the expertise and the capital to pull it off.

Best of luck to you.

 

[John P]

Oh,

And I don't believe in free samples.
If you want to be a fast food franchise, buy one.

 

[eldub]

John:

The OP didn't choose this location. Her mother did four months before she got sick. The op inherited this situation.

I really don't think a mall in (most of) the south is a place to sell organic coffee. A large portion of folks in our area who care about organics want nothing to do with malls.

 

[RenaMariesCoffees]

John:

The OP didn't choose this location. Her mother did four months before she got sick. The op inherited this situation.

Sigh... thank you.

 

[John P]

!! My mistake! OP and eldub, point is understood.

But that doesn't change the situation. Regardless of whose decision it was, it was clearly the wrong one.

The best answer is whatever leaves you the most whole with the least amount of hair pulling.

All you can sell is the value of the location based on potential.


I would amend to say you should contact a professional broker in your area, let them know the facts, and see if they can work their magic. You need an impassionate and skilled professional to get it done. You should be nowhere near it, except to give your signature when needed. You never know, you might find a hell of a salesman.

Again, best of luck.

 

[RenaMariesCoffees]

!! My mistake! OP and eldub, point is understood.

But that doesn't change the situation. Regardless of whose decision it was, it was clearly the wrong one.

The best answer is whatever leaves you the most whole with the least amount of hair pulling.

All you can sell is the value of the location based on potential.


I would amend to say you should contact a professional broker in your area, let them know the facts, and see if they can work their magic. You need an impassionate and skilled professional to get it done. You should be nowhere near it, except to give your signature when needed. You never know, you might find a hell of a salesman.

Again, best of luck.

I am not trying to sell.
I enjoy what I do minus the issues.