Franchise vs. Indie


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Jul 23, 2006
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I have been researching franchise coffee vs. independent. Does anyone have any input? I'm leaning toward franchise. The fee upfront will save on the long run mistake that could become costly. I want someone to take a lot of the stress off of me. I called around a bit and they know what they're doing it seems. i'll gladly take any suggestions or input.
go indie, in the coffee house business no coffee franchise has name recognition except dunkin and starbucks enough to draw customers or a proprietory products or business model. Franchise do work in some businesses such as subway etc....

You can take that extra 100k to 200k and spend it in the neighborhood where you open and build your customer base.
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But then you see so many of the indies struggle out there. I think if all the indies band together and get a name then there will be a force to reckon with. Maybe it is wishful think, huh?
go franchise. there is a reason they are franchised...most of them....because they work. 90% of independed small businesses fail in the first five years. I bet anything that coffee houses are even higher. Over 80% of franshises succeed over five years. You make up the higher costs of franchising with the lower cost of products that are negotiated with corporate contracts. There are many advantages in joining a team of others in your same situation.
I am sorry Brinkjr, but I disagree with you. The world green coffee market is not very negotiable. The price point for high end Arabica green coffee is based on consumer demand and not corporate buying power. Starbucks may buy all most of the coffee in a specific growing region, but they do not franchise!!! All of the franchised coffee companies pay within pennies of each other for green coffee. The biggest bang for the buck with franchised coffee houses is site work and start up. You would be better off paying a company like CafeMakers a onetime fee to start a coffee house than to pay a franchise company a fee for the life of your shop.
My 2 cents!!
I don't see why you couldn't be an apprentice of sorts for someone in a neighboring town whom you won't be competing with. That way, you could learn the drinks, what the place is doing right and wrong, not to mention perhaps getting a hand on the managing of the books and people to some degree. All this kind of stuff is what you could be paid for, or at least negotiated for on your part. This way, you would save dollars in "consulting" fees where they would teach you how to run the machines, not to mention franchise consulting where your set up and other stuff like that will be judged, and then approved by someone else. Going independent also allows you to tweak a light menu that you have. If you are in a franchise coffee shop and it's -20 outside, you can't just decide to serve soup. I know of a few people locked into this predicament. They can't serve what they want because the majority of share holders in San Jose or Long Beach see no need for clam chowder soup in the chain. The guy in Bismarck and Duluth vehemently disagree, but they are smaller in nubmer and hence, always lose out.

There are definite advantages and disadvantages whatever you do, I just believe that in my geographical area, going independent will be more cost efficient and beneficial. If I were in a larger metropolan area, going indie might not be the most intelligent thing to do. Just some food for thought.
Hey Jug-A-Joe:

In either case you are going to have to put in a lot of work. Keep in mind that if you franchine, that does not mean you will magically be successful just because you carry their name and products. You will be expected to keep up the numbers or you can be in danger of loosing the franchise. Basically you will be buying a job, whereas, being an independent you will will be making your own decisions. Everything from doing your own research from the ground up, unless you are purchasing an existing location that is already doing a good business. In this case it is a good idea to employ a consultant or someone that can evaluate the business from a third party view. But as I said earlier, in either case you are going to have to put in the work.

Hi Jug-A-Joe,

My opinion is go Indie all the way. I have investigated franchise opportunities and the costs are high with minimal reduction in risk. The coffee world is really too diverse to bank on a franchise, and the fees and other costs involved are prohibitive - if you fail in your location choice for some reason, you have so much money in it that you really lose big time. The franchisor is in it for the money, and they want to sell you their proprietary "set-up" as well as their branded (expensive) products. I agree with others who worry about the lack of freedom to try changes if and when they seem warranted in your market. I am building an independent espresso bar now and even with major reconstruction and nice finishes I am looking at at least 100K less than a franchise. This means fewer years till I can operate in the black. It is always a gamble, mind you, but I think the coffee franchises are mainly offering training ad guidance you can obtain elsewhere from qualified consultants. You do need a plan to do well, but you don't need a franchise. Just my opinion for what it's worth. :)

There is another option and that is licensing. Licensing is kind of between being independent and a franchisee; it depends on the licensing contract. You essentially are licensing their name and system. But the best part is you have much more flexibility compared to franchising. Typically they do not want you to change any core recipes or products but you can add your own products to meet local demand.

Their are advantages and disadvantages to all three systems: independent, licensing, and franchising. It is impossible to say which is better. It really depends on the system, your market, but most of all YOU! Are you the entreprenuer type that is passionate about coffee and are willing to take the time to learn all various aspects of the business? Or do you just have money and are willing to trust someone else to build a system for you to manage?
INDIE! lol! Really, it's all in what you want, which is what has been said. Franchise, although to some a 'proven' way to do business has so many restrictions. I myself, like the idea of having a different blend each day along with a house signature, and others opportunities to make your store a rich and diverse environment. Only as a for instance, let's say your favorite color is Red, and you want to paint your store red. I don't think Starbucks is going to allow that. It's just so restricting. But, if you're in it to make money, and that's all your worried about, then Franchise is alright. Essesstially you pay the fee, and they do the rest. You have an accountant, and they tell you what your profit is, and that's it. It sounds easy, although, it can also be decieving...