Going up against Dunkin Donuts

[Fred44]

I'm seriously contemplating opening a coffee roasting facility / coffee house in a somewhat rural region of New Jersey. The population of the town is about 8,000, pop density is 3400 sq-mile, medium household income of $60,000, 31% college educated, medium age 35 years old, most common industries are construction and manufacturing. It's a nice community, virtually no crime, good middle-class folks.

There is one Dunkin in town, and it does VERY well. You can go in there anytime of day and there are people in line. Weekday mornings, packed. Saturdays from 9-3, packed. This Dunkin draws on the working class, people on the go, that this community offers. Its the perfect people that Dunkin targets.

There are no other specialty coffee shops or roasters within 10 miles.

So, here I come with my fresh roasted coffee, home baked pastries and ice cream. No other food. I want to be known for coffee, not a deli. I'm this close to buying a small building on the main road 1/2 mile down the road from the Dunkin, traffic count is 12,000 in front of this building.

I've been researching the coffee biz since 2008, attended several coffee fests, etc. Been making my own roasts and espressos at home for years. I'm ready to rock and roll. Finally have the cash, my wife's blessing, and can get this building for a great price.

I will market my coffee as insanely fresh, compared to who knows how old Dunkin beans. My biggest obstacle will be educating people on how this is important to flavor.

So, not really sure what my question is. I guess I'm just looking for advice, or hearing other stories on how you go up against Dunkin. I think this is a totally different customer than Starbucks, working class vs. yuppie. But can the working class appreciate the difference in blah Dunkin to fresh roasted yummy-ness? I think I can put a hurtin on them, their coffee is crap, but that is my taste and opinion. I know Dunkin customers are loyal, but is it naive to think that once they try great, fresh coffee they will defect?

 

[alsterling]

If you're really ready, then you should be on the phone to a coffee consultant.......

This is not advice, but more sharing what I've learned along the way....... I'm not going to sugar coat this. As I get frustrated when someone comes to a forum thinking they will actually get "advice." Usually, you'll get fantasy input from those that have never actually walked the walk. If you're investing hard savings, for God's sake, get a business consultant who can do quantitative analysis of your business plan, and can also address the immediate market by actual quantitative analysis of those locals you think could be your clients. Forget Dunkin' as a competitor, and concentrate on their client base, but in behavioural detail; who enters their building, when they enter, how much they buy per transaction, what they're buying, etc. You're not going up against anyone..... especially this Dunkin' group. You're trying to take market share from an existing business, while also as many new consumers to your market that nobody currently services.

I firmly believe that we all need to listen to our market, and try to understand what they want. Since you're not running a technical school or extension learning center, like Phoenix University or DeVry Institute, I wouldn't worry about educating anyone right now. If it'll make you feel better to include "Fair Trade" or "Organic" in your marketing, fine. But again, I wouldn't focus on what you think is important, unless it comes directly from your marketplace in the form of documented buying behaviour. To convert your labor and cash investment into a positive return as soon as possible, concentrate on selling an appropriate product and service to your marketplace. And while that sounds straight forward enough, and if you were my nephew, I'd drag you kicking and screaming, if necessary, to a coffee business consultant in the closest major market. It'll be the best money you will invest. You've not mentioned your business background, but unless you've actually done a startup before, and know what it's like to pay that overhead, workman's comp, deal with the city, etc., while also trying to market and grow your investment, you really will need some guidance. And that's if you want to stay open past the spending of all your investment and savings.

You've pretty much described your clients, and asked a question about your clientel, and I paraphrase; "Can these people appreciate and understand how great my coffee is, compared to Dunkin?" I doubt they can, at least beyond knowing bitter and acrid versus rich and yet smooth. That's about as sophisticated as you should anticipate, in my opinion. So don't over-extract, use quality gear and the best beans and blends you can get your hands on. I'm sure you're sold on roasting in-house. But unless you've owned your own businesses before, roasting and retailing are two totally seperate operations...... if done right. If you're thinking of a small air-roaster, that's even worse in my book. Why reinvent the wheel? Hook up with some of the best roasters in the country, set your starting buying schedules, and concentrate on brewing and managing inventory. You want to sell kickass roasts? Buy from a great roaster, push their proven blends, and do what you can do best; run your retail store. Roasting should come later, when you have a handle on retailing. And even competent roasters I know have moved their roasting out of their high cost per square foot retail space, and have put it into a small industrial space, where they can more easily get in and out, and deal with their commercial customers. But that's after the retail side is working and in the black.

With all respect, and because we don't know each other, I have to remind you that asking for "advice" from a forum like this, and in my opinion, is more for those who are "speculating" on what it would be like to run a coffee shop and roastery. If you're dead serious, get on the phone and call any of the coffee consultants that advertise nationally. It's got more positive leverage on making you successful than all the tidbits you'll catch through the internet. And yes, maybe you will meet a fellow shop owner who'll share their experiences as new startups. But that leads me to my other comment to any small business venture. Find similar businesses in similar or the same market as yours that have "failed!" Talk to the owners. Find out what their regrets include. While we can learn from success, learning from failure seems to be even more pungent. A successful person can say, "I guess I was just in the right place at the right time." A thoughtful person, who's failed, will usually relate a number of mistakes that they felt led to their failure. And they're the ones that, if they try again, usually do very well.

I'm hoping that you'll contact the consultants you met at the coffee shows. You should know who they are, as they attend every Coffee Fest and the yearly SCAA big show. Good luck.....

 

[ElPugDiablo]

Don't underestimate Dunkin, it's irrelevant that you think their coffee is crap because many people like their coffee.

I have a two shops, one is across the street from a Dunkin (they occupied one corner of a city intersection, I am on the other side of the same intersection), the other shop is surrounded by five Dunkins, one Starbucks and two indies within three city blocks (I roast in this shop). I don't have many cross-over. They have their followings and I have the more adventuresome people who don't like watery Dunkin and hate over roasted Starbucks.

Roasting is nice, it will draw people in at least once, but if they are not impressed by the coffee then they may give you one more try or they may not.

For those just want quick caffeine, and there are many, they can care less about freshness and well crafted coffee. They just want fast in and out. You will have to compete on location, atmosphere and efficiency. I would think for most coffee shops, these factors are way more important than having a citrusy Earl Grey liked Yirg.

Don't overlooked your baked goods. Unlike Starbucks they have many baked items, sugary and cheap, but fresh. Your baked items better be on par with your fresh coffee.

 

[Fred44]

Thank you for the insightful thoughts. As for consultants, I agree that would be a great idea. I did buy the Bellissimo book (Bean Business Basics?) a few years back, read it several times, excellent reference. You mentioned talking to those that have failed, funny thing is I recently had my teeth cleaned and in talking with my hygienist, she had a coffee house for seven years before it went under. I would have thought that after seven years you were on your way for the long haul. I will call her to find out the details. I know she mentioned something about a bowling alley closing in her strip mall.

ElPug, I guess you answered the one thing I was most interested, you mention that there is no real crossover from the Dunkin customers. I was hoping there would be. I know people like Dunkin, but I thought it was because they just didn't have anything better for comparison. I used to like Dunkin too, but now drinking any of their coffee makes me gasp. They do have good donuts. I imagine DD customers coming into my shop, trying a coffee or latte, and realize there is actual taste associated with this product, thus winning them over forever. But as you said, and I agree, to some people it's just a caffeine fix and they could care less about quality. This is what worries me. And are there enough of the "adventuresome" folks to help keep my doors open.

-----------------
My background is varied. Prior to going to college I worked in restaurants, I witnessed the daily routines of the owners and staff. Fun business, lots of hours and hard work, but gratifying in that you did something that made people happy.

I also helped my Uncle start a cell phone business back when cell phones were housed in briefcases and sold for over $2000. Not the same as food service, but nonetheless a sobering experience into the world of small business. After leaving my Uncle's business and finishing college, I worked as a chemist (which is why roasting really appeals to me) most of my career. Currently I'm teaching high school chemistry.

I'm interested in a coffee house and roasting to satisfy my entrepreneurial spirit. I'm not looking to be the next Starbucks, I just want to offer my community something better (in my eyes), and make enough to pay the bills. I'm interested in the romance of the coffee shop first. That's not to say I don't want to make money, I'm a practical person, it's my nature to be successful in everything I do. But I'd be happy with a small place where people come to relax, enjoy the atmosphere and have a great coffee and piece of baklava, and come back again with their friends.

I feel the timing is right now mostly because this property can be had at a great price in a great (not perfect) location. Perfect would be a higher traffic count, but 12,000 is decent with low overhead. I can buy the building and my mortgage and taxes would be less than $500/month. It is big enough for a 800 sq-ft coffee shop in the front, with another 800 sq-ft for roasting and baking below. I think the economy will improve and housing will turn around within the next two years, so this to me is the perfect time to get started. I look at the financial risk as minimal. If it falls through, I still have a piece of good commercial property I can sell or lease out, and sell my equipment. Although I'd be out a couple years salary if I continued teaching.

I've done the research, I've made spreadsheets out the yingyang, and the numbers say it will work, if I get the customers I think I can get. That's the tricky part.

 

[ElPugDiablo]

I should further my reply. When I opened my first shop, customers of Starbucks and Dunkin tried me, I was able to convert some, but I certainly did not get most of them. When I opened my second shop around Yale University, I am across the street from a Dunkin, very little Dunkin customers come in for a try, but Yale students came to try from other coffee places, I was able to retain a large percentage of them. On weekdays, the convenient factor dictate where they frequent, believe me, Yale students sleep late yet like to be on time for their classes; on weekends my shop is the destination for coffee centric students, many from other side of the campus. So it is not that you cannot get Dunkin's customer, rather, it is not as easy as your coffee is better than theirs. One more thing, Dunkin is well established in New England, they only went outside NE in the last few years, so it may be a bit easier to take them on.

800 sq-ft is smallish, can you build a deck for outdoor seating? A parking lot is also a big plus.

Is the 12,000 traffic count car or pedestrian count? If it is car, how may lanes and is there a divider?

Have you visited other roasting shops in NJ? Small World in Princeton, and Rojo in Lambertville are two I know of. Small World roasts off site on a huge Joper, Rojo roasts on site on a beautifully restored probat UG15. Coffee Lab in Tarrytown NY is another place to take a look.

 

[Fred44]

Yeah, 800 is on the small side but it does have a full basement that I would finish and use for baking and storage. Already cleared it with the Health and Zoning departments, as long as everything is within code. I plotted out a floor plan and it all fits, even the roaster behind the counter, and enough seating for 20 people, which is the limit.

There is room for a deck, already had my tape measure out for that. There are 13 parking spaces, same amount as the Dunkin up the road. 12,000 is cars per day. It is a two lane road with a speed limit of 40mph, it has very wide shoulders on both sides and no barrier separating the lanes. It would be easy in and out no matter which way customers were coming. It is 1/2 mile from the center crossroads of town, the road heads to a major interstate so I'm on the way for commuters, although on the opposite side of the road, so they would have to hang a quick left into my place. But because there isn't that much traffic, especially going the other way, shouldn't be a problem. It would actually be easier for those commuters to hit my place rather than the Dunkin that is at the intersection of town, but opposite corner of their direction to the interstate, so commuters have to wait for the light to go in, and again going back out.

I did visit a couple of roasters in the area, not the ones you mention. I will have to take a ride to Princeton, and damn, I was just near Lambertville. Will check them out. The closest roasters to me are about 10 miles, each one has been in business for at about 10-15 years. This is another reason I think this will work in my location, similar clientele.

I attached my floor plan, it's a work in progress, but I think I got everything. I'll have cabinets and shelves behind the counter for small wares etc. I laid it out this way because people will be coming in the back door, that's where the parking lot is. The front is on the main road, but there is a cute sitting area there too. I'll put the deck off the rear door. With only 800 sq-ft, it will be...cozy.

Thanks for your help.

 

[ElPugDiablo]

See your PM

 

[JoelForthe]

Hi Fred44,

Of all the coffee chains, (Starbucks, Peets, Seattle's Best, etc...) in my opinion (IN THE STATES), Dunkin Donuts has done the best job of consistently serving a delicious, fresh-brewed, rich and flavorful coffee. While living on the West coast I was unable to obtain Dunkin but actually ordered it online to get it. The beans have a distinct flavor I've really come to miss. - Best of luck with your coffee venture, but truth be told, - you may have more success opening a Dunkin Franchise in an area without one. (All the process, purchasing, and marketing is covered).

 

[Fred44]

Hi JoelForthe, I agree, among the chains I think DD is the best, but to my tastes, that's not saying much. My wife and I actually considered a DD franchise years ago, but we didn't have the required $1 million in the bank.

I'm really not a fan of franchises anymore anyway. In fact, I will give my business to independents over franchises and chains whenever possible. Indy's put out a better quality in almost all businesses, coffee, food, clothes, etc, over chains. Chains excel in putting out inexpensive products, but at what expense? Having all our manufacturing overseas? These days, I believe we should go local as much as possible.

ElPubDiablo, my wife and I took a ride to Rojo's in Lambertville today. Excellent coffee, and that ancient Probat was very cool. Wasn't really a fan of the industrial motiff though. Industrial can work, I liked the high, exposed ceilings, and some of the decor, but it was too cluttered, and having a forklift in the middle of the room was just weird. But, yes that was some great espresso. Thanks for the heads up on that place.

 

[ElPugDiablo]

haha, I wonder how often he uses that forklift. But when a green delivery comes in it's probably quite nice to have that expensive toy around. Yeah that UG15 is some nice roaster.

 

[Surfer]

Hi Fred44,

Of all the coffee chains, (Starbucks, Peets, Seattle's Best, etc...) in my opinion (IN THE STATES), Dunkin Donuts has done the best job of consistently serving a delicious, fresh-brewed, rich and flavorful coffee. While living on the West coast I was unable to obtain Dunkin but actually ordered it online to get it. The beans have a distinct flavor I've really come to miss. - Best of luck with your coffee venture, but truth be told, - you may have more success opening a Dunkin Franchise in an area without one. (All the process, purchasing, and marketing is covered).

I agree too, of all the chains, I like their coffee best, and generally their always consistent. But we just moved a lil south and found a cool little place by me with great food and excellent coffee, not sure if they roast their own, but it was pretty damn good.

 

[tortillatree]

Does anyone have a roasting recipe formula for copying Dunkin Donuts coffee? I personally don't care for the taste of it, so I'm having a hard time finding something that matches it, but I've had a few customers ask me if I could make them a Dunkin' Donuts blend. The closest DD to here is about an hour away, so it's not like they're competing with me, but they do certainly have a fan base. So does anyone have an educated guess of what's in it?

 

[zev]

Hi I have heard it a blend of 3 coffee's clombian,brazil and guat good luck