Coffee Franchises
Weighing your options

You’ve decided to join the ranks of garden centers nationwide and offer coffee, but you’re not sure how to get started.

One approach with big-name impact is to sign a food-service agreement with an established brand powerhouse such as Starbucks, Seattle’s Best Coffee (bought by Starbucks two years ago) or Caribou Coffee. While none of these three coffee franchises offers full licenses to garden centers, you could sell their branded beverages by agreeing to a limited food-service contract, which may provide you with the product and associated accessories like cups, as well as permission to display signs stating you serve the well-known brands.

Limited Contract
At Homestead Gardens in Davidsonville, MD, Owner Don Riddle has been able to offer coffee by inviting Ken Brannan to operate his beverage station, Saucy Salamander, from the garden center. While it is not an official Seattle’s Best Coffee franchise, Saucy Salamander does sell the company’s branded beverages, displaying a sign that reads, “We proudly serve Seattle’s Best Coffee.”

Open daily, the coffee bar operates independently of Homestead, without a formal lease or contract. Brannan retains all the profits generated from the business, and pays no lease fees to Homestead. However, he does have an agreement with the retailer to cover a percentage of the utilities.
Since Brannan moved in 14 years ago, the relationship has proven beneficial for both parties.

“Unless [garden centers] have the personal passion for food and coffee, I would encourage them to either lease it out or find some other way to do it than themselves,” Riddle says.

Full Franchise
While this type of limited food-service contract may appeal to some garden centers, others may prefer to license a franchise. One company that offers this option is The Coffee Beanery, which deals in “store within a store” concepts for garden centers.

Using The Coffee Beanery’s standard procedure as an example, here’s what you might expect in bringing a coffee franchise into your garden center.

Step 1: Application - Complete a four-page application (available by mail or online), and forward it to the headquarters for review and approval.

Step 2: Information Review - A representative will work closely with you to review the Uniform Franchising Offering Circular (UFOC) and answer questions you may have. This is your opportunity to contact current franchisees, review their UFOC and related information, and focus on any other matters before moving forward. Also during this time, the company will assess your application and contact you about the status of your application.

Step 3: Discovery Day at the Coffee Beanery - After your application is approved, you’ll visit company headquarters in Flushing, MI. This day-and-a-half conference includes meeting with key managers and team members and a review of all the particulars related to the development of your store. You’ll learn about the company’s history, culture and vision; store construction, coordination, planning and design; and franchisee training, education and ongoing support. You will also visit a local store. This step is completed by the signing of your franchise agreement.

Step 4: The Coffee Beanery System -

Store Construction: The design team, along with professional architects, will help you plan your “store within a store,” complete with the design, fixtures, lighting, furniture, equipment and branded menu boards and signs.

Training and Education: Includes a 14-day (beverage only) or 21-day (beverage and food) classroom management training program along with on-site opening training. Follow-up training visits and on-line manuals are also available year-round. Continuing education is available during Regional Meeting and National Convention workshop programs.

Support Services: An online communication network provides additional support along with corporate assistance. Marketing and merchandising materials, information and training manuals are also available for download.

Store Management System: To assist with store management, the company’s system details daily sales, weekly and monthly sales, schedules, cost of goods and payroll expenses.

Your Investment Financial Requirements:

 Kiosk Store: Liquidity/Cash Equivalents - $15,000-$60,000; Net Worth - $100,000-$125,000; Total Franchise Investment (includes franchise fee) - $50,000- $175,000

 In-Line Store: Liquidity/Cash Equivalents - $125,000-$175,000; Net Worth - $350,000-$400,000; Total Franchise Investment (includes franchise fee) - $250,000-$350,000

 Franchise Fee: $27,500 (includes site selection support; layout and design services; training; grand opening support; initial customized printed materials; and the use of The Coffee Beanery system and trademarks.

 Royalty Contributions: 6 percent of gross sales paid weekly (used to fund ongoing development; toll-free and online support; e-mail bulletins and newsletters; system updates and enhancements; regional support meetings/conventions; and research and development).

 Marketing Fund Contribution: 2 percent of gross sales (used to provide franchisees with local brand-building materials and other professionally prepared marketing and advertising materials).

PROS

• The name is easily recognized.
• The product is popular.
• You have little fuss and no bother.
• It reduces your product liability exposure. The development process is shortened for opening. You have no additional labor costs or liabilities.

CONS

• You have no say in the menu offered.
• High prices to your customers.
• You may have little input as to how much is charged for various products.
• The branded coffee organization may consider your location a poor risk. It may offer you little or no rental for its assigned space usage.
• Its employees may not fit in well with yours.
• It may insist that you share some of the construction costs.
• It may require that you share some of the operating costs.