BB’s, Muffin Break and Jamaica Blue and why Australians love their coffee franchises

“At the BBs franchise we want everyone – young and old to come to our store. We’re not exclusive like the bigger coffee franchises. We want everyone to have a good experience here. We still even serve Devonshire tea. The success of BB’s is that we cater for everyone.” Nicole Dodd, brand manager, explains why Australian coffee outlets need to move with the times or else be left behind.

“Committing to only coffee can limit yourself a great deal these days. Single outlet stores are doing a great job and are a franchisee’s greatest competitor. Franchisees need to add compliments like food to the coffee menu. There are great-tasting foods that enhance the flavour of coffee such as gourmet breads.

“Customers like the café chain experience. The bigger the experience the more inclined they are to come back again and again. Emotive marketing is the way forward. We have an in-store program starting soon where we do ‘table talks’ to customers on topics on how beans are roasted, and how we grind and store them. Consumers want to know more about everything these days and like to talk about their knowledge. The ‘table talks’ will fuel their curiosity while at the same giving our baristas credibility.

“We also run an incentive competition with staff. If they can increase coffee sales they’ll win prizes. If they are enthusiastic it will naturally rub off on their customers.

“I really think there will be a consolidation of coffee outlets. It’s only those that are slightly unique that will remain. The others will be chewed up by the bigger chains.

“Gloria Jean’s has done a great job convincing customers that they are the people that know coffee. It doesn’t mean they have great-tasting coffee – it just means they’ve been successful by making their customers believe they are coffee connoisseurs for consuming their coffee.

“Australians are still uneducated about coffee. Europeans can talk about espresso quality with knowledge. We still have a learning curve ahead of us. People know the difference between a latte and espresso, but many still don’t know what a macchiato is.

“We’re also not that adventurous when it comes to coffee. People don’t ask for a decaf low fat soy latte with a double express shot with a dash of hazelnut flavour. We’re still a long way off that.

“We do a lot of in-store taste-testing and there’s never one coffee that people choose. What I think is a great coffee may not be for someone else. This just proves that if an individual’s needs are not fulfilled they’ll walk out the door.

“However, if you put enough money behind the marketing and create hype ‘as the place to be’, the outlet will work even if the coffee is ordinary. Starbucks, for example, has made itself trendy with uni students. Gloria Jean’s has made it fashionable to be seen there and that’s where their marketing has worked.

“It’s all about brand image. People buy a name, not a product. People buy Nike, not the sneaker. This is where a lot of businesses fall down and where we have an advantage.

Grant Willard says it’s easier to go to customers than waiting for them to come to you. So why not do it in a van?

“We’re not at all inhibited by being van-based. Our coffee quality, we think, is better than most cafes and our franchisees are trained baristas. There are four major players in this sector and I’m proud to say we are now larger than the first coffee van concept in Australia.

“It’s the quality of our vans that differentiates us. I’m not making as much profit as my competitors because I’m spending the money on a better fit-out for the vehicles. We won’t compromise our offering to build a cheap product just to make a profit.

“Normally the franchisee chooses their territory. We set a territory within a suburb and they stick to that. Franchisees normally turnover 200 coffees from about 20 to 25 businesses a day.

“I honestly believe we do have too many cafes in Australia. Everyone wants to get on the bandwagon. We’ll either hit complete saturation or a lot of smaller independents will fall away. The benefit of franchising is the brand awareness and management support, which is better than doing it alone.

“Some 90 percent of franchisee enquiries come through the internet. In fact, we receive around 25 enquiries a day. People are curious about the idea yet conversion is low because they think it’s cheap to get into, but forget the vehicle itself costs $50,000.”

Co-owner and director, Mark Hawthorn, discusses how critical it is to understand and test your market first before taking the plunge into franchising – and why coffee is king.

“We’re very conscious about how we grow. We took about four or five years to set up systems and understand the market and brand potential before we were ready to franchise. It’s not just about making money. We want to ensure that every site is a winner and that our franchisees are successful as soon as they open their doors. We grow at about 10 to 15 sites per year.

“I get asked quite a bit if there is a fear of cannibalisation because of the large number of coffee operators in the market. Coffee is a growing market and there’s still a lot of people drinking instant coffee who are just beginning to transfer to espresso-style coffee. In my opinion there will be a shakeout of outlets that aren’t doing a great job. There’s no need to worry, however, as this will only affect the poorer operators.

“Australians are very savvy coffee drinkers. Our coffee culture is a lot more refined than people give it credit for. I think many people are surprised by the sophistication of our coffee culture.

“Australians want good quality, good value coffee delivered in a fast and efficient manner. Of course, it’s different depending on the environment. In the city there are more time-poor people that just want to grab it and go. In the outskirts they have more time to sit and enjoy their coffee. But whatever the case, it’s all about the coffee. At the end of the day nothing else matters – not even the service or ambiance.

“We believe our product is king. We’ve done market research with focus groups and in terms of quality we are clearly recognised as the best of the three majors. We take marketing seriously and have a structured program that addresses all the issues to have come out of research.

“Coffee chains tend to look similar. If someone’s doing something well you are going to inevitably take your own spin on it. It’s a hard industry, as you can be easily duplicated.

“We like to think we keep pushing the envelope. We’re currently experimenting with a ‘make your own sandwich’ concept at our St Kilda store. If it works we might take it to other stores. We’ve tried an internet café-style at one outlet. We aim to tailor stores to their specific environment. For example, we will introduce gelato to one store because the weather is particularly hot there.

“We like to be innovative. In October we opened our first bar, The Deck by Hudsons, at the newly constructed Adelaide airport. Here we serve bar and hot food, coffee and alcohol. We don’t let ourselves get bogged down by red tape. If the market wants it we’ll trial it.

“We receive a lot of enquiries from all over the world. However, we’ve still got a lot to do here before we expand overseas. To pursue an overseas venture is a big task and sufficient resources are important. We’ll look at it when the time’s right. We need to be responsible about growth – we’re dealing with franchisees and their livelihoods.”

James Fitzgerald knows coffee. Almost 50 percent of his Muffin Break and Jamaica Blue franchise turnover is derived from coffee sales. Here he discusses why the “candy coffee operators” are in danger of losing market share.

“The Australian coffee market is probably one of the most competitive and competent at an operator level in the western world. The average ‘mum and dad’ operators have coffee competencies and qualities that are well above that offered by ‘candy coffee-style’ operations.

“We have good quality coffee but we also have quality food, which provides a distinct edge over other franchises. I think the candy operator finds it hard to stand out these days and discerning customers know this, unlike a lot of kids who are drawn in by the typical big brand chains.

“If you want to be competitive you need good preparation skills and quality beans. The market is getting smarter and there are a lot of coffee operators that we call lifestyle or mum and dad operators. Unfortunately, we’re all chasing the same sites, driving up occupancy costs.

“In the early 90s Australians were drinking only cappuccinos. Tastes have improved significantly since. In places like Dubai they’re about 10 years behind us. In Shanghai young people want to be seen in smarter coffee bar establishments but don’t have a very refined palate for coffee yet. These markets still think the candy coffee chains are good.

“The challenge candy coffee operators face is that they buy their food at an expensive margin. We can get our average sale up but maintain the margin because we make the food ourselves.

“There’s a creeping sameness in the coffee market. If you removed the logos of the coffee chains it would be difficult for customers to differentiate.”