Filters for success

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What does it take to be a great coffee franchise? Inside Franchise Business: Filters for success in a coffee business.

While Australia’s coffee retail sector is booming, competition is pushing down profitability.

Revenue in the coffee retail industry in Australia is expected to jump by 6.9 percent this year to a total $5.5 billion, following annualised growth of 7.2 percent over the past five years.

Despite this performance, IbisWorld’s Cafes and Coffee Shops in Australia report says competitive pressures have pushed profitability down slightly for the period.

The strong demand for coffee has led to an influx of new outlets, with many artisan bakeries and patisseries establishing cafes over the past five years, challenging established franchise businesses. Niche companies influence coffee culture with innovation, catching the attention and curiosity of consumers on social media.

According to the report, there are five markers of success:

Having a clear position in the market

As the coffee industry is highly competitive, it is critical for operators to have an excellent understanding of their market and quickly respond to changing customer tastes and preferences.

Having business expertise

Business expertise, such as experience in hospitality or retail, is a crucial factor to success in an industry characterised by high revenue, low profit and high propensity for losses.

Having effective cost controls

It is important that industry players minimise costs and waste, especially regarding food. This is particularly true given the industry’s low profit margins.

Having effective quality control

Consistent high quality is needed in the preparation, presentation and serving of coffee and food items to meet customer expectations and maintain positive referrals.

Having a multiskilled, flexible workforce

Operators need access to a high number of skilled, casual and permanent wait staff, cooks, chefs and kitchen hands to maintain quality customer service, especially during periods of peak demand.

So how do scaled franchised brands compete in the innovation game and stand up to independent, quirky independents? How can they respond to social-media sensations such as the turmeric latte, deconstructed coffee and even the pumpkin-spiced latte?

Find out in the May/June issue of Inside Franchise Business. Get your subscription now.

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