Explosion of the coffee shop culture

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EXECUTIVE SUMMARY

There are numerous explanations for the explosion of the coffee shop culture such as the influence of famous sitcoms such as Friends that encouraged people to consume beverages from coffee shops while attending to other matters at the same time. While most of these explanations cannot be verified, what is certain is the love affair between individuals and coffee consumed in a conducive ambiance that has resulted in a surge of coffee shops both locally and internationally. With many coffee shops such as Blenz Coffee and Starbucks enjoying immense success, one can only assume that the coffee shop industry is devoid of pitfalls. However, this is not the case as coffee shop face a number of problems in their operations and quest to maintain their operating margins.

A market analysis was conducted that involved exploring various market players in the coffee shops industry such as Starbucks and Blenz, among others so as to come up with solutions to surmount the problems experienced by Blenz Coffee and increase its revenue. Suggestions outlined in this proposal include increasing employee wage, formulating branches in places with attachment and differentiation to solve the problems faced by Blenz Coffee.

Offering higher wage payment will not only ensure Blenz Coffee has adequate employees but also foster customer satisfaction since the workers will be motivated to offer better services to customers. Since most of Blenz Coffee’s branches are close to its competitors and the cost of relocation is greater than the continued operation in the same location, an ideal proposal to increase sales and revenue and improve Blenz Coffee’s brand would be to differentiate its products and services. An ideal differentiation approach or strategy would be to provide high quality beverages and unique experiences to consumers such as large-sized cups in the convenience of a large volume of locations that are not only spacious, relaxing and comfortable but also unique and adaptable for different occasions while offering the often sought wireless internet connection. The top five features of an ideal coffee shop that makes it a place where the customers feel some sort of attachment include aroma, comfortable furniture, cleanliness, adequate lighting and a view to the outside. These are the five features that Blenz Coffee should consider when setting up novel branches to meet the increasing demand for its products and services.

This proposal came to the conclusion that implementation of these suggestions, that is, increasing employee wage, formulating branches in places with attachment and differentiation will enable Blenz Coffee to solve its problems and attain higher sales and revenue.

 

 

 

 

 

Introduction-explosion of the coffee shop culture

Blenz Coffee is a Canadian franchise chain of coffee shops. The first shop of the now established company was opened in Vancouver, British Columbia in 1992. The founders of Blenz Coffee started the company because they had a passion for improving the lives of consumers through the provision of opportunities for individuals to socialize while taking premium drinks in a conducive and relaxing café environment. Since its establishment in 1992, Blenz Coffee has grown to include a network of franchised shops, with over sixty branches across British Columbia, the Philippines and Japan (Blenz Coffee, 2017). The mission of the company is to listen to and meet customer needs through the provision of specialty beverages. Nonetheless, despite registering annual revenue of $5.4 million, there is increased pressure on Blenz Coffee to improve sales and revenue amidst competition due to its numerous sponsors. Problems such as inadequate branches, inadequate qualified and competent employees to guarantee customer satisfaction and situation of most branches of Blenz Coffee close to huge competitors have prevented the company from enjoying maximum economies of scale in the coffee industry locally and internationally. This proposal will evaluate the coffee markets where Blenz Coffee operates and the coffee industry as a whole to determine the best solutions to the problems faced by Blenz Coffee.

MARKET Analysis-explosion of the coffee shop culture

Franchise chains of coffee shops have been the ruling avatars of many a city life from the 1990s till now. While there are discordant plausible explanations to the explosion of the coffee shops culture including the concept that sitcoms such as Friends influenced the coffee shops culture, it is difficult to verify these explanations. What is certain is the love affair between  people and coffee that has made coffee shops a lucrative venture. The success of coffee shops was further boosted by the advent of Wi-Fi in almost every branch that led to many people opting to utilize coffee shops to hold convocations, conduct discourses and meet to talk as friends or on dates. Notwithstanding, like all business operators, coffee shop owners face certain problems that may be common or unique to their brands, many of which are preventable with the implementation of correct strategies or mechanisms.

In order to discern the problems that franchise chains of coffee shops face, particularly Blenz Coffee, this research explored the various market players in the coffee shops industry such as Starbucks and Blenz among others so as to come up with solutions to surmount the problems experienced by Blenz Coffee and increase its revenue. Blenz Coffee provides loose leaf teas, coffee and chocolate drinks.  With an estimated annual revenue of $5.4 million and forty employees Blenz Coffee has the potential of attaining a strong international position as a franchise (Blenz Coffee, 2017). It is imperative to note that other franchise chains of coffee shops have experienced problems that affected their operations and revenue.

A good example is Starbucks that has experienced rapid growth in the last two decades, but started experiencing slow growth in the last few years; a problem that resulted in the closure of some locations (Forbes, 2016). However, as Forbes reports, Starbucks implemented certain strategies that resulted in increased revenue sufficient for the sustenance of all its branches throughout the world (Forbes, 2016). For instance, Starbucks increased prices continuously. While the company enjoys strong consumer loyalty, there were concerns regarding whether Starbucks would be able to retain its customers and not lose them to competing coffee shops. However, Starbucks retained its customers, mostly due to its premium and inviting atmosphere. Starbucks became a popular place for people to have casual meetings for purposes of work or study while having coffee.

The analysis conducted on Blenz Coffee revealed that the company faces certain problems in its operations. The company has plans to increase its operations in other countries apart from Canada. However, the inadequate employees and branches in Canada and in other states make it difficult for Blenz Coffee to meet the increasing demand for coffee from coffee shops, as well as, achieve optimal customer satisfaction. Moreover, the branches of Blenz Coffee in existence are quite close to the company’s competitors affecting its ability to obtain maximum sales and revenues from consumers in those locations. Notwithstanding, increasing employee wage, formulating branches in places with attachment and differentiation are proposals that are ideal to solving the problems faced by Blenz Coffee.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Figure 1: Solution Framework

Differentiation-explosion of the coffee shop culture

Most of Blenz Coffee shops in British Columbia, Japan and the Philippines are situated close to the company’s competitors. This decision is based on the various studies conducted on location of businesses and whether closeness to competitors affects their operations and revenues. The decision to establish branches close to competitors may have been appropriate when Blenz Coffee was commencing operation and sought to create a brand by offering alternative beverages. Moreover, it was easier for consumers to take note of the company by virtue of its closeness to already established coffee shops such as Starbucks. However, given the duration that Blenz has been in operation since its establishment in 1992, the decision to have its branches close to competitors is detrimental to its plans to increase sales and revenues. However, since the cost of relocation is greater than the continued operation in the same location, an ideal proposal to increase sales and revenue and improve Blenz Coffee’s brand would be to differentiate its products and services.

Products

Currently, Blenz Coffee offers beverages such as loose leaf teas, coffee and chocolate drinks. An ideal differentiation approach or strategy would be to provide high quality beverages and unique experiences to consumers in the convenience of a large volume of locations. This strategy is vital as it will separate Blenz Coffee from its competition. Packaging is also important when it comes to product differentiation. Blenz should increase the sizes of their coffee cups above the sizes offered by other coffee shops. The size increase may not be that significant, but more consumers will purchase their beverages with the knowledge that they are getting more coffee, tea or chocolate than the ones offered in other coffee shops.

Services-explosion of the coffee shop culture

The ambience of any location that an individual visits is the first thing that most consumers take note of when they seek to engage with a business. It is for this reason that Blenz Coffee branches must not only be spacious, relaxing and comfortable but also unique and adaptable for different occasions while offering the often sought wireless internet connection. The market analysis revealed that most unique services offered by big franchises such as Starbucks, for instance, Tasting Room stores and Reserve Roastery stores are mainly elevated and highly customized experiences offered to coffee connoisseurs and wealthy consumers (Forbes, 2016). These kind of unique experiences are neither affordable nor affordable to low and middle income earners. Blenz Coffee can step in to fill this gap in the market by implementing a cost effective strategy. Operating such as an endeavor at a large scale may not be prudent given that the company may experience losses. However, offering unique experiences and concept stores such as Tasting Rooms and Reserve Roastery stores to middle and low income earners at a small scale will result in an increase in customers, especially those who are ardent coffee lovers. In order for Blenz Coffee to stand out in locations where the coffee shop is close to its competitors, the facility has to be extremely accommodating, adaptable and with an ambience that customers want to experience each day. Blenz Coffee branches should accommodate both consumers who are in a hurry and customers who want to spend a little time at the coffee shop to unwind, study, catch-up with friends, use the internet and hold discussions. Such accommodations in Blenz Coffee branches coupled with a formidable reward program are what will result in customer acquisition and customer retention should Blenz Coffee decide to increase the prices for its beverages to protect its operating margins.

INADEQUATE BRANCHES

The coffee shop culture is continuing to grow in various cities and towns in Canada, as well as, in other nations. This means that there is an increase in demand for beverages offered at coffee shops. This can be attributed largely to the restructured facilities that offer more than mere stop points for people to purchase beverages. Coffee shops have been restructured in such a manner that they provide unique services to consumers such as ample and comfortable sitting areas, Wi-Fi and a variety of beverages that consumers can sample at affordable prices. Such services and products have resulted in a significant increase in consumers visiting coffee shops to purchase coffee and other beverages while enjoying the comfort and wireless internet of the facilities. However, while convenience had resulted in an increase in demand, the supply to meet this demand is insufficient. Blenz Coffee should increase its branches nationally and internationally, but it should do so with place attachment in mind.

Place Attachment-explosion of the coffee shop culture

The experience of a place is unique to each person and is directly related to his or her lived experiences. As such, the attachment to a certain place is a set of feelings that emotionally binds an individual to that particular place. According to Francis and Marcus, unique places root people to the earth, to their own memories and history (Francis and Marcus, 2003). The top five features of an ideal coffee shop that makes it a place where the customers feel some sort of attachment include aroma, comfortable furniture, cleanliness, adequate lighting and a view to the outside. These are the five features that Blenz Coffee should consider when setting up novel branches to meet the increasing demand for its products and services. Despite the fact that cleanliness is normally thought of as the responsibility of the cleaning staff and management, designers can influence cleanliness to an extent through discordant finishing materials specified for walls, floors and furniture. In high-traffic Blenz coffee shops, the company should utilize materials that camouflage or are easy to clean so as to maintain the sentimentality of customers to the high-level of cleanliness of the branch.

Given that many individuals study or read in coffee shops, Blenz Coffee should ensure that its new coffee shops have adequate lighting so as to improve the level of attachment of people to its branches. Some of the factors that affect the consumers preferred lighting levels include the color and reflective qualities of the finish materials, natural lighting and the type of artificial lighting illuminating the space. When designing the coffee their new coffee shops, Blenz Coffee should find the optimum level of comfort to keep customers in, but allow sufficient table turnover at the same time. The branches should provide some comfortable seating for the customers who linger in the coffee shops and those who spend meager time in the coffee shops. However, Blenz Coffee should be careful not to encourage a camping problem in its braches so as to ensure that there are available seats for customers who continue streaming into the shops. The need for a view and access to natural lighting and nature is common among many customers. A study conducted by Scott on environmental preferences revealed that preferences are contingent in part on the inferences about prospective experiences within a given setting or environment (Scott, 1989). Highly rated factors in the study included settings with natural contents in the form of natural light and plants, as well as, the presence of windows. Thus, if Blenz Coffee can construct new branches that have views of the outside that allow in adequate natural light and access to nature in the form of plants, it will increase the level of attachment of its customers to the branches and attain customer acquisition and customer retention. One of the most likable features of coffee shops is the aroma of beverages and baked goods that emanate from the shops. Designers of the new Blenz Coffee shops can utilize this knowledge and take advantage of the aroma to create a positive influence on the perception of the branches. The ventilating systems in the coffee shops can be designed in such a way that they retain desirable smells in the space rather than letting them out. The unique aroma will create pleasant café experiences for the customers.

INCREASE IN EMPLOYEES

Given the increase in demand for the products and services of Blenz Coffee over the years, the company has increased its branches nationally and internationally. However, Blenz Coffee still lacks adequate employees to serve the increasing number of people visiting the company’s branches to purchase beverages and use their facilities for studying, work discussions and causal meetings. Thus, Blenz Coffee needs to employ more people to ensure that the customers are served well and satisfactorily. Nonetheless, given the volatile nature of the coffee shop jobs, most employees normally prematurely terminate their services. It is because of this reason that Blenz Coffee should guarantee higher wage payment for its employees so as to attract adequate workers to provide services to the company’s customers.

Higher Employee Wage

Expenditure on wages is normally a small expense for companies and is often reported as administrative or general expenses. Thus, Blenz Coffee should offer a higher employee wage so as to attract more people to work for the company. Prospective employees are normally attracted by higher wages. By offering higher wage payment, Blenz Coffee will be able to attract people who will be willing to work for the company on long term basis. A decision to pay wages that are much higher than the stipulated minimum will render Blenz Coffee a popular employee choice when it comes to ideal places for people to work. Moreover, should there be a decision by the government(s) to increase federal minimum wages, the already wage that will be offered by Blenz Coffee will paint a good picture for the company while impacting its competitors adversely.

Higher employee wage is also a factor that affects customer satisfaction. When employees of Blenz Coffee earn higher wages compared to other companies in the coffee shop industry, they will be motivated to offer better services to customers. The reputation built from high levels of customer satisfaction will go a long way in improving the brand name of Blenz Coffee and consequently, result in increased sales and revenue and enable the company to edge out most of its competitors in the market.

 

 

Figure 2: A satisfied customer receiving her coffee

 

Conclusion-explosion of the coffee shop culture

Since its establishment in 1992, Blenz Coffee has grown to include a network of franchised locations, with over sixty locations across British Columbia, the Philippines and Japan. However, Blenz Coffee faces problems such as inadequate employees, inadequate branches and situation of its branches close to its competitors that affect the company’s product and service delivery, as well as, its sales and revenue. With an estimated annual revenue of $5.4 million and forty employees Blenz Coffee has the potential of attaining a strong international position as a franchise. This proposal suggests solutions such as increasing employee wage, formulating branches in places with attachment and differentiation to solve the problems faced by Blenz Coffee and improve the company brand name fostering customer satisfaction, sales and revenue.

Recommendations-explosion of the coffee shop culture

The biggest task that most franchises of coffee shops have is protecting their operating margin while expanding. Since Blenz Coffee aims to continue expanding and establishing more branches locally and internationally, it must operate in such a way that it protects its operating margin. This will require regulation of the market so that companies are not forced to increase their prices so as to protect their operating margins.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

REFERENCES

Blenz Coffee. (2017). About Us | Blenz Coffee. Blenz.com. Retrieved 19 November 2017, from http://blenz.com/about-us/

Forbes. (2016). Starbucks’ Challenges And How It Can Overcome Them. Forbes.com. Retrieved 19 November 2017, from https://www.forbes.com/sites/greatspeculations/2016/12/05/starbucks-challenges-and-how-it-can-overcome-them/#43e77d824be9

Francis, C., & Marcus, C. (2003). People places. New York [u.a.]: Wiley.

Mock, B. (2017). What Triggered the Rise of the Caffeinated Class?. CityLab. Retrieved 19 November 2017, from https://www.citylab.com/life/2017/01/the-cafe-tipping-point/513656/

Owler. (2017). Blenz Coffee Company Profile | Owler. Owler.com. Retrieved 19 November 2017, from https://www.owler.com/iaApp/369889/blenz-coffee-company-profile?onBoardingComplete=true

Scott, S. (1989). Preference, mystery, and visual attributes of interiors: A study of relationships. (Doctoral Dissertation, University Of Wisconsin- Madison, 1989). Dissertation Abstracts International, 50 (11-A), 3386..