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Growth-minded coffeehouses seek jolts from service, new items

Growth-minded coffeehouses seek jolts from service, new items

Coffeehouses nationwide are stepping up efforts to build customer loyalty by adding beverage variety, new dining room amenities, more drive-thrus and improved customer service as they strive to woo patrons away from segment leader Starbucks Coffee.

While none of the second-tier chains harbors hopes of nearing the number of units operated by the Seattle-based chain, currently totaling some 9,800 domestic and 4,000 foreign branches in 39 countries, all want to make their brands preferred by larger numbers of regular patrons.

And the coffeehouse rivals chasing Starbucks sense greater vulnerability on its part, since the company recently has reported flat same-store sales.

What’s more, smaller competitors have not forgotten last February’s widely publicized leaked internal memo from Starbucks chairman Howard Schultz, in which he expressed concern that the chain’s rapid expansion and standardization may be eroding the customer experience that built its fan base.

Michael Coles, chief executive of 450-unit Caribou Coffee, said recently that the Minneapolis-based chain, which is expected to reach 500 outlets before long, can provide the segment’s best experience through such tactics as training crew members to memorize regular customers’ names and drink preferences.

Caribou and other ambitious chains like The Coffee Beanery, Peet’s Coffee & Tea, Tully’s Coffee and Dunn Bros. Coffee Franchising continue to experiment with new initiatives to better meet the needs and desires of customers.

Coles, a big believer in focus groups and other consumer research tools, has adapted the brand to fit such research findings. Caribou stores now are outfitted with such amenities as free wireless Internet connections, fireplaces, lounge areas and “kids corners” with games and books.

The North-Woods-lodge-theme brand, which is just starting to franchise, seeks to provide a comfortable atmosphere that promotes lingering, but officials realize that 70 percent of morning sales are carryout.

“We have a higher percentadge of food sales in the afternoons,” Coles said.

In an attempt to improve flat or slightly declining same-store sales, Caribou has increased the pace of new-product introductions. This summer’s scheduled rollouts are an Acai Smoothie, featuring a Brazilian berry higher in antioxidants than blueberries, and a bottled iced-coffee drink line to be distributed by Coca-Cola North America.

Those introductions would follow such additions by Caribou as its lower-calorie Northern Lites Lattes, reduced-fat banana-nut bread, cheese bagels and blackberry-white chocolate scones. In high-volume markets like downtown Chicago and Minneapolis, Caribou contracts with local caterers to obtain lunch-oriented entrées, and is working to expand such arrangements to all of its markets.

Caribou also is building drive-thrus in select new suburban locations.

“Nearly half of the new ones this year have drive-thrus,” Coles said.

Drive-thrus are increasingly part of the package for Flushing, Mich.-based The Coffee Beanery, Seattle-based Tully’s and Minneapolis-based Dunn Bros. Coffee Franchising.

Coffee Beanery, which has 147 units, including 25 in five foreign countries, has just 10 drive-thrus but plans to build them with most future suburban stores. This summer the chain is expanding its line of coffees with new iced-coffee varieties: Caramel Crunch Swirl, White Chocolate Mocha, Iced Fudge Ripple, and Black and White Frappalatte.

Tully’s and Dunn Bros. also are increasing additions of the drive-thru platform. About half of Dunn Bros.’ 90 units have drive-thrus, while Tully’s continues to tweak its first ones.

Tully’s is in a limited-disclosure “quiet period” as it awaits regulatory approvals of an initial public stock offering. A spokesman for the 126-unit chain would not comment on possible growth plans.

Dunn Bros., which has on-site roasteries in all of its coffeehouses, 89 of which are franchised, counts 42 drive-thrus to date. Those stores do about 40 percent of their total sales in the drive-thru.

The chain expects to to open between 25 and 28 Dunn Bros. units this year, compared with 24 opened in 2006.

Peet’s, based in Emeryville, Calif., deliberately has no drive-thrus, because the brand’s priority is to preserve its dedication to serving hand-crafted beverages, spokeswoman Erica Hess said. Other than selling baked goods from local bakers, Peet’s focuses on coffee and tea only, she said.

Peet’s has opened 14 of a planned 30 new stores so far this year. Meanwhile, the California-born chain, which has about 135 coffeehouses in six states, is seeing growth on the East Coast.

“Peet’s is the fastest-growing specialty coffee brand in Boston and is accelerating its growth throughout New England,” chief executive Pat O’Dea said earlier this month in announcing a deal with Springfield, Mass.-based Big Y Foods to put Peet’s packaged beans in 55 Big Y supermarkets in Massachusetts and Connecticut.

Despite such marketing coups, coffeehouses are having difficulty differentiating themselves from each other, according to Darren Tristano, executive vice president of the Chicago-based restaurant consulting firm Technomic.

“It all comes down to quality of coffee, speed of service and location, location, location,” he said.

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