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Tea & Coffee's Business Classifieds!
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Carts


By Joan Reis Nielsen

As coffee carts and kiosks are popping up in more locations, experts in the field agree on three key rules for success - location, consistency among product offerings and great customer service. Joan Reis Nielsen talks to four leaders in the field.


The common link in all of the answers to that question of how to succeed in the coffee kiosk business is an old familiar refrain… location, location, location! If you don’t have the right location, whether you are a small one-cart operator or a large franchise kiosk operation, you will struggle to succeed. Kiosks and carts should be placed to take advantage of traffic flow patterns (whether on foot or in cars), but that’s just the first step. In today’s competitive environment, you must also let those passing by know that you’ve got great and/or unique beverages. The easiest way to grab attention is to have readily identifiable and intriguing brand signage, but there are other ways, as well. If you are catering to pedestrians, you can offer free samples to those wandering by. If you are looking for drive-thru customers, you can offer various limited-time promotions or coupons in your local newspapers. You want to do whatever it takes to get people to try your product and to change their routine enough to make you part of it. Once you start getting customers to try your product then you need to make sure that when they come back, your drinks are as good as they were the first time. You can do this by always offering consistent products and great service. Encourage your staff to remember your customers and their routine daily orders. Kiosks and carts can be very profitable because their small footprint makes it possible for them to function well with a small staff - often only one person. Treasure those who enjoy doing their job and don’t hesitate to offer bonuses to your best employees for increased and steady sales.

Michael Taylor, director of kiosk operations for Montana-based City Brew Coffee, sees kiosk trends moving toward more drive-through kiosks. City Brew currently has seven brick and mortar locations and four drive-through kiosk locations, and expects to have 16 corporate-owned and 75 licensed units open by the end of 2006. They began their expansion into drive-through kiosks three years ago, after operating full-service locations since 1998. “Part of our success,” says Taylor, “is that we had a pretty firm foundation in running brick and mortar locations before venturing into the kiosk concept, which should be a complement to brick and mortar locations. The goal is to expand the business, using kiosks in areas that wouldn’t support a full build-out - for example, near major transportation corridors and manufacturing areas.” City Brew’s kiosks are typically 8x12 feet, stationed with two employees, with drive-through windows on two sides, and loaded with a bevy of brewing equipment, as well as refrigeration, storage, blenders, and sinks.

Taylor underlined the importance of a great location. City Brews considers only locations that have steady traffic flows throughout the day, not just at particular times. Taylor also advises considering parking lots of major retailers such as K-Mart or Target. “There’s a lot of asphalt there, and one of these companies may be very interested in collecting some rent off a rarely-used corner of a parking lot!” Portability of the units offers benefits as well. If a big road construction project begins right in front of your kiosk, it’s fairly inexpensive to pick it up and move it to another location. Another big issue regarding opening a kiosk is the myriad of health code regulations at multiple levels. These requirements are particularly important because kiosk units don’t necessarily fit into the typical brick and mortar category. “Basically, we want to build a unit that can be placed anywhere in the country. Because of the many variations in requirements, our solution was to use materials and equipment that not only exceed any regulation we could find, but significantly exceed them.” To that end, they use galvanized steel for exteriors, surgical floors, marine-grade wood to prevent mold and mildew, lots of light and ample electrical power.

“Convenience may bring the customer in, but it’s the product quality that will keep them coming back.” Taylor adds, “We provide the same high-quality drinks in our kiosks as we do in our brick and mortar locations.” Due to space limitation and health code regulations, menu offerings are a bit more streamlined than in a full-service location; kiosks offer pre-packaged food items and fewer syrups. Although food sales may be less, the mix of drink types stays fairly consistent between the two unit types. The only time there seems to be a major variation in sales is when a competitor offers deep-discount coupons. “While you may take a temporary hit, sales will quickly return to normal once the offer ends,” says Taylor.

The Rocky Roaster coffee cart is a familiar, long time sight at the farmers markets of Los Angeles, were discerning chefs and foodies alike go to procure the best produce of the Southland. “We had the first ‘Limited Food Use Vehicle/Cappuccino Cart’ in L.A. County, selling freshly roasted coffee,” says Rocky Rhodes, president of Rocky Roaster. It was a hybrid, what he calls “a coffeetrailer” that was built and (finally) got licensed in 1998 - sort of a cross between a cart and a kiosk that was towed behind another vehicle. “It was like your typical ‘catering truck’ in that you flipped up the sides for business and could have up to four people standing inside of it, taking orders and money and serving coffee drinks. But back then, there were no hard and fast rules in place. It took me forever to get licensing in order, mainly because there were no licenses for this type of business! There were few guiding rules - all you needed was a sink and NSF approved equipment.” The coffeetrailer is still operational in five large and very popular farmers markets and he also has a well-loved, 12-seat retail shop in Canoga Park, Calif.

Nowadays, Rhodes has expanded into a thriving wholesale roasting business. “We are kickin’ it!” But he still has his cart-oriented side of the business and his opinions. He has become an official commissary, now. “L.A. County health code laws state that all carts must have a home to return to at the end of the day - a commissary to live in. I provide that storage for carts across the county, as well as a large area to wash down the carts and their equipment and a large walk-in cooler to store their perishables.” As for his opinions, he is a realist. “This is a very tough business, this cart biz. At the end of the day, you can add one and a half to two hours of clean-up labor that won’t bring in any money. Then you add the expense of traveling the streets and the damage that you may sustain in ruined or out-of-calibration equipment from that travel. When you get to that location, be it a party or wedding or other event, do you have the power, is it available to you? That’s just one of many problems that you face.” He adds prophetically, “The myth is that the cart business is a good, easy mobile business. If you don’t have the right location or the proper licensing, that is the first indicator of imminent failure.” In other words, be informed and prepared.

Andrew Pierce, director of sales for Kiosko Inc. in Tyngsboro, Massachusetts, offers perspective from the manufacturer’s point of view. “We are the preferred kiosk vendor for major malls across the U.S., for companies like Simon, General Growth and Westfield. It’s not only a manufacturing process that we offer, that’s just 50% of what we do. It’s the other 50% of our service that is so valuable to our clients, our niche in this business.” He continued, “We work from the conception of a kiosk idea, through the manufacturing of that kiosk, and on through challenging health code regulations that must be met. We deal with architects, mall real estate experts and a multitude of other individuals to get the mall approvals, the city operating permits. We are involved with the coordination of general contractors and all the other support and logistics that are necessary to insure smooth delivery and installation. We even offer a graphics package for clients who may need that.” Pierce added that, “It’s the ‘before and after’ that makes the difference-the bread that makes the sandwich. Our kiosk clients, like Gloria Jean’s Coffee, can just walk in to their new kiosk and start brewing!”

As far as trends go, Pierce emphatically states, “Kiosk sales are growing tremendously. Clearly, the push and drive in this business is for more and more kiosks. There isn’t the same investment required as an in-line store in a mall. A kiosk sees the same, if not more, traffic flow as that store, for far less rent. And malls are getting smart to this trend-why not charge rent for a space that used to have a potted plant in it?”

Pierce advises anyone that is seriously interested in starting up a kiosk business, but concerned with the details it may involve, to hire experts. Don’t be afraid to get help to find the right location or negotiate the terms of a lease, too.

Mountain Mudd Espresso started as an idea in a garage in Billings, Montana, over 10 years ago and has now grown to 16 corporate-owned and 72 individual “coop kiosks” in 21 states. They are the nation’s largest drive-through coffee kiosk manufacturer. They have spun off two other companies and have two facilities and 130 employees, not to mention more than $4 million in annual sales. Mountain Manufacturing designs, constructs, equips and ships turn-key coffee kiosks. According to Kirk Fritz, national sales consultant for Mountain Mudd, there are also plans for 50 more units with corporate partners over the next couple of years, as well as plans to offer franchised locations.

“While kiosks are more prevalent in the upper Northwest, there is a growing demand on a national basis.” Fritz adds, “We don’t really compete with the large chains. Our locations offer the convenience of a drive-through stop for a quality beverage, where we’re able to send you on your way quickly. The larger operators are more of a destination, where you might go to spend a couple of hours reading, socializing or working.” In contrast to other operations, Mountain Mudd does not have food offerings, with the exception of pre-packaged cookies. “We don’t discourage our individual operators from offering food, but they need to be sure they’re following the additional health code requirements involved. We prefer to focus on our beverages, particularly our specialty beverages, which are the core of our business and offer better returns.”

Mountain Mudd has found they don’t need to do a lot of advertising to be successful. They do offer frequent buyer cards (buy nine get one free) and gold cards (prepaid cards so the customer doesn’t have to fumble with money on each visit) and they have also incorporated coupons on their beverage cups. “Once they’ve tried us, the coupon gives them an incentive to come back again,” says Fritz.

Fritz concurs that there are three keys to running a successful kiosk: “A good location, a consistently high-quality product and outstanding customer service.” He added, “Our failure rate has been less than 4%, and has been a result of missing one of these three keys. We also try to focus on non-coffee drinking passengers in the car, with little treats such as special cups for children, and dog biscuits for pets who accompany their owners.” Another perfect example of reaching out to the customer to insure repeat business!

Again, as with any business, location is absolutely critical. Look at traffic patterns. Choose locations that are easily accessible-near major traffic arteries, commuter routes, and suburbs, in shopping centers or grocery store lots - places where plenty of people have to drive or walk, places where your coffee kiosk will thrive.


Tea & Coffee - October/November, 2005
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