Beverage Shop E&S

As specialty coffees and healthy smoothies are all the rage these days, beverage shops flourish by expanding their food menus, speeding up service, and maximizing efficiencies inherent in their equipment and design.

By Amelia Levin, Senior Associate Editor -- Foodservice Equipment & Supplies, 3/1/2007

The popularity of coffeehouses and smoothie chains may literally be out of control, but the funny thing is, these specialty beverage shops have extremely controlled operations. In short, whatever they're doing, they're doing right.

Beverage shop sales growth within the top 500 chains stood at nearly 20 percent for 2005 compared to 2004, according to Darren Tristano, executive vice president of Technomic, a Chicago-based research firm. (Tristano notes that the 2006 report has yet to be released.) A large part of that percentage stems from Starbucks' sales, which clocked in at $5.8 billion, a 25-percent sales increase. Today, Starbucks operates 76,061 units throughout the United States. Total beverage sales reached $11.3 billion in 2005, according to Tristano.

"We anticipate the beverage shop market to continue to grow at a rate of 15 percent to 20 percent," Tristano says. "There doesn't seem to be a saturation in the market in light of Starbucks' growth." In addition, beverage shops such as Starbucks appear to be moving into more non-traditional markets, such as shopping mall kiosks, food courts and corporate offices. Among the juice/smoothie shop chains, Jamba Juice stands out as a clear leader, according to Tristano. The chain raked in $310 million in sales at the close of 2005. The next player in line, Smoothie King, stood at a good $200 million away, with $110 million in 2005 sales, he says. Mintel, a market research firm also based in Chicago, outlines similar findings in its February 2006 report on coffee shops. "Driven by the enormous appetite consumers have shown for prepared, premium coffee drinks outside of the home, coffeehouse chains have expanded at breakneck pace with no signs yet of saturation," the report says. From 2000 to 2005, the total number of coffeehouses in the United States increased by 70 percent - that's 21,400, or one coffeehouse per every 13,809 Americans.

As far as juice and smoothie shops, the market stands at $1.6 billion in sales, thanks to consumers' growing demand for what they perceive as healthier, convenient products, according to Mintel's November 2005 smoothie chain report. "The major consumer trends that have fueled growth in the smoothies market - healthier eating and consuming more meals on the go - are expected to continue," the report says.

How do they do it?

First of all, coffee, juice and smoothie shops share one similar operational aspect. "They have virtually no cooking equipment except for microwaves - there are no grills, no major ventilation systems, and there's a much smaller requirement for HVAC systems," says Mark Godward, consultant and president of Strategic Restaurant Engineering in Miami. "Beverage shops are much cleaner, their requirements for cleaning are minimal and overall it's a much simpler operation compared to restaurants."

The majority of beverage shops serve some food, consisting mainly of prepackaged or pre-baked goods and some limited made-to-order service like fresh salads and sandwiches. As a result of this simplicity, beverage shops face the challenge of creating extremely efficient designs that will allow them to sell enough beverages to generate revenues and make a profit.

"The key thing about beverage shops is that they are somewhat small operations, typically 1,000-square-feet or less," Godward says. As a result, he says, "They need to design the stores so everything flows well.

"The requirements for throughput are much higher for beverage shops," Godward adds. "You need to do a lot of transactions to make a living. If a coffee shop makes billions each year, think how many cups of coffee you have to sell." Efficient design creates space and movement, which creates speed, which leads to more transactions and, hence, more sales. "At a typical bakery-café, a customer might wait five, six, seven minutes and be OK with that," Godward says. "But if you go to a coffee shop, and it takes you more than a couple minutes, you think that's a bad deal. Speed of service should be around four to five minutes for quick-service restaurants, but it needs to be two to three minutes for coffee shops. You need to be able to crank those transactions out."

Given this, Godward stresses, purchasing enough cash registers for the store remains extremely important. "There's an idea out there that beverage shops can deal with the volume with just one register, but they're in the business to make money. You don't want to create a bottleneck at the cash register. You want to put the orders in and cash the orders out immediately. You need to make sure you don't need two, but if you do, get them, spend money."

Beverage shops may be smaller in size, but the good news is liquid ingredients turn over rapidly compared to food, Godward says. "Storage can be quite efficient for beverages," he says. Milk and juice jugs pack tightly into a single reach-in refrigerator because they take up less space than food and don't require wrapping. And, paper cups use less space than plates and dishware.

The key is to position these refrigerators near the front of the store to maintain an efficient flow. "You want to make sure you have enough storage of the key liquids, juices, dairy products, and syrups in the workstation so you don't have to be going to the back every 15 minutes," Godward says. "You want to hold an hour or two of liquids at the point of use." Many shops rely on undercounter and reach-in refrigerators to accomplish this.

When designing for beverage shops, Godward will allow for enough space in the workstations to further create an efficient flow. "You need to consider where people are going to stand, and make sure you have enough room for those people if they are working at the same time," he says.

While improving efficiency within the store helps generate sales, beverage shops also look to achieve the same thing by drawing customers in during non-peak day parts, Godward says. Breakfast and sometimes lunch naturally generate the most business, but beverage shops often add more foods to a menu or try out some serious marketing techniques to boost sales.

Minneapolis-based Caribou Coffee, a popular coffee shop second only to Starbucks with 432 stores around the country and a sales volume of $220 million, according to the 2005 Mintel report, relies on an efficient design for fast service, which, of course, means happy customers and more sales for the company. "Our cueing is very important," says Edward Boyle, Caribou's vice president of research and development. "We always have a minimum of two registers, and sometimes three registers, so you can get a person through the line quickly, and they're not bundling up. Timing needs to be balanced between ordering and production. We have about 100 transactions every half hour or so.

"We strive to get customers in the door and get their drink in three minutes, tops," Boyle says. "We may want them to stay for three hours, but we don't want them standing in line too long." But sit in the store Caribou customers do - Boyle says the chain prides itself not only on its speed of service, but also on its comfortable sitting environment. Most of the shops feature a lot of light-colored wood paneling, fireplaces, plush couches and free Wi-Fi access.

"We try to create a very convenient and comfortable place to relax or get connected and conduct business - these represent points of differentiation we take advantage of," Boyle says. While an efficient design allows for faster service and, thus, more transactions and sales, the comfortable atmosphere helps Caribou create a solid brand that allows the chain to keep up with competition, he says.

Looking to leverage its brand equity, Caribou's menu now includes fresh lunch items to help meet the demands of its customer base looking for healthier options. In the past, the menus featured mainly just baked goods for breakfast and snacks; however, now customers can purchase fresh sandwiches and salads, yogurt parfaits and fruit. The menu expansion was a way for the store to attract more customers during lunch and the afternoons outside of the breakfast rush, which Boyle says occurs from about 6:30 a.m. to 9:30 a.m.

The menu expansion didn't require a different equipment package because the store receives daily deliveries from its commissary, although Caribou does use toasters to warm baked goods.

The most important pieces of equipment for Caribou, naturally, consist of the coffee urns and heavy-duty, automatic espresso machines, which, according to Boyle, generate 40 percent to 50 percent of sold beverages. This means two attributes remain most important in any successful operation: durability and preventative maintenance. "I would give up cost for quality and reliability," Boyle says in regard to equipment purchasing. Before purchasing begins, "We try to determine failure rates and project operating costs as well as total cost of ownership."

This stems mainly from the fact that due to the high-volume service, espresso machines and blenders take a major beating on a day-to-day basis. To keep the machines in top shape, employees must undergo a "fairly extensive training program" to understand how to use, clean and essentially take care of the equipment, Boyle says. The machines also have a self-cleaning function that will automatically activate during non-peak times.

When properly maintained, the espresso machines last about five to seven years, but occasionally require the replacement of pistons, gaskets and other smaller parts that move frequently. Caribou has an internal service maintenance team, but sometimes enlists outside service agents. The coffee urns also need proper daily and preventative maintenance due to their extremely high volumes. "We throw our coffee away after an hour if we don't sell it," Boyle says. As a result, Caribou's coffee bean grinders go through enormous volume as well.

Proper water filtration systems help keep equipment in top running shape. "In the case of beverage shops, they have to be particularly picky about getting the right filtration system that ensures their water is of good quality," Godward says. "That helps enormously in keeping the machines clean without as much buildup. It's shocking to see the sizes of these water filtration systems, and how much money is invested in them."

Pure water doesn't just prevent mineral buildup on equipment. More importantly, it makes the coffee and other drinks taste better. Boyle stresses that "one of the worst things you could do with coffee is take a coffee bean and brew it with bad water."

Juice and smoothie stores face the same issue when it comes to water purification, according to David Gross, consultant and president of Juice Bar Solutions, a design consulting and equipment supplier for juice bars and smoothie shops.

When working with a smoothie operator or chain, Gross always recommends installing a water purification system to create the best-tasting, freshest product. This is largely due to the fact that fresh remains a big sticking point with smoothie consumers, who mostly represent people concerned with their health.

"With people becoming more health conscious every day, the smoothie industry is a business that will continue to grow by leaps and bounds," Gross says. But, he says, for smaller smoothie shops or chains, "Unless you have that perfect location, it's very difficult to sell smoothies only. No one wants to go to one store for one thing and then go to another for lunch or dinner."

Consequently, Gross views "fusion" concepts, smoothie and juice shops that also serve coffee, espresso, salads, sandwiches and other fresh menu items, as the "wave of the future." An expanded menu helps draw smoothie customers in the stores beyond peak times, which fall generally between 10 p.m. and 11 a.m.; 2:30 p.m. to 5:30 p.m.; and 8 p.m. to 10 p.m. In addition to drawing in customers from other day parts, expanded menus provide an added sense of convenience for the smoothie customer also looking for a full meal or snack as well.

Blendz, a rapidly growing California smoothie chain with five locations, soon to grow to 10, represents a good example of this type of fusion concept, Gross says. In addition to its list of smoothies and freshly squeezed juices, Blendz offers a selection of grilled panini sandwiches, tossed salads, and a slew of soups such as Azteca chicken and rice and Pacific Northwest clam chowder. The chain further enhances its sales, Gross says, by offering combo meals that pair these food items with smoothies.

The concept of fusion has been part of the recipe at Robeks, a chain with more than 100 locations throughout the United States. The chain offers freshly squeezed fruit and vegetable juices and smoothies as well as a menu of fresh food items that includes salads, sandwiches and wraps prepared on-site, says Sheri Miksa, president and chief executive officer of the Manhattan Beach, Calif.-based chain.

In addition, Robeks ships in baked goods from a commissary. This includes power muffins, cookies and pretzels that staff warm using countertop pizza ovens. Robeks has also tried to branch out to other day parts through its selection of "energy bowls" with fruit and granola suitable for breakfast, and frozen yogurt selections for dessert.

The stores take a traditional quick-service restaurant-style layout with a cash register line, flanked by the juice and smoothie area to one side and the fresh food section to the other side, where a designated employee assembles the orders. Robeks positions only one employee for the food area, Miksa explains, to prevent cross-contamination and maintain a safe food environment. "We're very passionate about food safety and sanitation," she says. "We train our employees and franchisees on proper handwashing and use the ServSafe system."

At the juice station, undercounter refrigeration holds juices and dip boxes store frozen fruit, sorbets and yogurts used for the smoothies. An organic wheat grass extraction transforms wheat grass into liquid "shots" for nutritional boosts. Robeks also sells its own line of green tea and proprietary nutritional boosts and supplements that rest on the countertops in various containers. Freshly squeezed orange and other juices continuously mix in a countertop refrigerated dispensing unit to ensure freshness and prevent bacteria growth.

The back of the house, like most beverage shops, takes up little space and mainly features a single walk-in cooler and freezer as well as a three-compartment sink where staff wash, rinse and sanitize dishes. "We ensure each blender is used a single time and is fully washed and sanitized before it's reused," Miksa says. What does that mean? Robeks uses "lots of blender jars" in just one day.

The blenders represent the key pieces of equipment at Robeks, according to Miksa. They need to be extremely high-powered to handle the high volume. Your basic household blender just won't do in these cases. Like Godward says, the better ones are "made like tanks."

Robeks' success stems not only from its efficient design, but also from its diverse customer base, according to Miksa. From bodybuilders to families, business associates and others seeking nutritional meal replacements or healthy snacks, the chain draws customers of all types.

On the flipside, with coffeehouses drawing in larger and larger breakfast crowds as well as those looking for a way to recharge in the afternoon or relax in the store, it's no wonder specialty beverage shops continue to grow both in sales and in number.