Harvest Roasting

November Newsletter

By Don Eckles, President

 

I’ve never seen tougher economic conditions than what we are now experiencing in the United States.  At the same time, I’m not seeing a down-turn in business…which at first glance seems a bit puzzling.  Starbucks reported same store sales for the 3^rd quarter were down 8% from 2007.  They also reported a huge drop in profits for the same period.

 

Last week I was eating at the FarmHouse Café in Omaha.  The place was packed.  As I’m sitting there, I was trying to make sense of that.  The food is certainly not inexpensive…other restaurants are closing, and yet, I had to wait 10 minutes to get a table.  What’s the difference?  It’s quality.  Great restaurants rarely close, and when they do, it’s usually because of something like a poor location.

 

I have always believed that, while coffee isn’t totally recession proof, it’s close to it.  Customers may not buy a new car or a new home, but things have to be pretty bad before someone gives up their daily coffee.  That doesn’t mean that we won’t see a slowdown in spending, but a recession doesn’t have to be fatal to your business.  In fact, some of your competitors probably will fail.  That could mean good things for your store.  Are you prepared to take advantage of that opportunity?

 

When people have less money to spend, they are going to be choosier about where they spend it. 

 

Those who think that “a latte is a latte”, or that, “all flavoring syrups are alike”, are probably going to have a hard time distinguishing themselves from their competitors.  Many people in the specialty coffee business use whichever supplier they were told to use.  It might be the same one used by the person they purchased their store from…or it may be whoever the local supplier is, or, it may even be someone who gave you a “heck of a deal” somewhere along the line.  Those are not necessarily good reasons to buy from a particular supplier.

 

Most of us think that we make the best drinks, because, that’s what we know.  We’re accustomed to the taste of our own drinks.  When we try drinks from other stores, somehow, ours just taste better.  Don’t confuse familiar with great.

 

Years ago, I used Monin Flavoring syrups in our drinks (we still do).  A local distributor had decided to close out a different (and less expensive) brand, and offered to sell a pallet of that flavoring syrup for $3.50 per bottle.  Well…I thought I had hit the mother load.  I purchased the whole pallet, and began using it the next week. 

 

The day after I began using the cheaper syrups, one of my good customers pulled up to the window and said, “you were a little off on my drink yesterday…it wasn’t very good”.  OH MY GOSH!!!  I asked what the problem was, and she said that the drink just had a “funny after-taste”.  That’s when I learned the importance of natural ingredients verses artificial ingredients.  And I had a whole pallet of this stuff!!!

 

Personally, I believe in Monin.  But that’s not the point.  The point is this…the quality of the ingredients that go into your drinks is important.  Just as important as the customer service, and almost as important as your location.  Pretty good will not be good enough during tough times.

 

To distinguish yourself, you should look at everything you offer in your store.  Don’t kid yourself!!!  Be open-minded about your drinks.  Sample your best competitors, and ask yourself, honestly, how you compare.  Ask your customers to give you some honest feedback.  “How do my drinks compare to______?”  “What is it that brings you to my store verses another store?”  “What could I do better?”

 

 

 

I still think that, for the most part, we are a coffee and pastry business.  Do those two things well, and you’ll probably do just fine.  Let’s look at both…

 

Pastries…

You don’t need a huge variety, but what you do carry should be eye-appealing, and delicious.  And, change things up now and then.  See what your baker has for each season, and offer your customers some fun new things.

 

Don’t hold pastries past their life.  A stale muffin is nasty.  If they haven’t sold, toss them…don’t try to save .90 cents by passing off an old muffin on an unsuspecting customer.  You may never see them again.

 

Keep the display case clean and well lit.  Arrange things in a way that makes them appealing to the customer.

 

AND…UPSELL!!!  “Would you like a fresh wild-berry muffin with your latte?”

 

Drinks…

This is why people come to you in the first place (or go to your competitor).  Use a high-quality espresso, from a supplier you can trust.  This is very important.  Burnt or bitter isn’t good.  Smooth and rich and flavorful is good.  Make sure it’s fresh.  Espresso or coffee that’s over a month old is too old.

 

I suggest whole milk in all unflavored drinks, and 2% in all flavored drinks.  Only use non-fat milk if the customer asks for it.  Whole milk tastes richer and creamer (obviously), but you really have to have a fine palette to tell the difference when you’re mixing it with chocolate or flavoring syrups.  The cost difference is generally around .25 cents a gallon.  Use fresh milk every time.  Don’t re-steam milk.

 

Do some taste tests of your own.  Ask suppliers for samples of flavoring syrups and sauces.  Try them as steamers, and, mixed with espresso.  Sometimes a chocolate that tastes great in steamed milk tastes different when you add espresso.  We sell the best at www.harvestroasting.com

 

Use a cup with an insulated sleeve, or a paper cup with a jacket.  Styrofoam is a non-starter with customers of specialty coffee.  While they are cheaper, customers don’t like them.

 

And remember, if you need help…We Consult.

 

Roasters Minute

Customers love new things, and the holidays are a great time to roll out some new choices.  Each November and December, for the past several years, I have roasted a special blend just for the holidays.  I call it Holiday Blend.  It’s a wonderfully smooth coffee with a nutty flavor, with hints of chocolate overtones.  Maybe it’s just because we call it Holiday Blend, but it sells well.

 

Another holiday favorite is a flavored coffee.  It’s called Mistletoe Mocha.  And while it isn’t a big seller throughout the year…at the holidays, chocolate mint coffee just seems right.

 

Both are available on our website www.harvestroasting.com

 

For Information, call:

Barb Miller

402-670-9755

Harvest Roasting

October, 2008 Newsletter

By Don Eckles, President

 

There are many ingredients in a “success pie”.  But in the coffee business, the important things are fairly easy to identify.  They are:  Sales, Cost of Goods, Cost of Labor, and, Fixed Costs.  Actually, these are the same things all businesses must focus on.  But in the coffee business, where smaller sales volumes and a lower average ticket are commonplace, it’s critical that we get these things right.

 

In the last two newsletters, I talked about the importance of selling high quality products, providing great customer service, and, how to control your cost of goods.  In this month’s issue, we’re going to look at the cost of labor, and again, how to control it.

 

It’s important to have a labor goal, and stick to it.  Otherwise, when profits are down, an owner may have a tendency to cut labor costs, and just work the hours themselves.  An owner’s (or manager’s) time is much better spent managing the business, and finding ways to get more dollars in the door, rather than just cutting expenses.  We’ll talk more about that later in this edition.

 

First, we need to have a labor cost “goal”.  I like to live in the “25% of daily sales” range.  That may not be possible in a new store, or one with lower sales volumes.  But, a mature store with a capable staff should be close to that percentage.  Even for a new store, anything over 30%

of sales (long-term) could be fatal to your business.

 

Your labor cost, as a percentage of sales, is figured by dividing the labor costs into the sales.  So, a monthly labor cost (including all taxes and payroll expenses) of $5100.00 divided into $20,000.00 of sales, would be 25.5%.  A general way to figure your total hourly cost would be to take the wage you pay and multiply it by 1.12.  That would (depending on location and tax rate) include FICA, Medicare, and unemployment taxes.

 

In our stores, we give our managers a labor budget.  It’s based on the number of employee hours we feel are needed to operate the store effectively, and still allow for growth.  Each store is different, but based on the number of hours a store is open; we decide how many people are needed for each hour of the day.  Based on hourly sales volume, you can determine your staffing needs.

 

Generally, while allowing for growth, I staff for the “usual” volume of the store, and then handle the unforeseen rushes as they occur.  I hear people say that “I need 3 people here in the late afternoon, because sometimes we get hit hard.  My question is…how often do you get hit hard?  If it’s every couple of days or so, then maybe the extra staff is justified (remember, we’re allowing for growth).  You can’t staff for the occasional surprise rush…you just handle those.

 

A busy coffee store will need 3 or 4 good people working during the morning rush, with each person assigned to specific responsibilities.  That’s a busy coffee store…one that is doing $700.00 - $1,000.00 by 11:00 a.m.  Otherwise, 2 morning people would be fine.  We look at the number of customer rings per hour, for our staffing.  Anything under 16 rings per hour is a 1 person hour.  Up to about 35 rings per hour is a 2 person hour, up to 60 rings per hour is a 3 person hour, and so on.  And, when the rush is over, we scale down quickly.

 

For many reasons, I think it’s important for a manager to work shifts during the busy times.  Those reasons include the customer contact (VERY IMPORTANT for customer loyalty), observation and ongoing training of the staff, the opportunity to keep a good handle on the wants and needs of your customers, and the need to stay “tuned in” to what’s going on in the industry and your business.  This is critical to keeping your current customers.

 

Just as important though, is driving new business to your store.  As a manager, you should spend time every week marketing your store.  EVERY WEEK…FOREVER.  It’s important to remember

that things change.  Customers move away, they change their habits, they change their daily routine…whatever.  Developing new business is vital to your long-term success.

 

We’ll spend time in future newsletters discussing the many ways you can effectively market your store…and for a very small cost (or no cost at all).  But, since we’re discussing labor costs today, I want to point out that the best way to keep costs down (as a percentage of sales), is to increase sales.

 

One other thing I’ve found, over the years, is that hiring people for the minimum amount of money doesn’t usually work out very well.  We’re in the Midwest, so costs may a bit different here, but, paying in the $7.50 to $8.00 per hour range seems to get us a pretty good employee.  Shift leaders, supervisors, or managers, obviously get more.  Including taxes, we budget based on an average hourly wage of $9.60 per hour.  That would be an average hourly base wage of around $8.55.

 

Employee retention is also very important…both in terms of customer retention and in over-all labor costs.  Turnover is a killer to the budget.  I’ve found that a new employee isn’t very valuable for a couple of months.  During that time, there is a lot of babysitting, and supervising.  That means double staffed shifts, and products mistakes (cost of goods…remember that one?).  Paying people well, and treating them with respect, will keep the employees happy, longer.

 

And finally, don’t forget that training never ends.  That doesn’t mean that you should badger your employees, or constantly find things to criticize.  But, you can’t let things go, either.  Train, train, train, on customer service, on drink quality, on speed of service, and on the importance of store cleanliness.  Your customers will appreciate it, and ultimately, so will your employees.

 

Roasters Minute

 

Most people know that there are two types of coffee beans…Robusta and Arabica.  Specialty coffee roasters use Arabica beans. Commercial coffee roasters tend to use the cheaper, lower quality Robusta, or a blend of both.  But, even Arabica beans can differ greatly, in quality and taste. 

 

There are 5 grades of Arabica coffee beans.  These grades are rated by the size of the bean, number of defects per 300 grams of coffee beans, and moisture content. 

Grade 1. Specialty coffee: Has less than 5% size variance, only up to 3 full defects and moisture between 9 and 13 per cent. This is the best of the best.

Grade 2. Premium coffee: same as grade 1, but with up to 8 defects.

Grade 3. Exchange grade coffee: 9-23 defects, 15%-20% size variance, and moisture content somewhat off.

Grade 4. Standard grade coffee: 24-86 defects and more variance on size and moisture

Grade 5. Off grade coffee: more than 86 defects

 

We use only Specialty grade and Premium grade beans for all of our coffees. If you are buying coffees in the 5.00 per lb. range, chances are, they are either grade 4 or grade 5 beans.

 

Please check out our Web Site

 

At www.harvestroasting.com you’ll find premium products at very competitive prices.  We would love to send you some samples of our wonderfully smooth espresso…just call.  And, if you’ve missed them, our previous newsletters are available there, as well. 

 

In next month’s newsletter, we’ll talk about surviving during these very difficult times.

 

Happy Selling,

 

Don Eckles

Harvest Roasting

September Newsletter

By Don Eckles, President

 

 

The specialty coffee business is a strange beast.  Many people want to own and operate their own store, but at the same time, many people fail in this business. That’s not to say that this isn’t a wonderful business…because it is.  It is to say that, like any business, it takes hard work and determination.  It also takes management skills.

 

Making a profit is as simple as bringing in more money than you spend.  WOW! Wasn’t that easy?  Assuming that great customer service, great drinks, and a clean well kept store are givens, the focus has to be on 3 things…sales volume, cost of goods sold, and cost of labor.  In this newsletter, we’re going to focus on cost of goods sold.

 

I (with my partners) own 17 specialty coffee stores, and I know dozens of people who also own their own coffee store(s).  I can’t tell you how many of them have no idea what their total cost of goods is, as a percentage of sales.  Fewer still, even have an idea of what it should be.

 

30% of sales, excluding sales taxes, is a good target.  28%-29% is obviously better.  You have

to strike a balance between making a good margin, and giving your customers a good value.

 

First, let’s look at how to figure cost of goods sold, as a percentage of sales.  Simply divide the cost of products into your gross sales (excluding sales tax).  So, if your product purchases total $1,800.00, and your weekly sales total $5,600.00, your cost of goods sold is 32.15% ($1,800.00 divided by $5,600.0 = 32.15%).

 

Now…what is included in your cost of goods?  Basically, anything that goes into the products you are selling.  Cups, lids, milk, espresso, chocolate, straws, stir sticks, napkins, bags, drink carriers.  If it goes into the product or, out the window, it’s in cost of goods.  Even whipped cream chargers would be considered cost of goods.

 

What is not?  Everything else.  Cleaning supplies are not cost of goods.  Steaming pitchers are not cost of goods.  If it isn’t sold, as part of the drink (or food item), it’s not cost of goods.  Those items might be listed as supplies, or equipment, or miscellaneous…but, they are not considered part of your cost of goods sold.

 

Your cost of goods can be controlled through purchasing, product selection, pricing structure, and, by controlling waste.

 

 Start with high quality products, then, shop around.  If you’re paying $6.00 for a bottle of flavoring syrup, you’re paying too much.  That doesn’t mean that you should use cheap products…it means, use the best, and, pay a reasonable price.  Please check our web-site www.harvestroasting.com…we sell the best products, and we work hard to keep the prices low.

 

Next, look at the products you’re selling.  How are your margins?  You can’t afford to have many items with a cost of goods over 35%.  Pastries and food items are, for the most part, add-ons.  Cost of goods on some of those items may be close to 50%.  Keep those to a minimum.

 

Your pricing structure is VERY important.  Don’t be shy about pricing your items appropriately.  Most of your drink items should have a cost of goods percentage in the low to mid 20s range.  Smoothies will be slightly higher, at upper 20s to low 30s.  Figure out, item by item, what your cost of goods is for everything you sell. 

 

Finally, look at your waste.  It could be (probably is) more than you think.  Steam the amount of milk you need to make the drink(s) you’re making.  Don’t re-steam milk, and don’t pour 3 or 4 ounces down the drain.  How much are your employees consuming?  Are you selling what you’re buying?  Look at your offerings, regularly.  If you are throwing away muffins, each day, buy fewer muffins, or better yet, learn to up-sell.  You can’t afford to toss a couple of sandwiches every day, if you’re only selling 6 or 8.  There is no profit in waste…just cost of goods.

 

Look into finding a pump for your smoothie containers.  Pumps will give you an accurate amount, each time, and reduce the “waste cost” of a smoothie.  You’re not pouring chocolate by sight…don’t pour smoothie mix by sight, either.  The same goes for flavoring syrups.  Get a pump; it will save you some money.

 

Eliminate mistakes.  An incorrect drink is 100% cost of goods.  Be sure that you and your baristas are careful to get the order right.  If you’re not sure, just ask the customer.  Believe me…they would rather have you ask, than give them a drink they didn’t order.

 

Order supplies based on your sales.  If your sales are $800.00 per day average, and you want your cost of goods to be 29%, you have $1,624.00 per week to spend on cost of goods ($800.00 X 7 X .29%).  Know how much you are spending, and how much you have to spend.

 

If your cost of goods drifts much above 33%-34%, you will have a hard time making any money.  Remember…you still have labor, a bank loan, rent, utilities, miscellaneous costs, up-keep, etc. and, you’d probably like to make a little profit.  If you need help, remember, we consult for a very reasonable fee.

 

The Roasters Minute

 

Coffee goes through several chemical changes during roasting, which creates more than 800 compounds.  More than 1/3 of those are aromatic compounds which gives coffee its great and varied aromas.  There are 2 important phases to roasting…1^st crack and 2^nd crack.  1^st crack is the point at which coffee is considered usable.  2^nd crack is the point at which the beans develop a slightly oily appearance.  There is a world of taste between the two.

 

Next month we will look at cost of labor.  How do you strike the balance between the dollars you’re bringing in, to the amount you can afford to spend on labor, to how your time could be better spent building or managing your business?

 

Blow-out Pricing

At Harvest Roasting, we have decided that we are going to sell only those “top-tier” products, which we consider difference makers.  For flavoring syrups, that means Monin.  It is our opinion that they are the best on the market.  Therefore, we are selling all of our DiVinci flavoring syrups for $3.75 per bottle, by the case…first come, first served.  We are also offering Jet Tea at greatly reduced prices.

 

One Stop Shopping

We would love to supply most of your coffee house needs.  Please call for a sample of our wonderfully smooth espresso.  Or, try one of our origin coffees or blends.  We’re sure that you’ll be pleasantly surprised by the quality and price.

 

Have a great month.  Fall is a good time in our business.  Be prepared to sell something.

 

For Information, call:

Barb Miller

402-670-9755 

Hi all,

I just finished with a new blend for Scooter’s Coffeehouse. It is called Il Dando Miscela ( the giving blend). They will be using it to promote charities. Pretty cool.

 It has a rich, full body with  mild acidity and a hint of sweet, dark chocolate that really adds to the mouth feel and aftertaste of this coffee. It is versatile enough to be a morning coffee, after dinner coffee, or alongside your favorite dessert.

I personally prefer it all by itself. Try a single serve, or for the best flavors to come through, I recommend a french pressed cup of this fine gourmet blend.

I also tried a Tanzanian peaberry to see what flavor profile I could attain. Non flattering results so far. Will be working on this one over the next week or so and will keep you all posted on the results.