Bad Habits of a Failing Coffee Shop Owner

A couple of months ago I had an opportunity to speak with a Cuppy's franchise owner. Cuppy's Coffee and More is a franchise system of somewhere in the neighborhood of a hundred existing coffee shops and traveling kiosks with many more waiting in line to open up. 

This is the gist of how I remember the conversation. I won't name names. Let's just call him Zee. I caught him just as he drove up and unlocked the door to his shop to retrieve something. I have opportunities to speak with such franchisees as I sometimes travel around the country.

Veteran franchise consultant Nick Bibby, principal of the Bibby Group, has been invited to interject a few key learning points as a running commentary.

"Zee" is just one person. He does not necessarily reflect on the quality of the Cuppy's franchise network nor imply that other owners in the system are similar in their viewpoint.

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Don: I am a reporter for Blue MauMau, a franchise news site. I've been reporting the news on Cuppy's. Have you heard of Blue MauMau?

Zee: No, I haven't.

Don: Do you mind my asking some questions? When did you buy your franchise?

Zee: No, I don't mind. I bought the store in the spring of 2007.

Don: Spring of 2007? Really. That brings back memories. When you were buying your franchise, what did you make of all the controversial news, blogs and online forum postings? At the time, a number of investors were complaining about not being able to receive promised refunds. There were complaints about stores not getting build-outs. It created quite a ruckus on the blogosphere and in some franchise trade journals, all beginning the first part of January, then growing. By spring, such news had taken off into the stratosphere.

Zee: Nope. I didn't see anything like that. I did read the disclosure document that my franchisor gave me though. Back then, Java Jo'z had a good name and a good reputation when I started thinking about the franchise. But Java Jo'z was in the process of changing their name to Cuppy's Coffee. 

Don: I don't believe any of this information appeared in the Cuppy's disclosure document at the time. At least, not that I recall. Did you use the Internet to search about Java Jo'z or Cuppy's when you were investigating buying a franchise?

Zee: I looked through the Internet and I went down to Cuppy's head office in Florida to investigate the company and the franchise opportunity. I really liked what I saw.

Don: When you visited the company and interviewed with their staff, did you hear about why Java Jo'z president and founder Roy Snowden wasn't there? He had been convicted of defrauding the Internal Revenue Service and was off to prison.

Zee: I heard nothing. I heard about that much later.

Consultant: It appears to me that this franchise buyer, like so many others, fell in love with the concept without testing it. And, as I have said/written on so many occasions, emotion and desire generally trump the brain. The process of falling in love with a franchise is no different from the feelings that emotions generate toward any other ‘object of love’ be it a house, a stock, a person, and so on. “It had a good name and a good reputation when I bought it.” Of course it did based on the buyer’s selective hearing. Hint: One should obtain a sounding board for their emotional desires. In the case of buying a franchise, even if that sounding board is not a franchise person, and so long as it’s not your franchise broker, at least there might be a chance of challenging emotion with logic.

Don: You heard nothing?? How about now? How are you learning about what's happening in the franchise system?

Zee: I get emails once in a while from the head office. I haven't really needed to contact the office and they haven't needed to contact me.

Don: What about your fellow classmates that graduated with you when you went through your franchise training class? Do you owners share problems and best practices with each other?

Zee: I'm kind of a loner. Pretty independent. We don't really contact each other.

Consultant: Being a ‘loner’ is probably not a good trait for a franchisee. If you are a loner, you are probably better off running alone because the best use of a franchise is to use the franchise and its entire system, if it has value. Otherwise, a person should stay a loner and have an independent business using his own ideas. Often, independents are very successful because they have the ability to patiently think and plan, and use their funds more judiciously (unlike governments and many franchise buyers). Franchising in NOT meant for everyone and that is why I suggest a process beginning with a full and real analysis of the person, not the opportunity.  

Don: Interesting. What do you make of the current management? Dale Nabors has been CEO for over three months now. Is his leadership making a difference to Cuppy's franchise operations?

Zee: You know I don't really know Dale. He's been there for just a short time and he doesn't communicate much with us (franchisees). I really liked Morg (Robert Morgan). You know, when I went to buy a franchise, he greeted me and singled me out for dinner. He told me how well I'd do with my franchise. We hit it off well. Had some drinks together. He was a warm human being. I felt very comfortable talking with him. He was a fun guy with a tremendous vision of the company and what the franchises would accomplish. I miss him and wish he were running things.

Don: Was Morg right in his prediction that you would do well? Do you mind if I ask -- is your franchise profitable?

Zee: I've lost money every month since day one of opening. And things are getting worse. I'm thinking I may sell my store. I'm not happy with the franchisor. It's their fault I'm in this predicament. When I think back, I realize that the Cuppy's name never really reached Java Jo'z level of goodwill and name recognition. They shouldn't have changed it.

Consultant: Infatuation supported by quality salesmanship on the part of the franchisor works most of the time to cement a franchise sale. Why do you think so many franchise sales are made? They are  referred to in the industry as ‘awards’, e.g. a franchise has been awarded to Mr. Smith of Arlington, but sorry, these results come from hard selling efforts by franchisors. 

Don: It's hard to imagine a coffee shop losing money at this location. There's a lot of big office buildings around here. I don't see any coffee shops. I would think that most people want to start their day off with a cup of coffee.

Zee: That's what I thought. I estimated that this site is surrounded by some 15,000 office workers within a few blocks.

Don: That makes sense. There's a lot of offices here, which means there should be a lot of potential customers. But why is your mobile unit closed right now at 1 p.m. on a weekday? I would think if the shop were open there would be customers.

Zee: I don't get much business. Besides, I have to close up the mobile unit when it is here. I applied for a mobile license with the state. But they didn't like me using a mobile shop in this one spot permanently. The state says that I can only be in one place for 15 days with the mobile license. The state intends the mobile license to be used for temporary events like football games, fairs and special events.

Don: If you like this site so much why didn't you apply for a permanent store license? Is the mobile license that much cheaper?

Zee: Yes. A mobile license is cheaper. But it doesn't matter. I know a state senator that will help me out with my license. I'll get it.

Don: Did you buy this property? (Pointing at the empty lot.)

Zee: Yes, I bought the lot to put the shop here.

Don: Seems like you saved a little money with your license fee but that has ended up costing you money because you aren't allowed to open your business.

Zee: Aaah, it'll work out.

Don: Well, I wish you the best of luck. Thanks for your time.

Consultant: Again, the buyer appears to be a loner. But in addition, in this case, the buyer apparently went on the cheap with a small-scale mobile unit. He apparently believed that it would substitute for a permanent, more upscale location. This type of thinking would suggest that perhaps the surrounding office workers would also buy their lunch from a canteen truck; I would question that assumption. A franchisor interested in generating royalties would probably argue for an appropriate location.