Alton McEwen of Second Cup: Summary of Coffee Talk Magazine Article

Coffee Talk Magazine featured an article about Alton McEwen, owner of what we know of as Second Cup in its ‘modern form’.

It’s important to read business biographies like these to gain a deeper insight and respect for brands or independent businesses we see on a daily basis.  One does not have to like or participate in the brand to appreciate the history and work that has gone into a well known enterprise.

In this article, there is a story of how Alton McEwen took 129 franchisees to the source of the coffee beans to help them understand the passion he shares for a cup of coffee.  This is truly a great story and perhaps part of why Second Cup has stood the test of time.  The old cliche “They won’t care what you know until you know that you care [or however that one goes]” is played out perfectly with this example.

Another highlight was how McEwen left the company and came back on more than one occasion.  This story seems almost like a rite of passage in the coffee industry when we think of the famous story of Howard Shultz coming back to Starbucks.

A final highlight from the article is how McEwen welcomes the rise of coffee prices.  Although it’s tough to bear to see any commodity jump in price, coffee is a complicated plant and process and must remain sustainable.  Cheap coffee on the back of slaves is doomed to failure.  It’s far better to suck up the increases now than risk losing coffee forever.

Second Cup Gets Serious Hires Former Starbucks Marketing Person Alix Box

February 3rd, 2014 it was announced that Alix Box, a former marketing person for Starbucks (and Holt Renfrew) was brought on to Second Cup as CEO.   If you are in the coffee business in Canada, this announcement would force you to take notice, but if you are in the coffee *franchise* business business, this announcement should have you somewhat concerned.

In Vancouver, Second Cup used to enjoy a fairly strong presence around town – at least to the extent that when you said the name most people knew what it was and where you could find one.  Over the years, they were slowly ground out of the business as more aggressive local franchise chains overshadowed them and the demand for higher quality drove customers to more boutique options. Many can still remember when Second Cup was ‘the place to meet’ in Richmond Centre until a few years ago when even that location evaporated into thin air.  Now there are just three locations in Vancouver – two of which I had no idea about.

But that may soon change.

If there is ever a place in the world a chain can test their coffee skills, Vancouver is it.  Perhaps Second Cup will put the gloves back on in Vancouver in an attempt to redeem the territory on which other Vancouver coffee franchises have taken from them.  If Second Cup can provide a win-win business model for their Franchisees (while avoiding the Supreme Court), provide a very high quality offering for their customers, launch branding that distinguishes them and replaces their fairly generic flavour, and re-launch with a bang – they have a fighting chance.  Vancouverites, if they like your brand, will give their loyalty.

 

What Would a Union of Baristas Mean to the Coffee Shop Owner?

If you haven’t read all about it, a recent article spoke of a group of well-meaning folk in Halifax would like to create a union of coffee shop employees.  Yep, you read that correctly – baristas – your daily latte slingers.

Unions all started with a good purpose – employees were getting abused and treated unfairly.  These kind of things still happen today.  The people trying to create this niche union feel things could be better.

The Vancouver Coffee Shop Franchisees Association formulated for similar reasons – we saw acts of injustice taking place towards Franchisees of popular coffee shop chains by their Franchisors.  The Franchisees were in a position of vulnerability and subject to gross abuse by means of hand-crafted contracts by skilled lawyers – especially in BC where there is currently no franchise legislation.  In a sense, the VCSFA is a kind of ‘union’ of like-minded people.

Do the baristas need to actually unionize, though?

It was notable to us that Second Cup was mentioned on several occasions as a possible inspiration for the union.  Second Cup is a coffee shop Franchise well known in Canada, specifically around Ontario.  Second Cup has few locations (possibly just one?) in BC and operates primarily in the other provinces, so we are not yet entirely familiar with their specific Franchisor-Franchisee relationship.  That said, we know how the relationships between staff and Franchisee can be strained as a result of financial pressures from operating a franchised coffee shop.  Perhaps this trickled down to the staff?  Perhaps the Franchisees were locked into tricky contracts that pummelled their finances and they started viewing their staff as expenses rather than prized assets?  One can only speculate but it’s important to understand both sides of this story.

The coffee shop business, with it’s high operating costs and usually severe competition, is not well suited for providing high paid jobs – at least not many of them at the same location.  The argument against this position – and it’s valid – is that you can attract ‘talent’ by paying more and offering benefits.  In the coffee business, much like the restaurant business, there is a threshold where eventually paying more is not an option. Hence the gradual acceptance of the tip jar (usually an old stained mug to be precise). In many of the coffee shops we know, a good barista will earn no less than an average of $2/hour extra just from that old stained mug.

If the customer is willing to pay more for their drink there is no reason why a unionized labour force wouldn’t work but we are not convinced that the current market will allow for such a price hike.  One can look towards Australia where tipping is not part of the culture.  Word has it that a barista makes between $12 and $16/hr.  Accordingly, word also has it that the drinks in Australia are priced higher and the volume per cup is much less.

The coffee shop needs to remain a very flexible job as it serves a very unique employment position in our country.  If the Union of Professional Baristas (or whatever they decide to call themselves) is willing to work reasonably with the owners of both franchised and independent cafes, it *could* work but we think issues can still be worked out between the owner and the barista.

Business in Vancouver’s Biggest BC Franchise List – A Coffee Perspective

This list was published by Business in Vancouver not that long ago and deserves some attention.  First of all, we commend Business in Vancouver for putting together lists like these and for gathering data as it’s very useful for the public, especially the potential buyer of a coffee shop franchise.

Here are some pieces of information that we pulled out of this related to coffee, but first, please familiarize yourself with the VCSFA’s exhaustive Francouver. (Franchises in Vancouver) page.

1. Out of 80 franchises, only 6 are coffee.  That’s only 7.5% of all franchises in the list – pretty low numbers, I thought, actually.  And is Tim Horton’s really a ‘coffee franchise’ or is it a ‘food franchise’?  That discussion is up for debate.  We will give them the benefit of the doubt as well as add McDonalds to our Francouver list since it’s not there at the time of writing this article.

Here is the list with our running commentary:

#2 Tim Horton’s: Not much to say here except I’d be carefully watching the golden arches if I were them

#3 McDonalds: They are definitely into coffee now and much better in fact, than many of their competitors – they are in a new game now and I would not be surprised to see them start to seriously eat away at #2’s coffee share.

#13 Blenz: Sheer numbers.  They were cranking out new locations until about two years ago when everything seemed to come to a grinding halt.  Economy?  Other?

#39 Waves Coffee: Very similar situation to Blenz the way they were cranking out new stores. In fact, they may have out-cranked Blenz this year… I’d like to see those stats. Waves may be heading into other provinces to crank further whereas Blenz doesn’t seem to be doing much with North America.  Let’s see where these numbers sit between Blenz and Waves next year.  They are, if you didn’t know, rivals to say the least.  We will hopefully publish that story one day but feel free to dig in yourself. It’s very interesting!  We’ll leave that for a rainy day which will likely be soon. And, apparently another Vancouver coffee franchise will be joining this story in based on some new announcements from one of these chains.

#62 Esquires: They are huge elsewhere but I was actually impressed with their footprint here (respectable numbers!)

#65 Second Cup: Still hanging in there with their Ontario fanclub.  Not much expansion in BC but apparently heading quickly into the states.

Notes for Potential Buyers

From our experience in the coffee shop franchise arena, there is a small guage that is worth looking at on this list that would likely go unnoticed. You’ll note that there is a column for ‘number of locations’ and then ‘number of franchises’.  Typically speaking you would be looking for the number to be the same and that would indicate a better health.  You should not see the gap between the number growing and if you do, you would want to ask why.  Typcially what is happening is the owner of the store is going bankrupt, or, they have been forced out by the head office and they are running it.  We would very much welcome our readers to email us your comments as I think this would make a good discussion.  For now, however, we would recommend considering a fluctuating number here to be an indication that you should ask more questions about the health of the chain. Here is how those numbers look:

#2 Tim Horton’s: 289/289

#3 McDonalds: 166/207

#13 Blenz: 62/64

#39 Waves Coffee: 24/24

#62 Esquires: NP (Not Provided!)/12

#65 Second Cup: NP (Not Provided!) / 9

We would be concerned about a ‘not provided’ answer.

We would recommend monitoring the number of locations from one year the next and especially keep an eye on that gap mentioned above from one year to the next.  If you see an increase in the gap you know that head office has taken over another store and you would want to investigate why from both sides.

We hope this coffee shop franchise perspective on this famous list was useful and don’t forget that we always welcome you to email us with your feedback.

Five Signs of Excellence in Franchising – a Must Read

This article is an absolute must read for all prospective franchisees (franchise operators) and current franchise owners.

The VCSFA completely agrees with these 5 measurements of excellence and we are excited that a reputable organization has published this.  It is backed with actual research as well, which is a great bonus.

After hearing horror stories in coffee shop franchising in Vancouver, we ran a quick check amongst our members and the ones who are suffering agree that their franchisor failed at least half of these measurements.  In fact, one chain has failed all of them.  Here is the list of five points from the article with some concrete examples of how some of our members were failed by their franchisor:

Five behaviours of credible franchisor leadership

  1. The franchisor demonstrates a clear strategy and direction for the brand (including awareness of competitive threats with a plan to deal with them).

One Vancouver franchisor has not acknowledged the sudden emergence of a competing brand, nor attempted to match their radio advertising on a local news channel.  Customers are asking the franchisees why the competing chain is advertising and they are not.  The same brand has completely different standards of ‘branding’ applied to different stores.  This is interpreted as ‘favouritism’ by the franchisees creating a poor business environment.

  2. The franchisor is fair and consistent in dealings with all franchisees (this means having clear policies and sticking to them).

This same local Vancouver coffee chain has also failed this.  Some stores are making their own sandwiches while other stores were told they would be ‘in violation’ if they did and that the stores making them are ‘special cases’.  Some stores were told they must do certain things while others were not.

  3. The franchisor shows respect by listening to franchisee ideas and concerns before making important decisions. However listening does not mean agreeing.

In the case of this same failing chain, several franchisees requested urgent meetings with the directors to discuss very important issues that affect the whole brand.  One franchisee was told to wait 3-4 weeks because ‘it was summertime’. The franchisor never got back to them and when the franchisee pointed this out, they immediately tried to remedy it but needless to say putting off an urgent meeting for 1.5 months make this person feel loved. Many of the franchisees have asked the same franchisor to address issues related to their business and the franchisor has remained silent – completely ignoring the questions.  Needless to say this entire chain is quickly approaching a crisis.

  4. The franchisor embodies the values of the brand in their own behaviour. Hypocrisy kills brand passion like nothing else.

When confronted by franchisees about expensive vendors that they were forced to use, the franchisor replied “The vendors must make money, too.”  However, when the franchisees themselves were going bankrupt, there was no support or help was given.  The chain continues to force on their franchisees the same vendors.  This chain talked endlessly about ‘the importance of brand’ yet in the same city they opened a location in a hotel lobby in prominent location with a ‘similar’ but not ‘same’ name.  The sleeves are from the chain but the cups are branded to the hotel.  Some of the drinks are the same but the entire concept is muddy and unclear.  Customers around the city have asked the franchisees ‘what is this thing?” to which they have no reply.  Hypocrisy kills the brand.  A franchisor must practice what they preach or risk losing the trust of their entire front line.

  5. The franchisor reminds franchisees that he/she and the entire support team care about franchisee profitability as much as their own.

As mentioned in some of the examples above, this same offending chain has demonstrated to their franchisees that they don’t care about their profitability as much as their own.  No offer of reduced royalty payments to struggling stores.  No offer of reduced marketing fund payments for the obvious absence of advertising.

Thankfully for the franchisees, times have changed quite a bit recently.  If you read this article we published about the Dunkin’ Donuts situation you will learn that a franchisor cannot simply continue to fail.

In addition to this 5  point health check you can now perform on your franchise or your prospective franchise, we strongly recommend you also read this article we published about Five Things You Should Know Before You Buy a Coffee Shop Franchise as well as our Checklist to Evaluate a Prospective Coffee Shop Franchise (with bonus commentary)

Don’t forget that the VCSFA is always here to help.  You are not alone and your questions are important.

In case you have not see our most up-to-date list of coffee shop franchises in Vancouver, here is a list in alphabetical order.  Let us know if we’ve missed any:

 

Bean Around the World, Blenz, BG Urban Cafe (formerly Bread Garden), Cultured Coffee and Tea, Esquires, Moka House Coffee, My Cup, Second Cup, Serious Coffee (Vancouver Island), Take Five Cafe, Tim Horton’s, Wave’s Coffee, Wired Monk

 

 

Second Cup Expands into USA

This article is interesting as it shows that Second Cup is still growing in other markets.  It’s no secret that they have not been doing so in the Vancouver area, though.  I remember when I was growing up there were many more Second Cup locations around the lower mainland.  Now Blenz (and even more recently Waves) have all but taken that market away.

I would like to reach out for some authors to do a bit of research into this topic to find out some answers to the following questions:

  • If Second Cup has such a big following (which it still does) why did they decrease in market presence here in Vancouver
  • Why did Second Cup choose to expand in the USA instead of, say, attempt to battle it out in BC again?