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.


Electronic Transactions – Big Green Coffee Chain Accepts Square Payments

Admittedly, I haven’t been keeping up with the latest and greatest payment methods for the retail environment.  The last few I have seen and worked with didn’t seem to catch on and/or were only used by tech-buffs.  This article talks about Square Payments and Starbuck’s involvement and is a very relevant article and case study for franchise coffee shop owners.

PayPass and PayWave were able to remove the password and swiping process, but standing on the barista’s side of the counter, they never really seemed to speed anything up.  In fact, in some occasions multiple attempts to ‘tap’ the card on the ‘tap thing’ proved to take longer than had they just grabbed the pin pad and entered their password.  So why risk using proximity readers when there isn’t any speed advantage?

Of course the thing that is rarely explained to consumers and business owners is that these technologies are not necessarily ‘all good’ for anyone, especially at a coffee shop franchise.

The way the idea is sold to people is that volume of sales will take over and the speed of transactions will offset any costs associated with the technology.  Costs?  Yes, costs.  The customer pays when they don’t pay their bill on time every month.  Making $2.50 transactions as easy as adjusting your necktie will not decrease the likelihood of eradicating that monthly credit card balance.  And what was most surprising for me to learn while running a $2.00 credit card transaction through my payment device was that most customers were legitimately unaware that they were costing the business profit by their habit.  There is a good chance that you are one of those customers, so allow me to open your eyes.

First, Visa and Mastercard are not charitable organizations.  In fact, they are the masters of double and triple dippin’.  Here’s a dumbed-down explanation of how Uncle Visa and his associates get their fat commission cheques every month.

  1. The customer pays interest penalties when they don’t pay their bill.  Everyone knows about this one.
  2. The business pays a ‘transaction fee’ every time a transaction is made, regardless of the size of that transaction. This occurs on both debit and credit cards.
  3. The business pays a percentage of the total sale to credit card company at a rate determined by merchant services company.  The bigger your company is, the better your rate is. This doesn’t happen for debit cards.
  4. When you collect your free VCR (I mean internet-ready LCD TV) for diligently accumulating all those points when you ran those $2.00 transactions through your victim’s credit card machine all those years, be aware that it wasn’t ‘free’.  Credit card companies don’t do things for free.  It was paid for by the merchant’s increased fees.  So, the better the ‘free program’ is associated with your credit card, the more your local cafe will be paying Visa.

So now can you understand why your local convenience store or coffee shop has that cute hand written sign ‘under $5 cash only’?

So it will be interesting to see how these innovative newbies compare to Uncle Visa.  If you see them showing up on street vendors or convenience stores, you’ll know why.

For brands like the ones mentioned in this article, or major coffee shop franchises, merchant fees are not a big concern.  They are more interested in getting as much money through the till in whatever way possible.  For a non-franchise operation, this is just fine and dandy because they are looking chain-wide at averages.  In a coffee shop franchise environment, the franchisor is also looking at getting as much volume through the till because they get paid BEFORE the expense of that transaction is paid for by the owner of that location.  An easy example of a 10% royalty looks like this:

-customer pays coffee shop $1.00 for ghetto 4 oz coffee
-the franchise takes $0.10
-the owner is left with $0.90 and from that must now pay for visa transaction (and every other business-related expense)

What would be revolutionary would be if the franchise would take the 10% royalty on the amount remaining after the transaction costs! I am guessing you would see them get instantly more intimately involved with lowering those fees and getting new and innovative solutions in place.

In conclusion, here’s a thought-provoking question for you:

“Does speed of transaction honestly matter in a coffee shop environment?”

Isn’t waiting 3-4 minutes and chatting with your barista/counsellor the whole reason you go there in the first place (oh, and the hand-made drink, too)?  Otherwise just go set up a Keurig machine with a payPass pad on it and talk to that during your coffee break.