Added On: Friday, December 28, 2007

Hot stuff

by Julie Sturgeon * • 19 Dec 2007

There’s a new beverage motto in the fast casual world: When you’re hot, you’re hot.
When Chicago-based Mintel Menu Insights studied hot drinks on menus in 2007, it found 103 varieties of coffees across 14 fast-casual chains, followed by 52 ver­sions of tea, 26 lattes, 24 hot chocolates, 18 cappuccinos, 14 mochas and eight espressos. Herbal teas, cider and café Americano scored a handful each.
Sure, demand goes up when the weather cools down: In Lake City, Fla., where Ellianos Coffee Co. is headquartered, temperatures in the 40s will bring out the coffee drinkers in droves. According to director of operations Mike Stewart, hot sales see a 25 to 50 percent jump during the cool season. Chalk it up to the psychological comfort people associate with a warm drink on even a cloudy day.
And yet Starbucks, Peet’s and even Mc­Donald’s continue to churn out the roasts in the hottest summers. “So, if you think it’s a seasonal thing, you would probably be leav­ing money on your table,” said Bob Phibbs, a Long beach, Calif.-based retail consultant who previously worked with It’s a Grind and Polly’s Gourmet Coffee. And that’s before you count in the fact that coffees and other hot beverages boost dessert sales.
Meanwhile, carbonated caffeine sales are posting a decline for the fourth straight year, which industry experts interpret as an audience looking for alternatives.
Rules of the game
That doesn’t mean, however, any old coffee or hot drink will sell.
To even enter the competition, a fast-casual restaurant must make the same commitment to hot beverages as the leaders in this niche. For instance, coffee shouldn’t sit longer than two hours in a vacuum pot, so unit managers must have the discipline to toss out product at two hours and one minute. And there’s no excuse for serving a cappuccino or latte with any product spilling over the side — employees must wipe off the cup before handing it to the customer.
“Presentation is everything,” Phibbs said. “Know your audience: You don’t go with a Styrofoam cup or the too-thin paper cup. You have to do your research because other people in this niche serve coffee very well.”
That goes double for the product’s quality.
“We’re not talking about some bag of concentrate that you add hot water to and call an espresso drink,” he adds.

Instead, scour the Specialty Coffee As­sociation of America (SCAA) Web site for tips. Get a brewer that gets hot enough to make the coffee taste good — Ellianos strives to serve its coffees at 150 to 170 degrees, says chain president Mick Rynning. Pick out a supply of premium beans, not just the cheapest stuff you can pick up at Costco. After all, even McDonald’s is making a run at Starbucks quality — and consumers are responding with their money.
It’s a lesson Phibbs hopes every restau­rant owner recognizes. “We have to get out of that mentality that coffee is down on the totem pole below the rags and cleaning sup­plies as a purchasing priority,” he says.
Timeliness counts
Roughly 80 percent of coffee consump­tion in the United States takes place before 11 a.m. Customer surveys tell Rynning that 83 percent of his customers are females — half of who stop in on their way to work, while the other half is handling carpool or heading off to run errands.
So, it stands to reason they won’t stand in line long. According to Phibbs, the industry standard wait time to shoot for is three minutes between payment and receiving the cup, but he advises his clients to strive for two. Still, if you have 20 people in line, that adds up to too long — and if the person on the espresso machine isn’t well-trained, the crowd will overwhelm you even faster. “The longer the wait, the more people won’t put up with it,” he warns.
There’s no doubt this presents a challenge for a restaurant that primarily concentrates on sandwiches, just as the logistics of making fresh sandwiches is confounding the coffeehouses. And yes, there are machines on the market to speed things up, but the trade-off is price — you may need to sell as many as 50 cups of $3 espresso a day to break even.
On the more affordable end, the product taste doesn’t live up to a fast-casual’s quality image. And neither route is worth a hill of beans if your employee shows a preference for text-messaging her boyfriend instead of hustling to make top-notch drinks.
Pricing dilemma
Hot specialty drinks imitate a bar: The average Joe isn’t sure how to price the product, so restaurants don’t have to stick with the standard formula of determining ingredient cost and marking that up by a small percentage. Conventional wisdom says to charge $4 for the average specialty drink, Phibbs said, if only because that’s what the other guy is charging. Of course, you must have the accompanying upscale atmosphere to play into the image that price creates, too. McDonald’s is unlikely to pull off a $4 coffee any time soon.
But don’t look the other way and make it a loss leader, either. This menu item is strong enough to be the star in its own advertising campaigns — no entrees needed, assures Rynning.
For all the upfront hurdles, “I haven’t understood why more fast casuals haven’t taken the leap and improved their coffee and hot beverage service,” Phibbs said. “That’s what keeps people — it’s the most memorable thing about the meal.”

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