http://www.zolibeau.com/

So…here’s the thing. You can still buy afternoon tea vouchers online for our current price of £11.50. These are valid indefinitely. If you live locally you can pop in and buy them, without having to pay the postage.

We generally don’t have special offers, as we try and price our products as competitively as we can. However, I guess you could call this a special offer. On June 1st the ‘Afternoon Tea for Two’ voucher will increase to £27.

Here’s the link

Issues to be outlined in this post are: ingredient cost, selling price and staff pay.

I have drawn a lot on conversations I have had from other people in the industry. 

Ingredient cost:

In general, you can buy coffee from a speciality UK based roaster for cheaper than you can buy Illy etc. One will be freshly roasted speciality grade beans, the other will not. This seems odd.

When it comes to tea, a serving of loose leaf tea is cheaper than your ‘quality’ tea bag. Again, one is normally fresh,higher quality and with full provenance. Tea bags do have the added cost of bag manufacture, which is for convenience instead of taste.

The obvious question to be asked is, are wholesalers charging too little? The cost of green coffee beans is a lot more transparent than speciality tea. So is there a fear to charge more because of this?

I think it is good to be competitive with others, to a degree. ‘Economics theory’ dictates that you can charge whatever you want, if people are prepared to pay for it. Some roasters in the UK sell a kilo of coffee at close to £5. So, is what holds back roasters from charging too much, is that they know a competitor will be able to charge considerably less?

I can also buy loose leaf tea for $2 a kilo.

But we do not use these suppliers. We pay between £13 and £20 per kilo of coffee, and ten times as much for our basic teas. (speciality tea prices can go up to hundreds per kilo).

One of the problems is the low public awareness of speciality grade coffee compared to commodity grade. This is evident whenever you pass a bustling coffee chain. Why pay more when the public don’t care? This is an issue that affects every speciality. We geek out over it, other people ‘just dont get it’.

When it comes to tea, we have a similar problem. We buy what we love and what the farmers are proudest about. These command huge prices, but we are willing to pay. Knowing that you are buying picks of the season gives you confidence when dealing with customers. If someone comes up to the counter and tells you that they didn’t enjoy that tea, you never feel bad. This is because you have performed your part of the bargain – by sourcing the highest quality tea you can. Price hasn’t come into it and you haven’t tried to palm off some basic tea to people kind enough to choose yours as a place to spend their money.

In summary, there is a lot of competition between businesses in this field. Once public awareness increases, speciality wholesale prices can also increase. If they increased now, then the number of customers for the wholesale company would probably decrease – which would result in no overall benefit for the company.

Cafe Pricing

Should we charge a lot more for our products? This question gets asked a lot. Would we be able to keep our staff for longer if they were paid more? Would higher prices on the front line allow roasters to charge more and in turn allow farmers to charge more? Would cafes be financially sound investments, rather than lifestyle business?

A lot of questions.

So, lets say we charge £5 for a cappuccino. Would customers pay? I don’t think they would. Sure in some areas they would, but on the whole, no. I understand they do pay these kind of prices in nice restaurants and hotels. But I’m talking about all of this with cafes being ‘everyday places’, with people popping in a few times a week, refuelling on ‘essentials’ as opposed to luxury occasional spends.

When it comes to tea, you can aim to be a venue that attracts 20 customers a day, charging £10 per pot, and making money on retail sales of tea and tea ware. Or, you can have a cafe format, attracting hundreds of people per day, with a smaller percentage coming from retail sales.

Personally, I think that speciality tea and coffee should be part of everyday life. They should no longer be served just in ’boutique’ places.

People say that the big chains charge more that independents for these goods. The chains are very good at setting prices. They are charging the maximum that they can get away with. The chains in this field can charge a premium because of the ‘comfort’ factor associated with them. We should not compete with them on price. We should be comfortable charging what they charge. Our points of difference should be noticeable enough for customers to realise what we offer.

There are added costs for good independents. I spoke about the costs involved with buying coffee. In a good cafe, the coffee is ‘dialled in’, to achieve a good brew/extraction. This involves changing the grinder settings and sometimes temperature settings. We taste, we decide, we change. this all uses up coffee. I would say at least 5-8% of coffee bought gets used up like this. This gets added onto the cost of the drink. I have never seen this happen in a chain. Everytime i see an espresso pulled in a chain, it looks terrible. Even without tasting it, I can tell that it hasnt been extracted well. I have never seen staff in these chains throwing away a bad shot of espresso. I have never seen them dial in coffee in between peaks and troughs in trade. Good independents do this throughout the day.

Customers often say, ‘coffee only costs 15 pence per cup’. I hope all the above outlines why for a good independent this isn’t the case. We havent even started talking about costs of milk, and in particular using fresh milk everytime, as opposed to reheating old milk…

So what should we charge per cup? Again, whatever we can get away with. If you are lucky, and in an area where you have no competition, or an affluent clientele, or a ‘superstar barista’, you can charge more. If you are doing the same s everyone else, using the same beans etc  - you will price accordingly. The time it takes to train a barista should also be taken in to account.

When we look at tea, the price can be determined on the exclusivity of the tea sourced, as well as the time taken to drink it. Pots are priced more than cups, and this has no direct correlation to ingredient cost, but time taken to drink.

Business sense

All of this leads onto staff pay, and profitability. If we charge the same as chains although our costs are higher, can we compete and grow? The obvious answer is no. Something has to give. We cannot buy as cheaply as them, and in many cases, we don’t want to. We cannot expect to have amazing staff, and pay them less than what they would get in a supermarket. The option of increasing prices, when the customers aren’t aware of the ‘gain’ associated with the higher prices is dangerous. Are we destined to be lifestyle businesses if we don’t cut corners?

In my previous full time profession of pharmacy, we encountered these issues all the time. I remember doing a locum shift in a chemist shop. They had lost every single member of staff in one go. A supermarket had opened across the road, and they got paid more sitting at a checkout. with more flexible working patterns. This is despite the fact in pharmacy there is obvious career progression, education, associated wage increases. The staff just wanted less stress, an easier life. In cafes, we expect the staff to be as passionate as us. This may be asking a bit too much. This post is about profitability, and staff think on the same lines. They don’t just want to be able to afford an iPad, they want to put a deposit down on a house. They are often young, educated and ambitious. They think bottom line, in the same way as we do.

So, do we pay more for staff? As stated before, if you can afford to pay, why not. Generally, there is the perception that great cafe staff should be paid more. My belief is that all staff should be paid more. The national minimum wage has been a step in the right direction, as well as compulsory holiday pay. But can we afford to have cafe  staff earning £30k per year? I would say not. This leads on to the famous problem of staff retention. We have had members of staff leave and instantly double their wage, by going to work in a good restaurant. This has not been down the increase in basic pay, but an increase in tips received. I remember when i used to work in restaurants during my university days. My basic was £4.50 per hour. On an 8 hour shift I would make £36 in wages. My tips would be between £40 and £100.

Speciality cafes need to embrace table service. We need to be different to the streamline systems that chains adopt. We need to give the customers a reason to tip. We should hide the till. Bills should be brought to the table. Whenever I eat out, I always round up when I pay. I am not for one second saying that tipping should be compulsory. I hated the system in the US where you felt compelled to tip. But, if the service is good, then you may deserve a tip. If service is routine, then don’d expect a tip. This in turn would increase the quality of service in cafes. If staff knew they could buy their iPad quicker if they smiled, they would smile.

Buying groups. In pharmacy we have companies that negotiate with manufacturers on the behalf of a number of independents in their group. Prices are much better than you could negotiate independently. I’m not sure how this would translate into the speciality cafe market, but in some areas it could work well. Milk is an obvious target product. As an independent you will always want to treat your suppliers as you would wish to be treated. This sometimes steers owners away from negotiating win-win situations.

In summary

Wholesalers should charge more, but only when they have effectively communicated to the masses why their product is better. For now, they should make it a ‘no risk’ situation to buyers.

Retailers should be comfortable selling at the same price as chains, and more if they can highlight their points of excellence well. If you walk in to an independent and the customer experience is the same as when you walk into a chain, then I would say you should charge less than them. Chains can often justify charging a premium because of high street locations and premiums associated with ‘knowing what you are going to get’.

Staff should be paid more than they are. As stated, costs to independents are higher than those to chains. Costs of drinks shouldn’t go astronomically up, as that would push speciality coffee and tea into the domain of ‘niche’. Instead, we should encourage the tipping culture in places of excellence. If people like it, they will pay. This has obvious and measurable advantages.

Yeah, that’s what I reckon..

From the outset I would like to state that in no way do I think that what we have done is complete. As a matter of fact, I am often humbled when I visit other cafes, and frequently embarrassed when other café owners/staff visit our teahouse. This post is purely from my perspective. Comments are welcome for any readers to add or disagree. I hope that potential café owners will be able to use this post as a resource.

a)      Would you open a restaurant without knowing how to cook?

Many people enter the café world without learning how to make their products. It is often a career that people venture into as they feel that they can ‘do things better’. A lot of focus seems to be spent on the feel of a place, marketing, fit out and securing a good location. However, when it comes to making the products, it is an afterthought. Having recently started consultancy work for new start ups this phenomenon has become apparent. Owners get in touch and when I ask at what stage they are at in the open, the most terrifying answer is ‘we are opening in a couple of weeks’. I also speak to many ‘soon to be operators’ during our barista evenings, and some have never made a coffee before. Yet they have had their counters built, and bought their machinery. Training on product creation is the one vital ingredient to success. One of the most amazing places I visited recently was white washed and used pallets as furniture. Their coffee was amazing. I would return. Gone are the days when all you had to do was open the doors. The public expect a lot more, and we should give a lot more. Learn how to make food, how to make drinks. Learn how to make them well. Make people remember your creations, as well as your colour schemes.

b)      Trade Shows

Before we opened we visited a number of trade shows. I felt that they provided a great insight into the products that are available in the café sector, and you also get some great nuggets of information. However, not many  speciality products will be found at these trade shows. No great roaster will exhibit there, in general. What must be remembered is that everyone manning the stalls is a salesman. I often speak to people who have returned from such a show and they feel as if they know everything they need to know to set up. My opinion is that instead of these shows, people should visit places of excellence. Take notes. It is as important to note things you like, as well as things you would do differently. See what machinery these places use. Find out about product ranges.  Communication of menus. I am not saying that you should copy these places. Your stamp should definitely be put on the final outcome.

c)       Living the dream

Coming from a professional background myself, I was as guilty of this as anybody else. Having a café would be like having a bar, only not having to deal with drunks. What could be better? Now, when customers come in and say to me ‘you’re living the dream’, I think ‘you work 9-5, five days a week, 6 weeks paid holiday, sick days paid, perks’. We open seven days a week, 8-6. I remember the first year we opened, on my birthday, I was scrubbing the oven at 9pm. It is hard. The perks are amazing, don’t get me wrong. The people you meet, the sense of satisfaction that you are delivering great products, to the best of your ability, and the spin offs. But is it living the dream? I’m not sure.

d)      Exit Strategy

This is the reason why I write this post now. A couple of weeks ago I met with a friend who advises directors on company structures. The first question he asked me was ‘What is your exit strategy?’ I replied that I had only been going for three and a half years. He then asked, ‘What if I had asked you after ten years?’, my reply was ‘I don’t know’.  It is the first question he puts to any of his clients. I think it is worth thinking about. Do you want to be working in a café for 20 years? If not, how will you realistically benefit from your experience?  An important thing to consider is ownership of the café. If you can manage to buy freehold, then do it. If you take just one thing away from this post, it is this. Renting is sometimes the only way, but as most of our parents will say, it is not ideal. If you buy freehold, after 10-15 years you will have a lump sum which you can retire off. If you rent, it is unlikely that you will ever get that lump sum, unless your goodwill value is astonishingly high. Think of where you want to be in 5, 10, 15 years time. A good café business can certainly afford you a good lifestyle. However, the guy who cleans the windows in our area – he cleans virtually every house in each of the streets on his patch. He must have at least 500 houses that he does every week, at £4 each. If making money is your thing, then if you work hard you can make it in any trade.

e)      Staff

This should be the subject of another post, but I will outline my thoughts here. Employ good people, obviously. There is no better time than now to get your hands on amazing staff. Employ people with degrees in marketing, catering, IT, accounting etc. allow them to use their skills. They will love you for it. They of course have to be passionate about your project too. If they feel part of your plans, they will not be clock watchers. They may not all be amazing, but as long as they work hard. You may find staff who don’t care, who put in 80% effort, but shine bright on occasion. I prefer someone who gives 100%, but may not be able to shine as bright. I feel I can call them members of my team, and I treat them accordingly. You should try and harness who you have, but the work ethic is something I find is part of someones make up. I am sure many of you management people will disagree. This is my perspective.

So in summary, learn how to make delicious food and drink. Have a look at how other places do it, as opposed to getting info from salesmen. Accept its going to be hard. Have an exit strategy, or a vision. Surround yourself with good workers.

This has been promised for a while. For any of you who have had the misfortune of meeting me, the topic will come as no surprise.

Just a quick intro. Some teas are brewed at near boiling point. Others are brewed at around 60^oC. The ability to brew different teas, quickly, in a café environment, is the subject of this post.

At the teahouse we have two different boilers, one set at 98^oC, the other set at 78^oC. These effectively deliver 95^oC and 75^oC onto the leaves when we dispense. For our Japanese greens we add filtered cold water to hot water. To achieve 80, 85 and 90^oC we measure, mix and pour. As we have been operating for over three years this process has become streamlined and fast. Although new members of staff have to be given full training on the techniques involved.

Other teahouses employ three boilers – 75, 85 and 95. The practice of always adding cold water to hot water in a busy environment is impractical. It can be done in slow paced cafes, but it is certainly not laying foundations for success.

I have been researching into variable temperature hot water dispensers for a number of years. The ideal solution would deal with

a)      Footprint – although having three of four boilers set at different temperatures provides a solution, it is not viable in many café settings. The preferred piece of equipment would reduce the space required to deliver the variable temperatures.

b)      Temperature accuracy – an accuracy of plus or minus 1^oC is a good benchmark to aim for. This would mean than teas would be brewed within a margin of 2^oC. This is perfectly acceptable for tea. Obviously, even more accurate would be welcomed.

c)       Output time– the required temperature should ideally be available at the touch of a button. Waiting while the font is primed for a set temperature is acceptable, only if it is less than a 10 second wait. If there is a wait of a minute or so, then procedures could be adopted where temperature is set, tea is weighed out, and the boiler returned to when ready. This is do-able, but not ideal.

d)      Output temperature and volume – Most teas you will find are brewed at the higher end of the scale, closer to 95oC. However, it may be the case that a place specialises in green tea, which would be using temperatures in the range of 65-85^oC. The ideal solution would allow users to specify what range they would be mostly using, and for the equipment to be created with that in mind. This is of note if the solution comprises of different temperature boilers linked to the output font. The most commonly used temperature could be held in a larger tank than less commonly used temperatures.

e)      Water loss – there are some delivery systems available which allow users to set the temperature. These are often useful when increasing temperature, but when reducing temperature it necessitates the hot water from the tank being drained to allow an influx of cold water from the mains – cooling the overall water temperature. This flushing of water is not acceptable from an environmental viewpoint.

Possible Solutions

The obvious solution would seem to have one hot water tank, with a cold water inlet from the mains. This could mix and merge with the hot water, creating the temperature desired. One point that needs to be considered is the temperature of the inlet water. This needs to be monitored, and perhaps heated to a certain temperature – allowing the software used further down the line to mix known entities. Alternatively, this temperature could be monitored and adjusted further down the process, with a priming technique.

Having a 95^oC boiler and a 65^oC boiler, which can be mixed by the machinery and dispensed would be another option. Although perhaps more of a footprint involved, it would still take the manual mixing out of the equation.

Commercial Aspect

A variable temperature system would change the face of the tea world. Excellent teas could be brewed to perfection, at the touch of a button. No longer would you think twice about ordering a Japanese Sencha. Tea is potentially the biggest growth sector in the café world, and an already established feature of many fine hotels. By having a such a system, tea could be delivered consistently, and the ‘human error’ aspect of the brew process eradicated, to a certain degree.

In the coffee world it is perfectly acceptable to spend £4k-£9k on an espresso machine, and in excess of £1k for a grinder. If a new hot water delivery was available, and marketed as an essential component of an effective tea service then sales for manufacturers would justify the investment.

How much should it cost? To achieve accuracy, the cost will be high. Having the obvious ability to double up for brewing coffee, then we would expect to pay between £1.5k-£3k.

Comments

Feel free to add , or disagree. I have purposefully not mentioned any manufacturers.

Love coffee? Own a coffee shop? Thinking of opening one? Then read on…

Will Corby (aka The Caffeine Kid and now a Coffee Hunter employed byMercanta) will be leading classes in Coffee Tasting & Barista Skills. Winner of the 2010 Northern Heat and 2011 London Heat of the UK Barista Championships, Will is one of the foremost figures in the coffee world today.

8.00am

Coffee Cupping Course:

Tasting coffee in its most natural form as the professionals do; you will be guided through cupping protocol and tasting procedures. We will taste 8 coffees of different varietals and farms including some of the worlds most sought after beans.

6.00pm

Barista Skills

This course will cover all elements of espresso machine use from how to adjust your grinder, tamping technique, pulling top espresso, milk preparation and espresso machine maintenance. It will leave you heading for home packed with enthusiasm for producing great tasting drinks!

All courses are priced at £40 or £75 for both courses. Light food is included.  Spaces are limited.  Alternatively you can book online.

www.dangreenphotography.com