Coffee Republic looking to end year in profit

1st April 2008

Source: Food and Drink Exec
Publication date: 17/03/2008

Since opening the doors to its first coffee bar in London in 1995, Coffee Republic has seen its fair share of ups and downs. Exec finds out more

Written by Lucy Mowatt and produced by Hannah Edwards

Since 1995 Coffee Republic has gone through a significant number of changes, with the most notable coming in 2006; the company’s shareholders ousted founder Bobby Hashemi from his role as executive chairman and set about changing the company’s run of luck under new management.

Steven Bartlett, the current CEO explains that in nearly 13 years Coffee Republic has yet to end a year in profit. “We were the first coffee chain really and I think there is a disadvantage of being the first. We really over expanded and at the same time Vodafone shops were popping up everywhere and from what we can understand there was great demand for these premium sites, especially in London. The company really paid too much for these, overfitted them and didn’t really concentrate on the model.”

Since 2006 Coffee Republic has readressed these issues. “It’s all about the brand,” Bartlett explains, saying that it is looking to meet the competition that’s appeared in the market, including Starbucks and Caffé Nero.

“Speed of service is one of our key drivers too,” he continues, saying that the company is working hard to strike a balance between customers that just want to grab a coffee and go and those that want to relax or use the wi-fi facilities available at every Coffee Republic store.

The secret recipe

In line with these plans, the chain places a lot of emphasis on the training of its staff, not only to ensure that customers get an efficient service, but also so that they are able to make good coffee. “It’s amazing the number of people that think they’re doing a good coffee and they’re burning the milk,” he points out.

And with a selection of 20 different coffee beans from around the world making up its “secret blend”, it is easy to see why Coffee Republic places such an emphasis on training the staff in all of its own and franchised outlets.

In fact, the company has built very strong relationships with all its suppliers since 1995 and is still using the same company in Milan to brew its beans. “We’ve been through the wars, but people have stood by us, and I think that is testament to the brand,” Bartlett says. This is even true of its catering companies, with whom Coffee Republic has a strong history.

Coffee Republic now has 100 stores across the UK, a number which the CEO states is set to increase rapidly in the next twelve months. Having recently signed deals with Greene King, WH Smith and Cineworld, Coffee Republic concession outlets are set to open quickly.

“And there is a new company called McLeish which started up in Scotland and they have 49 stores to open in two years. There are going to be Coffee Republics in those too,” he adds, stating that it will add “critical mass” to the company and improve its finances.

Overwhelmed with enquiries

Since developing the brand, the company has been “overwhelmed” by franchise enquiries. “We have about 250-300 enquiries every week for franchising,” Bartlett explains. This has resulted in a lot of extra work for Coffee Republic, while they try to identify which enquiries are serious and which are less so. The company now holds a weekly franchise open day so that potential franchisees can go along and find out more.

In line with this, Coffee Republic has taken part in the One Life Exhibition at Olympia, as part of the Be Your Own Boss zone. A recent survey revealed that, when people were asked what they would do if they gave up their jobs, many said that they would like to open their own coffee bar.

“We tell people that you can go out and do it yourself, but unfortunately everybody is demanding branded coffee,” Bartlett points out. And Coffee Republic is in a position to help with those aspirations. Not only that, but Coffee Republic can offer training and branding for the outlet, making the venture much more secure.

International appeal

These potential franchisees are not just based in the UK either. Coffee Republic has appointed an international director in order to manage its coffee bars in eleven different countries, several of which are in the Middle East. “Our highest number of enquiries, internationally, was from Dubai and we have done a deal with the largest retail group there, the Paris Group,” says Bartlett.

He goes on to say that Coffee Republic has a competitive advantage in these markets too, ahead of companies such as Starbucks. “We tend to listen a little bit more to what our store operators are saying [about the menu],” he says. “For example, in India there is a vegetarian society, but there are some areas that are quite heavy meat eaters; you go to some countries and they won’t allow certain meats, so we make sure we’re flexible. Not everybody wants a croissant or a muffin.”

In addition to the flexibility of the menu, the service available can vary from market to market. “In the Middle East they very much like waitress service and we’ve got some areas where that has been half and half, as in the Dubai area; there’s a pick up point where you can help yourself or there is waitress service. It’s those kinds of things that companies like Starbucks don’t tolerate. It’s only a small point, but it’s very relevant.”

Owing to the popularity of the brand the company is now in the process of protecting the brand with trademarks too. Steven Bartlett points to a number of other Coffee Republic stores around the world with no link to the UK company - one store in Tasmania even has full branding. Bartlett makes it clear that this is on the agenda for 2008, as it is something that Coffee Republic given priority to in the past.

An internal branding exercise is also being launched this year, which will sit alongside its brands like Tea Republic. Caffe Republica will see the introduction of organic, Fairtrade coffee to its offering, along with recyclable bags. “We’re also looking at setting up a charity fund very similar to the Costa Foundation, but we’ll probably pick one country to focus on, probably Nicaragua,” Steven Bartlett says. The company will support the communities that supply its beans and build upon its infrastructure while offering customers ethically sourced coffee.

With such a strong focus on branding and turning the company around, it is sure to be an exciting year for Coffee Republic. “It’s been a very exciting journey and there has been a lot of work to do, but we’re starting to see the fruition of that work coming through now and we expect the international side of it to be even bigger than the UK,” he concludes. For the first time in 13 years Coffee Republic is looking to end the year in profit, which is testament to such hard work.