Biggby Coffee may double franchises


From the Detroit Free Press

 

You may not have heard of Biggby Coffee, but you will.

 

The East Lansing-based company, formerly known as Beaner’s Coffee, is in the midst of an expansion that would nearly double its current size in the next two years. The company, which opened its first franchise in 1999, has 86 stores in 11 states with 70 stores under contract to open in the next two years. The gourmet coffee chain changed its name last September after receiving complaints that the name was a derogatory term for Hispanics.

 

The company is about 80% done with sign changes and, when completed in the next several months, the name change will have cost close to $1 million.

 

Michael McFall, president of Biggby Coffee, said more than a dozen potential franchisees come to the East Lansing headquarters for the twice-a-month discovery days to learn more about opening their own Biggby.

 

He expects that the business will have 384 units by 2011 and be well on its way to becoming a national chain. His partners are the chain founders Mary Roszel and Bob Fish.

 

Potential franchisees need to have a minimum net worth of $400,000 with $100,000 of that in cash. It costs $250,000 to $350,000 to open a store. The upfront franchise fee is $30,000.

 

Jimmy Giarraputo, 45, is part of a group of investors that owns four Biggby Coffee franchises in metro Detroit. They are in Auburn Hills, Shelby Township, Southfield and Royal Oak.

 

He expects to generate positive cash flow within two to three years. The first store, in Shelby Township, opened in October 2006 and the group has plans for several more stores in the metro area.

 

“It’s like any other business. You have to grow them, nurture them,” Giarraputo said. “I think the coffee industry is almost recession-proof because most people need their coffee to get them going in the morning.”

 

He praised the Biggby Coffee team for guiding him and his partners, who had no experience in the coffee business, to build their operations.

 

Geared up for growth

 

McFall, 36, joined the company’s original store in East Lansing as a minimum-wage barista while a student at Michigan State University. Here are highlights from an interview with the entrepreneur.

 

QUESTION: How did you choose the new name ‘Biggby’?

 

ANSWER: We went through a whole process. We evaluated different names. At one point, there were 100 names on the board, but we kept coming back to Biggby.

 

Q: Why did it need to change?

 

A: What we’ve been trying to do for the past 13 years is build a great brand. If you have a name that is offending a large portion of the population, then you are not for everyone.

 

Q: How did you move up from a barista?

 

A: I was preparing to go back to graduate school at MSU. I just needed some extra money. In relatively short order, I realized what Mary and Bob were doing was very unique. We started Global Orange Development in 1998 and we each own a third of that. We are using that to expand the Biggby operations.

 

In the long run, I am here for one reason … to grow a national chain of coffee stores to compete with Starbucks. This is grad school right here.

 

Q: How will you succeed?

 

A: Biggby Coffee is established on a restaurant platform. That is significant. Most coffee stores are run like retail stores. My partners came from high-volume restaurants. Our stores run more efficiently, quicker and with fewer people.

 

Q: What types of people are signing up for a Biggby franchise?

 

A: It’s such a huge swath of people. We have a guy who owns hotels in the Southeast. We have a handful of people who are employees of auto companies and are diversifying. Our most successful operators are spouses whose spouses maintain full-time employment.

 

Contact GRETA GUEST at 313-223-4192 or gguest@freepress.com.

 

Original article: http://www.freep.com/apps/pbcs.dll/article?AID=/20080221/BUSINESS06/802210356/1019/BUSINESS