My father and I bought a preexisting business in January 2012. Obviously the returning customers have expectations based on how the business was run before we bought it. Our customer base is mostly retired and elderly people. One of the expectations we are really unsure of how to deal with is the bottomless cup of coffee! On average, customers buy their $1.90 cup of coffee and refill it 6 times, 5 days a week. My father has figured that with 1 refill, we make money, 2 refills we break even, and anything more than that, we are loosing money.

 

How would YOU deal with this?

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I bought a coffee shop that had a group of old men that would sit for hours. They wanted to be waited on at the table like a diner I catered to them for a while.but than I had to raise prices and they decided they would have to go elsewhere. Well it was the best thing that happened to my store now there is more space for customers and I have more female customers it turns out they stopped coming in because it was to much of a hassel to have to converse with this group when they where in a hurry. Once in a while they stop in get coffee and go now but the diner next door or the mcdonalds can have there everyday business because they arent really hear for the coffee just the social hour. And if we cant make money what is the point

 

This is a tough one! Although it's hard to turn your back on an existing customer base, in this case I would highly recommend it. As a compromise I would suggest perhaps leaving the cost of your "single cup" of coffee as is, and having a separate "bottomless coffee" option that costs more.

Otherwise, I would also consider doing away with the bottomless coffee altogether--this is your business now, and you will run it as you see fit (and in such a way that you can make a profit, and not lose money!)

In this day and time, you simply should not and cannot offer discounted refills or bottomless cups. At best you will attract those looking for the equivalent of a convenience store they can sit in, at worst you will go out of business. And coffee under $2 will kill you, you just can't survive as a viable, profitable business that way. Even with average quality C-market coffee, you just can't do it. 

The bottom line is, for each refill you do, you are telling your customer what your coffee is worth. So, according to your average customer, your coffee is worth less than $ .30 a cup.

There's a reason the business was sold. It wasn't making any money!

It's YOURS now. You have a business to run, not a hang-out for penny pinching old men. Source better coffee, bone up on your coffee training and skills, raise the prices, and before you finish reading this, ditch refills of any kind, otherwise, it will be a short-lived venture.

Seriously.

I like what's been said so far.

Bottom line? Forget "breaking even" and "making money". Every drink you sell needs to meet your COGS target. If it doesn't, raise your price or get rid of it.

The one instance that I think a refill makes sense is if your house mug is small. In that case, you'll probably want to price the drink so that a single refill (with condiments) meets your COGS target, and be upfront about it. It isn't a free refill, they've already paid for it. Price additional refills as needed to meet your target, then charge for them. Also, no "can I get my refill in a to-go cup"! Clearly communicate this and let the chips fall.

A great espresso bar that a friend runs does something else that you may consider. He brews his pourovers in a medium sized carafe, and serves it with a mug. You can share this carafe with a friend or have a couple of refills for yourself. This is something you might try - giving them an easy alternative that doesn't devalue your product. The old guys could even take turns buying new carafes.

Good luck!

Seems there's a consensus already, but yeah, it doesn't make sense to worry about losing the custom of people that are costing you money. It only makes sense to keep refilling them if you're somehow making money from them being there otherwise (e.g. it's an internet cafe, or you charge by the bum by the hour ;) )

Honestly this just comes down to respect.  Respect these guys enough to explain that, while you understand how it used to be, it isn't going to be that way going forward.  Give them a day when you're going to stop the free refills.  If you feel comfortable with it, show them how much it costs you to produce a cup of coffee and how their purchase ends up hurting any chance you have of succeeding.

If they respect you, they'll understand, pay up and stay put.  If they don't respect you they'll move on and in 2 months you'll be astonished that you didn't do anything sooner because even with a loss of customers you'll have dramatically lower stocking costs.

Just think, if you charge $1.90 for a cup (which is absurd by the way, completely ludicrously cheap), but you charge it for each cup and you decide to not give free refills and these guys decide to stay and drink half as much as normal (because the "price increase" is something they just "can't handle") that's a bonus $4.25 per customer.  Let's assume this applies to 30 customers.  That's $127.50 a day, $637.50 a week, $2,550 a month and $30,600 a year.  That's freaking disgusting.  It took me about 15 seconds to run those numbers, as a business owner you should be running the same kind of numbers and should realize how much this "bottomless cup" is completely gutting you.

Not trying to be harsh, but if those numbers don't make your head spin and make you ABSOLUTELY sure of what you need to do, well...

-bry

While I do understand where you're coming from, I still have to take our customer demographics into account. There were dozens of issues along this same strain that I have been working out for the past year. Klamath Falls is not exactly a place brimming with coffee connoiseurs. In fact a large part of our basin is a little on the redneck side. People here will shop for the bargin, regaurdless of taste or quality! So I need to deal with these issues in a way that will not allienate my entire customer base all at once!

That being said, I do agree its time for the bottomless cup of coffee to go. We just need to figure out how to do it sensitvely. The main group that drinks here is a bunch of retired teachers who think coffee costs no more than $0.10 per cup although we have tried to educate them otherwise!  

Lots of us have been in your situation - trying to offer a good product to those that didn't fully appreciate the quality or cost involved. I'd say most of us. The majority of people in the majority of markets fit the description you just gave. It's not like nobody here knows what you're dealing with.

You cannot compete on price. The big boys and gas stations have you beat before you even start.

Pick products that balance your quality and cost goals. Price them appropriately. Or plan an exit strategy. Trying to do anything else leads only to slow and painful financial ruin. I've seen that movie more times than I care to think about, and still see people try to have it both ways. It doesn't work.


Lindsey Doud said:

While I do understand where you're coming from, I still have to take our customer demographics into account. There were dozens of issues along this same strain that I have been working out for the past year. Klamath Falls is not exactly a place brimming with coffee connoiseurs. In fact a large part of our basin is a little on the redneck side. People here will shop for the bargin, regaurdless of taste or quality! So I need to deal with these issues in a way that will not allienate my entire customer base all at once!

That being said, I do agree its time for the bottomless cup of coffee to go. We just need to figure out how to do it sensitvely. The main group that drinks here is a bunch of retired teachers who think coffee costs no more than $0.10 per cup although we have tried to educate them otherwise!  

Hi Lindsey:  as you know refill are very good, but this cost money. please do what Starbucks do all refills 50 cents. plus tax....  if you sale very good coffee they will buy it at any price.

Jose

IMO decide how you want YOUR business to run and look. It's your business not the existing customer's business. Plan in specific detail what needs to change in menu offerings as well as look and feel. Then make the the business YOURS by making the changes all at once, either an over nighter make-over or close for a day or more if needed. Either way have a Grand Re-Opening introducing YOUR business.

 

Attempting making iddy biddy changes one at a time while keeping most of the old business model so as to not "offend" existing client base won't work. Been there done that at our acquistion location and end of two years still not how we wanted it to be and business was constantly going downhill and we closed the doors. On the other hand our other two locations are run how we want them to be run and revenue up 34.2% 2012 versus 2011 and the growth continues.

Thank you, I really appreciate the input! That is kind of what I'm leaning towards now that we're in year two.

 

 

"I still have to take our customer demographics into account. There were dozens of issues along this same strain that I have been working out for the past year. Klamath Falls is not exactly a place brimming with coffee connoiseurs."


Don't sell your customers short. you might be surprised at the power of delivering a good product even at a place like klamath falls. good coffee is good coffee, give it time and people will learn to tell the difference and appreciate it, even if it means paying 50c extra for a cup.

Good luck 

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