Reason for Selling:

The owners are planning for retirement.

Overview of the Business:

This privately held company has expanded to 7 espresso shops in its two metro market territories. Its exclusive territory rights provide for considerable growth potential as it operates in one of the highest growing MSAs in the country. The company also owns, operates, and has co-located a TCBY franchise within several key store locations, appealing to a wider consumer base of non-coffee drinkers.The company’s unique positioning is reflected in its commitment to ensuring consistency in the guest experience at each of its cafes, as it is the “gathering place of choice” for many loyal consumers. This brand of coffee shops is differentiated from national brands by the range of products offered, as well as the local community support provided through its customized marketing programs. Its brand equity is reflected in its #1 position in the greater metro area, with an estimated 40% market share. Since founding in 1993, the espresso licensor has expanded from its original café to nearly 75 locations across the country.The owners have been strategic in their direction of the firm, identifying consumer and competitive trends and implementing initiatives to grow the business. New menu items meet guest demands for greater variety and choice, while in-store bakery ovens enhance the aroma with “fresh from the oven” baked goods. Positive health messages are clear drivers of consumption with questions posed to consumers in recent surveys about the “health benefits of drinking coffee” and “is coffee good for my health” both up significantly to 46% and 36% respectively.

Property Features and Assets:

The company operates its business from its headquarters, which consists of approximately 600 square feet for its central office, and adjoins its drive-thru business with about 600 square feet. The company has been in its current location since December, 1998, and has renegotiated its lease through September, 2010. Each of the 10 locations are operated under leases ranging from one-year to ten-year terms, with five-year terms being most common. Two of the stores are owned separately by the owners and may be included in the purchase of the business. Details regarding the terms and conditions of the firm’s facility, operating and equipment leases will be available during the due diligence phase. All leases have clauses allowing transfer to new owners.

Market Competition and Expansion:

With the proliferation of cafés in the 1990s, specialty coffee has become one of the fastest growing food service markets in the world, netting $12 billion a year in the US alone, up nearly 60% from 2000 sales of $7.7 billion, and representing half of the U.S. coffee industry. Total number of stores has increased from about 5,000 to 23,900 in the past decade. Among young adults aged 18-24, consumption continues to trend upward to 3.2 cups per day versus 2.5 in 2005, while adults aged 25-59 expanded to 19% (+6%) of total daily gourmet coffee drinkers. The specialty coffee market is poised for substantial growth in the next decade, especially in this growing MSA of more than 600,000 residents, one of the fastest-growing metros in the country. The frozen desserts market is predicted to grow by more than $4 billion by 2012, up 18% from 2007 sales of $23.3 billion, with frozen yogurts experiencing the strongest growth. Ice cream, the traditional category leader, dropped by 3% since 2006 as consumers switched to frozen yogurt. Further, the specific frozen desserts in this company’s co-located franchises grew at a 4 percent compound annual growth rate from 2003 to 2007. Health eating trends are pushing more people to frozen yogurt to satisfy cravings.

Additional Details: