It’s been hardly a week since Starbucks (SBUX) announced that it’s planning to close 150 under-performing stores across the US next year. As the saying goes one firm’s loss is another’s gain, Coffee Bean & Tea Leaf announced on Tuesday that it’s re-entering New York with plans to open 100 cafes across the city over the next 10 years by taking the franchising route.
The Los Angeles-based firm has chosen Hudson River Coffee & Tea as its franchisee, which is well-versed about the intricacies of the business. Also, its knowledge about the New York City is expected to augur well for Coffee Bean. The first cafe is expected to be opened in Manhattan in 2018 and the coffee chain plans to operate 2 to 3 stores by the end of this year.
This is Coffee Bean & Tea’s reentry into Big Apple. The company forayed into the city in 2011 and was operating 13 stores by 2016, which was closed due to the face off with the franchisee. As a result, this time the coffee retailer is planning its entry with a different franchisee.
New York’s real estate market has cooled down compared to higher prices in 2012, which makes it unaffordable for businesses to open new shops. This helps Coffee Bean to open more stores at reasonable costs making it viable to run the business.
Coffee Bean currently operates 1,200 stores across the world with 311 in the US, with most of the stores located in Southern California. The company expects to beef up its presence in the US and plans to bring the total stores to 1,000 over the next 10 years. On the flip side, Starbucks has more than 14,000 stores in the US.
According to a recent survey from Sienna College Research Institute, 62% of people in New York are drinking coffee on a daily basis and about 60% New Yorkers would like to consume more than a cup each day. New York provides ample opportunity for Coffee Bean to expand its footprint, as it will be competing mainly with Starbucks along with other players like Pret A Manger, Peet’s Coffee, Dunkin’ Donuts and other local players.
Starbucks store closures might also include few stores in New York, which is expected to benefit other players in the city. Coffee Bean wants to tap the Big Apple customers who are looking for a change from the likes of Starbucks, which the CEO John Fuller calls as “Starbucks Fatigue.” Consumer preferences are changing over the years and they are moving up the value chain looking for specialty coffee offerings, players like Coffee Bean are going to benefit from the changing landscape.
New York City is touted to have over 4,000 coffee shops. It’s one of the most shop-dense cities for coffee in the world. Coffee Bean is brewing a different plan to take on the likes of Starbucks to attract millennials with its specialty coffee and tea blends. It’s a wait and watch game for now to see whether Coffee Bean’s come back to Big Apple would be fruitful or not.
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