Journal of Case Studies
www.sfcrjcs.org
June 2012, Vol. 30, No. 1, pp. 129-137
ISSN 2162-3171
BEANS ‘N CREAM COFFEEHOUSE…AND MORE?
Darlene Jaffke
Lake Forest College
This case was prepared by the author (Jaffke) and is intended to be used as a basis for class
discussion. The views represented here are those of the case author and does not necessarily
reflect the views of the Society for Case Research. The views are based on professional
judgment.
Introduction
Good Things Happen Over Coffee…an appropriate tagline for a business that Caroline McCourt
and Beth Mielcarek started in May, 2005. As Caroline pondered the last 6 years, she outwardly
acknowledged, “We really initially viewed this whole thing as a hobby”. Beth added, “and a
place where the residents of Sun Prairie could regularly gather and enjoy each other’s company.”
Beans ‘n Cream Coffeehouse, centrally located in Wisconsin, has been in business for six years
offering their customers the “3rd spot” (home, work, Beans ‘n Cream)… a comfortable place
where relationships can begin and grow while enjoying a good cup of coffee.
As Caroline and Beth looked to the front door of their shop, the long-winding line of customers
provided a great sense of accomplishment while at the same time was disheartening. A longstanding customer walked by commenting “see you tomorrow Beth and Caroline, too many
people here today”. Caroline pondered whether this distraction of over-crowding would
dissuade their current customers for not just the day but permanently. As Caroline moved
toward the front of the shop, she knew she could solve the issue of today’s crowd but the
ongoing problem was another matter that needed to be addressed soon.
Background
The path of Caroline’s dream commenced in 2002 as she found herself intrigued by the coffee
shop atmosphere and began contemplating the idea of opening a coffee shop. With this
revelation, she investigated resources such as the Wisconsin Women’s Business Initiative
Corporation (WWBIC) and began networking with a variety of small business owners. Through
an ongoing personal education process including taking small business courses, Caroline began
to realize that fulfilling her dream just might be a viable option. That vision became quite clear
in the early part of 2003 as she developed a relationship with her new business partner, Beth
Mielcarek. Armed with both of their business backgrounds, they visited coffee shops all across
the state, not afraid to ask the owners about their experiences and for their recommendations.
Additionally, they received continual hands-on training from a coffee distributor located in
nearby Madison, Wisconsin. The final “ah-ha” moment came in September 2003 when they
attended Coffee Fest 2003 (coffee industry convention) in Seattle, Washington. They both
agreed that this was the moment when they realized they were going forward with the plan to
open a coffee shop. The timeline of events for the development of Beans ‘n Cream is presented
in Table 1.
Page 129
Journal of Case Studies
www.sfcrjcs.org
June 2012, Vol. 30, No. 1, pp. 129-137
ISSN 2162-3171
Table 1. Timeline of Events
Fall, 2003
October, 2004
December, 2006
June, 2007
July, 2009
December, 2010
Partnership formed between Caroline McCourt and Beth Mielcarek
Beans ‘n Cream opens with Sun Prairie shop
Beans ‘n Cream shows a profit with Sun Prairie shop
Madison shop opened
Beans ‘n Cream does not show a profit
Madison shop closed
Beans’ n Cream does not show a profit
Beans ‘n Cream shows a profit with only the Sun Prairie store open
Location
Sun Prairie, a thriving community with a 2009 population of 29, 105 up from a 1990 population
figure of 15,333 had experienced significant growing pains. This 47% growth rate over the
course of 10 years calculated to an average annual growth rate of 4.7% (US Census Bureau,
2009) recording Sun Prairie as the fastest growing city in the state of Wisconsin. Centrally
located in the state of Wisconsin, Sun Prairie provided the advantages of a suburban lifestyle
while being located just outside the capital city, Madison. In respect to demographics, the
community was family based with 7,881 households of which 38.3% have children under the age
of 18 years old (ibid). The median age of a Sun Prairie citizen was 33 years old. The racial
make-up of the city was 92.68% white with the median income for the city was
$51,345/household (ibid).
With the ongoing population growth of Sun Prairie, and the advantages of their own personal
networks, Caroline and Beth felt that locating their coffee shop in Sun Prairie was an opportunity
in the waiting. Knowing that the downtown area was slated for significant development, they
wondered if this might be a good location. Caroline pondered this because the downtown was
run-down with a significant amount of empty storefronts and quite frankly, no traffic flow. Beth
stated that they realized the significant risk, but decided to look forward and pursue the
downtown location for their site location. Once they made this decision, Caroline and Beth
made it their goal to be the first “out of the gate” in obtaining a site.
About the Shop
In establishing a vision statement, their focus was around the Sun Prairie market.
“Our vision is to provide the people of Sun Prairie with an establishment to come and
enjoy a specialty drink, pastry, lunch or possibly an ice cream. We plan on being active
and contributing business owners to the community we live in. We plan on providing a
place for not only current patrons of the downtown area but we are looking to serve all
the new residents that will be moving into the area in the future as part of the
revitalization plan.” (McCourt, C., 2005)
Caroline remembered thinking that it was important to both Beth and her that their mission
statement reflected their desire to being business owners that made a significant contribution to
Page 130
Journal of Case Studies
www.sfcrjcs.org
June 2012, Vol. 30, No. 1, pp. 129-137
ISSN 2162-3171
the city of Sun Prairie. The idea was that their business became a part of the greater whole. As
the development of the downtown area continued, Caroline and Beth secured a location at the
center of the development near a small pocket park. In October, 2004, they opened Beans ‘n
Cream Coffeehouse in Sun Prairie, Wisconsin at 345 Cannery Street in the revitalized Cannery
Square portion of downtown Sun Prairie. They were the first retail shop opened in the square
with 1585 square feet leased as retail space.
The atmosphere both inside and outside of the store was themed to the story of Sun Prairie with
seating indoors and outdoors. The ambiance was inviting with tapestry on the walls and a central
fireplace separating the restaurant into two separate areas giving a more personal feel to each
area. The complete sound system ensured a relaxed and peaceful feel to the shop’s environment.
A small corner of the café’ was carpeted and housed a play area for younger customers to
socialize while providing their parents with space for some adult networking. The table and
chairs, counter area, and comfy seating in front of the fireplace rounded out the “living room”
feel.
Service was prescribed as a significant part of their product offering with courteous
knowledgeable service a must. The staff consisted of owner operators, Caroline McCourt and
Beth Mielcarek, Jeff (full time Operations Manager) and part time employees. The philosophy
of service at Beans ‘n Cream was to provide all employees with extensive training including an
understanding of how to brew the best coffee as a “good cup of coffee doesn’t just happen”.
Adherence to customer service policies which included but wasn’t limited to prompt courteous
service with a smile and a solid knowledge base of the coffee and products was absolutely
mandated (McCourt, 2005). Enhanced personal selling was regarded as an ongoing component
of their promotional mix. In exchange, Caroline, Beth and Jeff offered their staff schedule
flexibility and an atmosphere of open communication and feedback. Beth commented that they
like to think of the operations of the shop as a team effort towards the common goal of providing
their customers with the best experience. The efficiency of the operation was continually being
upgraded with staff recommendations highly encouraged. An example of this was when they reorganized the machines within the kitchen in order to increase the speed at which they could
serve the customer.
Their product menu included not only coffees but specialty drinks, Rishi tea, Sassy Cow Ice
Cream as well as breakfast and lunch menus that relied heavily on organically produced
ingredients. Their signature sandwiches, wraps, soups and salads used products from local
suppliers chosen to encourage growth in the local economy. This partnership between the local
suppliers drove the price point higher but customers realized and appreciated the support to the
local community as well as the option of “healthy” organic foods. Caroline and Beth both felt
that these two factors alone brought in more customers. Free Wi-Fi and a children’s play area
were additional services provided within the store. A unique offering was self-service refills
with a “historic” custom of a cup using the honor system suggesting that the customer drop in
coins to cover their refill. This was initially implemented to offer customers the ability to avoid
standing in a line for a refill but evolved into a “charm” within the theme of the shop.
The pricing strategies were established with at the market or possibly even above the market
level prices with the intention of providing a higher quality product and experience for the
Page 131
Journal of Case Studies
www.sfcrjcs.org
June 2012, Vol. 30, No. 1, pp. 129-137
ISSN 2162-3171
customer. The competition within the Sun Prairie city limits was limited to a Starbucks and
McDonalds which Caroline and Beth actually did not consider to be their direct competition.
They felt that their product offerings were unique to what was offered at Starbucks and
McDonalds. Additional competition was offered by Panera and other local coffee shops located
within 10 minutes of Sun Prairie and located within the city limits of Madison.
Initially, the shop was open from 6:00 am- 3:00 pm each day but due to the popularity of the
shop and customer requests, the hours were expanded with a close time of 8:00 pm.
Additionally, the menu had expanded to include serving breakfast all day long. Other learning
developed as they included beer and wine on the initial menu but removed this keeping their
focus on the coffee shop concept.
The target market was diverse depending upon the time of the day. During the weekdays, the
target market included stay-at-home parents with young children and retired folks meeting
friends. While there were some business people gathering for lunch meetings, this group was not
a main target market for this location. Evenings, the customer profile expanded to include local
high school aged students.
Marketing
Local media included newspapers, such as the Sun Prairie Star, which had a circulation rate of
5,300 and the Hometown Advertiser with a circulation rate of 35,000 (American Factfinder).
Being located in close proximity to Madison, the Wisconsin State Journal also served the area as
a prime regional newspaper with significantly better exposure. Sun Prairie was host to two local
cable access stations include KSUN-12 and KIDS 4. Additionally, Madison provided radio and
television programming to the area.
Initial marketing efforts for Beans ‘n Cream included front page publicity in the Sun Prairie Star
announcing the opening of the store. Both Caroline and Beth maintained a wide network within
the community which also contributed to a significant word-of-mouth campaign. Sales
promotions were conducted for faculty and staff within the local school district including
coupons and to go mugs as well as gift cards and loyalty programs.
Figure 1 indicates
advertising and promotional spending of $2,812 in the first year (2004) and $5,829 in the second
year. Upon reflecting upon these efforts, Caroline stated that these efforts really had a minimal
effect on the sales of the shop.
A website was set up for the store at
www.beansncreamcoffeehouse.com. Local newspaper advertisements and participation in the
local entertainment book were contemplated but avoided with the high expense of these options.
Overall, Caroline and Beth thought that the most effective marketing campaigns for Beans ‘n
Cream was word-of-mouth and the website.
Expansion to Madison
Riding high on their 2006 profits of over $7,000 at the Sun Prairie location (see Figure 1), the
decision was made to open an additional shop located in the American Parkway business park
within a strip center of business buildings in Madison, Wisconsin. Madison’s 2006 census
reflected a population of over 225,000 with a ranking of the 2nd largest city in the state of
Page 132
Journal of Case Studies
www.sfcrjcs.org
June 2012, Vol. 30, No. 1, pp. 129-137
ISSN 2162-3171
Wisconsin behind Milwaukee. This indicated a strong platform of sustainability and growth for
business in the area. The location of the Madison shop was approximately 8 miles southwest of
the Sun Prairie shop. Caroline and Beth carefully researched the possibilities choosing this
location based upon a variety of factors including the fact that it was centrally located within a
large number of business offices. The location seemed perfect with no other coffee shops in the
area and certainly nothing close to the unique atmosphere of Beans ‘n Cream. To attract this
new target market, the shop also offered a drive-through for the busy business person as well a
reading room marketed as an ideal business meeting location. Product offerings and price points
remained the same at the new location.
The result was a fairly solid morning traffic crowd with lukewarm reception on usage of the
reading room. As Caroline and Beth reflected on this venture, Caroline stated that the location of
the shop was the issue. Beth concurred with the statement that there was no “destination”
besides work. There was really no reason for customers to frequent their shop after business
hours. As time wore on and customer traffic did not pick up, they gradually reduced the hours
that the shop was open. Due to financial reasons as demonstrated in Figure 1 and Figure 2, this
shop was closed in July 2009.
Caroline wondered if they were in closer proximity to a
shopping area as well as the business center if things would have been different. Or was their
product and service offering not a good match for this new target market? Or was their
communication not reaching the target market?
Financial Details
Figure 1. Profit & Loss Statement Summary
(Years 2004-2010)
2004
SP only
54,426
32,421
22,005
2,812
2005
SP only
290,353
102,718
187,635
5,829
2006
SP only
399,421
148,331
251,090
9,135
2007
SP
444,062
157,805
286,257
8,382
2007
MAD
152,437
56,434
96,003
4,843
Total Income
Cost of Goods
Gross Profit
Total
Advertising
Other
24,067 190.982 234,809 235,910 161,240
Expenses
TOTAL EXP
26,879 196,811 243,944 244,292 166,083
Net Ordinary
-4,874
-9,176
7,146
41,965 -70,080
Income
Net Other
14
-743
146
278
147
Income/Exp.
NET
-4,860
-9,919
7,292
42,243 -69,933
INCOME
Note: all figures rounded to nearest dollar
Advertising category: Gift cards, loyalty cards, signs, coupons, etc.
2008
SP
460,564
166,361
294,203
36,797
2008
MAD
227,418
90,867
136,551
16,126
2009
SP
426,613
156,028
270,585
29,175
2009
MAD
111,821
41,767
70,054
5,001
2010
SP only
442,116
148,297
293,819
22,904
206,067
199,298
213,649
79,587
226,698
242,864
51,339
215,424
-78,873
242,824
27,761
84,588
-14,534
249,602
44,217
-862
-1,364
-563
4,352
-5,872
50,477
-80,237
27,198
-10,182
38,345
Source: McCourt, C., Mielcarek, B. (2010). Beans n’ Cream financial statements.
Page 133
Journal of Case Studies
www.sfcrjcs.org
June 2012, Vol. 30, No. 1, pp. 129-137
ISSN 2162-3171
Figure 2. Balance Sheet Summary
(Years 2004-2010)
Current
Assets
Fixed
Assets
Other
Assets
TOTAL
ASSETS
Current
Liabilities
Long
Term
Liabilities
TOTAL
LIAB
Equity
TOTAL
LIAB &
EQUITY
2004
SP only
2005
SP only
2006
SP only
56,053
36,688
67,806
100,523
115,107
100,917
2007
SP and
MAD
47,449
2008
SP and
MAD
40,907
2009
SP and
MAD
30,320
2010
SP only
221,574
190,452
98,067
92,120
120
120
120
120
39,213
156,576
151,795
168,723
269,143
231,479
128,507
131,453
11,513
16,654
26,020
7,732
10,058
6,501
4,446
100,000
88,500
71,071
34,550
11,513
16,654
26,020
107,732
98,558
77,572
38,996
145,063
*
156,576
135,141
142,703
161,411
132,921
50,935
92,457
151,795
168,723
269,143
231,479
128,507
131,453
Note: all figures rounded to dollar
*Includes initial partner investments: $75,000 Caroline, $75,000 Beth
Source: McCourt, C., Mielcarek, B. (2010). Beans n’ Cream financial statements.
The Dilemma
Fast forwarding to the present, the Sun Prairie shop has become increasingly popular with long
lines developing during peak hours. Caroline stated, “I wonder how long it will be before our
customers tire of the crowds, congestion and waiting.” She remarked that the entire ambience of
the shop is based upon a relaxing atmosphere where their customers could enjoy a good cup of
coffee with their friends. As Caroline and Beth reflected upon Caroline’s statement, they
contemplated what their next move would be. Taking into consideration the popularity of their
shop coupled with the 4.7% annual population growth rate in the size of Sun Prairie, it seemed
obvious to her that an expansion of some sort was a good option to solve their overcrowding
issue. Beth pointed out that they needed to consider the affect of their previous expansion
attempt. As shown in Figure 1, this resulted in going from a profit of $7,292 in 2006 with just
the Sun Prairie shop open to a loss of $27,690 in 2007 and an additional loss of $29,760 in 2008
with both shops open. Beth asked whether they really wanted to jump into another expansion
project. Appendix A presents a study by Entrepreneur magazine which supports many of these
Page 134
Journal of Case Studies
www.sfcrjcs.org
June 2012, Vol. 30, No. 1, pp. 129-137
ISSN 2162-3171
same concerns expressed by Beth and Caroline identifying the 10 most highly perceived
challenges by entrepreneurs and the 10 most feared events (2007).
Conclusion
As Caroline and Beth walked back into Beans ‘n Cream, they again pondered the situation at
hand. How could they maintain the atmosphere of the current shop but somehow control the
traffic flow? Maintaining the current level of customer service was a major concern leaving
them with the question of how they would accomplish this. They both knew that it was time to
take a hard look.
Page 135
Journal of Case Studies
www.sfcrjcs.org
June 2012, Vol. 30, No. 1, pp. 129-137
ISSN 2162-3171
References
American Factfinder. (2010). Retrieved from:
http://factfinder.census.gov/home/saff/main.html?_lang=en.
Beans ‘n Cream. (2010). Financial Reports.
Hendricks, M. (2007). A Look Ahead. Entrepreneur, 70-76.
McCourt, C. (2005). Beans ‘n Cream Coffeehouse Business Plan. Sun Prairie, Wisconsin.
US Census Bureau. (2000). Population Estimates Program.
Wisconsin Women’s Business Initiative Corporation. (2010). Retrieved from:
http://www.wwbic.com/.
Page 136
Journal of Case Studies
www.sfcrjcs.org
June 2012, Vol. 30, No. 1, pp. 129-137
ISSN 2162-3171
Appendix A.
Entrepreneur magazine and PricewaterhouseCoopers conducted a study in which they
polled 281 fast-growing firms of which 77% employed less than 100 people (Hendricks,
2007). The purpose of this study was to identify the top 10 perceived challenges as well
as the top 10 more feared events that could harm their venture (damage factors). The
below tables indicate their findings.
Perceived Challenges:
1
2
3
4
5
6
7
8
9
10
Retaining key employees
Hiring qualified employees
New product (or service) development
Expansion of U.S. market
Cost reductions
Productivity increases
Business alliances
Technology upgrades
Cash flow management
Merger or acquisition
Damage Factors:
1
2
3
4
5
6
7
8
9
10
Shortage of qualified workers
Unstable economy
Increased competition
Health care costs
Weaker capital spending
Shrinking profit margins
Interest rates
Government regulations
Weak consumer spending
Energy costs
Page 137
Download PDF
Similar pages