What kinds of sites do you like bestfor new-store openings?


Gravel: We definitely like in-bound traffic, thereneeds to be a decent amount of parking and we try not to positionourselves too close to any of our customers. Sometimes its hard notto do that depending on the situation. We have a certain amount ofstores we'd like to see open in each town we're in, and we have tobe somewhat competitive in getting those spots when they open up.But there isn't a big plan of where stores are going to go; it'smore of an opportunistic deal.

| So you don't have investors pushingyou for growth?


Gravel: Not at all. To a certain degree the growthis necessary. But it's difficult too. It's not something we want tojust jump into. We've been in business for 22 years, so it's notlike there are a lot of other coffee places that have been inbusiness less than us that have a heck of a lot more stores thanus.

| Have you seen what some othercompanies have done, watched that example, and decided not to overexpand?


Gravel: My background is accounting, and I havecertain amount of conservatism not wanting to overextend. I don'tlike the idea of a bunch of debt and stores that might be slow.That's always been in the back of my head. I've seen companies likeCaribou Coffee that are younger than us that have grown much fasterthan us, but I've never wanted to be accountable to a board ofdirectors. We just want to do our coffee the way we think it shouldbe done.

| It's interesting that there areindependent cafes around that are also your customers, and you'resensitive to that. If you need to open a store near them do yougive them any concessions?


Gravel: Yes. There have been a couple times wherewe ran into a situation where we were going to be very close. Weknew we were probably going to hurt their business a little bit. Sowe spoke to them before we made it public that the store was goingto open. We lowered the price of our roasted coffee to them, sothey could maintain a certain profit margin still using ourproduct. In one example, they sold sandwiches and soups, and weoffered to carry those items in our location that was really closeto theirs so people would know what's going on down the road. Youhave to have a conscience. We want to be proud of our product andour company. We don't want to do things that we regret and hurtanyone else's business. We'll be competitive and do our thing, buttry to help out people the best we can.

| As you've expanded to other areas,like Seattle, have you considered hitting other states?


Gravel: Not really. If something happened, wemight do something. We have a store Oslo. It was someone who knewus from here and moved to Oslo. Now he's doing super well andselling about 150 pounds a week. We air freight it to him. He'sdone very well in Oslo, and he uses our logo, but it's not likewe're going to venture to Oslo and start opening cafes. He wasreally interested in our product and how we handled our product, sohe was a good candidate. But once we opened a store in Denver, andit's very hard to keep good tabs on it without having one of usthere. Not knowing the area, we closed that store down.

| But do you think selling your coffeein hotels and grocery stores will drive more interest by potentialfranchisees?


Gravel: It's a very difficult business to getinto. With our Silverhook brand over the last couple of years wetried to get onto Alaska Airlines jets. It's a lot of product andvery, very thin margins. It can hurt a company like us very bad tohave that kind of business. We've backed off the idea of being onjets also because there are some inherent issues with trying tobrew coffee on jets. But on the flipside, the boardrooms for AlaskaAirlines are totally into how we do things. We ship them coffee, itgoes in their freezers, they take out what they need for a fewdays, and they treat the product the way we like it to be handled.But it hasn't really developed into a lot of online sales. That'sreally where we'd like to see some of the growth. We have quite afew out-of-state sales from our website, but it's not a significantamount of our business. But we're working on that.

| How have you had to adjust the wayyou do business as a result of the economic downturn?


Gravel: We've been trying to cut costs in areaswhere we have some room. We made those adjustments. We increasedsome prices, but not much, to deal with it. On the other hand,Alaska is a little different than the lower 48, as we haven't beenimpacted so much by the fuel-cost increases. Our housing market isrelatively stable. Our fuel costs are the highest in the country,but like most people in Anchorage, I drive five miles to work, so Idon't have to commute for an hour and a half. But I do notice a lotof people drinking Americano's, and that's one of the leastexpensive drinks we have, so there is somewhat of a switch. Beforethere were a lot of lattes, mochas and cappuccinos. But peoplereally held on to the social aspect. If I were a customer, the hardthing would be to let go of showing up and seeing all of the peopleI see in the morning. So I think people adjust what they get andstill show up.

Want to continue reading?
Become a Free ALM Digital Reader.

  • Unlimited access to GlobeSt and other free ALM publications
  • Access to 15 years of GlobeSt archives
  • Your choice of GlobeSt digital newsletters and over 70 others from popular sister publications
  • 1 free article* every 30 days across the ALM subscription network
  • Exclusive discounts on ALM events and publications

© 2024 ALM Global, LLC, All Rights Reserved. Request academic re-use from All other uses, submit a request to [email protected]. For more information visit Asset & Logo Licensing.