Coffee and Quick Serve Restaurants

How does a well-known quick serve restaurant enter the coffee arena, and what challenges and opportunities does it create? 

Interview by Aaron Kiel

The Chronicle chats with Roman Gaus, general manager for Franke Coffee Systems North America, a super-automatic espresso equipment supplier based in Smyrna, Tenn.

Question: Your company, Franke Coffee Systems, is a supplier to restaurant chains, including a well-known quick serve restaurant (QSR), which recently entered the specialty coffee arena by installing Franke super-automatic espresso machines around the world. Tell us about the process Franke goes through with customers to execute these initiatives.

Answer: The launch process for any QSR is very typical of how Franke works with our largest restaurant chain accounts. We may spend up to several years with the customer developing the program from the concept right through to the customer experience. First, we conduct research and discussions about machine performance criteria, operational support, beverage menu options and hands-on customer testing and sampling. These allow us to hone in on the technology and service the “sweet spot” for the customer. We then work with them through several in-depth design and development stages before the actual equipment decision is made. The customer experience for espresso has to be matched to a brand’s specific operational culture—for instance, its commitment to and focus on scalability, quality and consistency. Just as important is profitability. Helping a brand build the business case is always a vital part of the value-added service we offer our customers.

Question: Your operational experience with large-scale rollouts gives you some unique insights into this kind of business opportunity. What usually surprises you about projects of this magnitude?

Answer: When a QSR or fast casual chain decides to extend their brand and go in an entirely new direction, such as specialty coffees, it can fundamentally change the way consumers look at a brand. If done correctly, a QSR is no longer a “fast food” restaurant where you just eat. The restaurant becomes a place where you lounge, meet friends for a coffee, use free WiFi to work, study or spend your free time. In other words, it expands the brand’s offering and becomes a destination rather than a mere out-of-home consumption location. This kind of game-changing menu initiative, of course, requires full marketing support, which generates tremendous awareness about the program and creates broad customer acceptance of the concept. A brand-specific message combined with product sampling and a well-supported roll out is a great tool, and it’s also less expensive than traditional media. Experience shows that the most effective marketing strategy is for consumers to actually taste a true specialty coffee and begin to create a loyal following. It was surprising to see how quickly sampling products developed traction toward sustained sales and created demand among customers who previously were not even exposed to the category.

Question: What challenges do you encounter when executing such a program on a big scale in foodservice?

Answer: Before we started working with large, international QSRs, we were a relatively small Seattle-based company which had its roots in the local coffee community. The scope of meeting a large QSR challenge is immense, and to make that work we had to grow up really fast as a company to get accustomed to the speed, intensity of support and demanding schedules to meet program delivery. The planning, set-up, and “go live” schedule for installing thousands of sites requires extensive scheduling and project management. To meet this kind of challenge, we collaborate with our sister company, Franke Foodservice Systems. With their experience in creating and installing custom-designed foodservice environments, we can seamlessly align specialty coffee with the rest of a QSR brand’s “behind the counter” program.

But the bigger challenge for us is helping the brand to ensure consistent product quality and machine reliability. This entails not only an education and training campaign around machine cleaning and care, but also a service and after-sales network. This network must be built quickly and with the right capacity to support the brand’s needs for both reactive and scheduled maintenance service. We have to ramp up very quickly and hire more qualified service partners to cover the brand’s geographic footprint, as well as scale the supporting internal systems in IT and logistics very quickly.

Question: From your perspective, as a solutions provider specializing in super-automatic espresso machines, can you comment on how the specialty coffee industry will evolve going forward?

Answer: Now that McDonald’s has entered specialty coffee through its McCafe program, I think we will see what I call “the McCafe effect.” With it, thousands of new consumers are entering the specialty coffee category for the first time. Howard Schulz, CEO of Starbucks, initially predicted that the McCafe launch would not impact his company’s market share. We now know that he was largely correct: Starbucks customers continue to go to Starbucks, and McCafe has opened up a new segment of consumers that previously did not exist. “The McCafe effect” demonstrates ample opportunity for existing players as well as new entrants to grow in this market, and market shares can be sustainable with stand-out execution. We are only at the beginning of a dramatic growth phase in specialty coffee’s evolution, which will take place over the next couple of years. The trend is very consistent with what we are seeing globally, where specialty coffee continues to out-grow the traditional coffee markets.

Question: What impact does a branded QSR’s entry into this market have on independent coffeehouses?

Answer: I think the effect is insignificant from a market share point of view, but very positive from an overall awareness and differentiation point of view. Independent coffeehouses have a strong positioning, which they should not abandon despite “The McCafe effect”: hand-crafted beverages; trained baristas; personalized service; focus on quality execution and the in-store experience; and fresh and innovative beverage menus. This all leads to an incredible level of customer retention. I think we will see more innovative concepts that drive these differentiators, such as single-origin coffees, Fair Trade or sustainable coffee and so on. We can expect a significant amount of beverage menu innovation, including syrups and alcoholic beverages mixing with specialty coffees, and so forth. These trends will continue to define the market and drive growth for the independent coffeehouses.

Question: What’s your best advice for coffee companies that are either reaching out to restaurants or are already working with foodservice establishments?

Answer: From an equipment standpoint, full-service solutions that give the operator a turn-key program are going to win. It sounds easier than it is but ultimately that is what our customers expect us to deliver: Make it easy, keep me running. That has been a mantra that we will continue to follow. Stay tuned into the trends around consumer preference. Opportunities continue to emerge, and being one step ahead of the trends has allowed us to become solution-focused rather than only “equipment vendors.”