“We were part of two trends in early ’80s; specialty retailing and the specialty coffee movement, as opposed to going to the supermarket for Folgers or Maxwell House. When I sold the company, counting in-store kiosks, we had about 150 stores, and sales were around $60 million,” said Jones. “We bought it back after it had switched focus from being a retail chain to interest in third-party relationships through supermarkets and office coffee service.”
Soon after acquiring the business from Jones, Sara Lee decided to get out of the coffee business, a divestiture process that included selling the Chock full o’Nuts brand. Sara Lee sold Barnie’s to Phil Leach, a Miami banker who expanded franchise and international locations and increased sales in supermarkets.
But Barnie’s was losing the competitive battle for market dominance, leading Leach to sell 56 mall stores to Starbucks, cut back company-owned stores to 10, and reduce the number of franchise stores to 40, most of which were in the Southeastern US (a few were overseas in Egypt, Ireland, Jordan, and Turkey). After learning the company was for sale, Jones, his wife Barbara, and Jim Pugh, Jr., a central Florida developer, bought the company back to reinvigorate the brand.
Something to shoot for
The first goal Jones set was to aim for a triple-double in the next few years—double the store count, double sales volume, and double profit. On top of those objectives, the company aimed to improve the quality and variety of products in stores and move away from being a coffee bar.
“If you want to buy great coffee and tea, you don’t go to coffee bar, you visit a serious purveyor of coffees and teas and related appliances. We wanted to move away from a fast-food format and relying on coffee by the cup,” Jones said. “We didn’t want to give up that business, but we wanted to match it with a focus on retail, combining the best aspects of a coffee bar with a stronger retail presentation of whole bean coffees, bulk tea, and accessories.”
Barnie’s moved quickly to begin its transformation. Jones bought back some franchise stores, increasing company stores to 13. The company increased the number of whole bean coffees on sale to 48 and raised the number of four-feet wide by eight-feet tall merchandise display units in each store from two or three to eight, which is where packaged teas, accessories, and appliances are displayed. Jones added sales personnel in each store to improve service to the serious coffee and tea connoisseur, instead of simply having a barista taking orders for lattes.
The company began renovating stores to reflect the business model. Barnie’s was actually the first to develop the racing green coloration associated with gourmet coffee products in the ’80s and recently revised its logo and store décor, returning to its roots. Heavy in-store promotional efforts became the norm again with posters, banners, and point-of-sale displays. Seasonal items and advertising campaigns helped reinforce the news that a new, yet familiar, sheriff is in town at Barnie’s. During the Christmas season, the company saw success with a Santa’s White Christmas flavored coffee, supported by a “Guess who’s back in town?” advertising campaign.
Although the downturn in the economy coincided with Jones’ return to Barnie’s, the company was able to take advantage of some market developments. For many consumers looking to save money, buying an expensive cup of coffee at Starbucks is being replaced by buying coffee and tea to brew at home. Barnie’s extensive product line has so far been appealing to those customers. Also, Jones said Barnie’s coffee by the cup is demonstrably higher quality than Starbucks, giving the company an edge in the battle for consumers who still want to pop in for coffee on the way to work.
And when Starbucks announced it was closing 600 stores, 60 were in Florida. Since buying the company back, Jones has already converted two Starbucks into Barnie’s and has another 10 conversions on the drawing board. “Starbucks thought if they saturated the market, they’d kill everyone off. But the people who don’t like their coffee aren’t going to like it even if they have a store on every corner. For people who like mild, mellow, rich coffee, and flavored coffee, we’re their cup of tea,” said Jones.
Early returns have been positive. The stores are nearing Jones’ goal of splitting sales in half between takeout service and retail purchases. When he repurchased the company, it was at 80% takeout and 20% retail. Since then, the numbers have shifted to 58% takeout and 42% retail. And the difficulties faced by many retailers in December didn’t knock on Barnie’s doors, as the company increased same-store sales. Overall, the company increased annual sales slightly in 2008, a year when many retailers were off by double digits.
With the company’s new concept entrenched and successful, Barnie’s is looking to increase the number of both company and franchise stores, mostly focused on Florida. Jones sees other markets in the Southeast as potential areas for Barnie’s to look for franchisees, but only under the right circumstances with capitalized and experienced retail operators. Although many quality locations are now available because of business closings, Jones said landlords in general are still trying to get rental prices they were seeing several years ago. Once those prices reflect the changes in our nation’s economic reality, there will be more opportunity for expansion.
“In the short term, we are watching expenses, working to increase sales, and making sure our pricing is right on. We believe in having the highest quality products, and we are working to develop friendships with loyal customers,” said Jones. “We will amplify sales though our e-commerce business and third-party office coffee service partnerships. Lastly, we are committed to our family of employees and franchisees, trying to offer a work environment that is personally rewarding and enjoyable.”