Tuesday, July 24, 2007

Scott's Two Cents And A Biscotti

This is the interview I promised about, uh, nine months ago. Yeah. I know. Think of it as a long time in the arriving but worth the wait. Think of it as...hell, it took long enough, think of it as a child if you want.

Scott runs the Daily Grind at the College of William & Mary. I figured if anyone had ideas on how to run a successful small business, it would be the guy who managed to run a coffeehouse that was pretty much smack in the middle of the campus, right next to a busy cafeteria building (the University Center) not to mention fairly conveniently located in regards to New and Old Campus. So, without further ado, Scott's reflections and suggestions to those, like me, who fancy a taste of the small business sector.








Scott: …So as I understand it you want to open a coffeehouse/wine shop?

Gryffilion Darkblade, Adventurer: Yeah, it’s kind of…the coffeehouse—I’m not sure how feasible it would be to open it up along with a winery…

Scott: You want to open up a real winery?

GDA: Yeah, I want to open a winery/vineyard.

Scott: Wow. Where would you want to do this?

GDA: I was thinking the Shenandoah Valley. The business seems to be growing there and the soil is supposed to be good.

Scott: It seems to be doing better.

GDA: Some people tell me Virginia is no good for growing grapes, but there’s over [two] hundred wineries (Note: the correct number has been found to be one hundred and eighteen as of July 2007. –Ed.) in this state, so I think it’s fine…

Scott: Hey, with global warming, you never know.

GDA: So what was your first business enterprise?

Scott: My own personal business enterprise? My first business enterprise, I wrote a business plan back in 1981 for a triathlon store, which was basically for the triathlon boom which was just beginning at the time.

GDA: So what got you interested in opening a coffeehouse?

Scott: Well, what got me interested in opening a coffeehouse—I’d been in the restaurant business since I was 14, either busing tables or prepping food, you know, waiting, bartending, as time went by, then eventually managing restaurants—was, I just became a coffee drinker. I hadn’t been a coffee drinker, my whole life, up until I met my wife in New York, and she actually had a bean roaster on her counter. I met her when I was working in the Virgin Islands bartending, and she came down to get her diving certificate, and so I came up to New York to visit her and she said “Oh, let’s go get some green coffee and we’ll roast it.” And I said “Well, I hate coffee.” Because I’d only ever had Folger’s or Maxwell House, and it tasted like cardboard to me. And that was it. We went to a little shop, they sold her some green beans and we stuck them in the roaster and we smelled the aroma—of course, now I know that’s called “first crack” and it smells almost like chocolate. My wife said “I don’t understand how you can not like coffee” and I said “Well, I’ve never had a real cup.” So we roasted it and she frothed up some cream, so she made me a macchiato out of it, and it happened.

GDA: In my opinion, espresso is the only way to go. Nothing else ever tastes quite as good after you’ve had it…

Scott: Right…I mean, it still seems a bit bitter, so I’m not really a true espresso drinker, but a macchiato where you take some half-and-half and just dollop it in equal amounts with espresso and add some bittersweet chocolate—anyway, that got me started. So, anyway, we started drinking coffee and we got an espresso machine…and then I started working for an Italian company and then I got transferred and then they downsized…business in this country wasn’t what they thought it would be…I worked for a plant, ran this plant, for six years, but in the meantime I was looking for coffee. I found this little shop [in Williamsburg] that specialized in coffee and tea, and the guy who owned it, his name was Todd Arnette...well, I’d run retail shops before—not coffee, but retail stores—and when I walked into his store, the way it was laid out didn’t make any sense to me. He had about three thousand square feet inside there and about eight hundred square foot business, and all that footage was costing him money. I said “If you take what you’re paying it and divide it by your footage in square inches, then you have a numerical value for how much each square inch is costing you. If you have no product in that space, or if your product isn’t covering the cost of that space, then you have a problem.” And so my suggestion to him was either to downsize, or—I asked him, straight out, “Todd, what’s your daily receipts like?” And he said “On a good day, I take in about four hundred dollars.” And I asked “Well, what’s your overhead?” He was paying eighteen or nineteen dollars a square foot for this space, and I was like “You’re not even covering the cost of your building” and he said “No, not yet. I will, though.” I said “So how much in the hole are you each month?” and it turned out he was paying about five thousand out of pocket each month…

GDA: And he really believed it was going to get better at some point?

Scott: He thought it was going to get better. But if you know the area—the mall with the Food Lion—where he was located, it was just awful. The traffic flow is wrong, and if you look at it now, it’s empty, and the real cause of that is that it was poorly managed. And he was complaining about the landlord. And I said to him, “Look, you should really go into the wholesale coffee business and get out of retail.” To be honest with you, he really had no personality for retail anyway. So, he said, “That would be great, if you and I could do something like that sometime,” and I said “Well, you know, I’m not really in a position”—you know, I was running a place in Richmond, and I had run the Surry House restaurant, and I had taken a job in Richmond and was running another place because these people needed help, and that was seventy miles there, seventy miles home each day, six days a week, so nine hundred miles a week on my car. So he called me up and said “Look, for what it’s worth, I’ve been given this opportunity and I’m already in there. It’s at the College of William and Mary. Would you come and take a look at this place?” And I said “OK.” So I came in on a Friday night and there was some music playing and I just watched what they were doing back there, got a coffee and was sitting here…so I went home and the next day I called him, said “So what’s your idea?” and he said “Look, I don’t want to be in that game. I don’t want to be in the retail business at all, I just want to roast my coffee. So the deal is, I’ll give it to you. I have the contract, the contract is yours.”

GDA: Sounds like a classic introvert to me. “Keep me out of the business, I’ll provide you with your product…”

Scott: Right. That’s all he wanted. Our agreement is we’re partners, fifty-fifty, basically it’s just that I buy all my products from him and that’s all he wants.

GDA: So he’s the guy we never see, right?

Scott: He’s the guy you never see. I’m the upfront guy, he’s the guy who provides the coffee.

GDA: How was the Lodge acquired?

Scott: Well, that’s kind of interesting, actually. About seven years ago, a group of students approached the College—Sam Sadler—and said “We want to have a coffeehouse on campus that’s representational of the student body”—not a coffeehouse like the Meridian, which wasn’t very central anyway.

GDA: You know, I’ve never actually been there [the Meridian]. I’ve meant to all the time I’ve been here, but I never got around to it.

Scott: Well, it’s not always open, either.

GDA: And it’s far away.

Scott: It’s very far away, and it’s very clubbish. It’s a certain group of people, they all meet, they always go there…

GDA: From what I’ve heard, it’s turned into the Indie Rock hangout.

Scott: It’s actually more like the English Department. Most of the people that go there are in the English Department. They have poetry readings, and they do other things—and it’s fun, you know? I actually supply them with some of their coffee.

GDA: I’ve come to the conclusion that there are no bad coffeehouses, there’s just the ones you go to more often.

Scott: Exactly.

GDA: I mean, what could be wrong with a place that serves coffee?

Scott: Exactly right. So, Sam Sadler agreed that they would do this, he approved it—with Timothy Sullivan, at the time—but this [Lodge 2] wasn’t even being considered as the space. They were going to put it in the basement of the UC—the UC was new [then], it had been there for a few years. They were developing the basement, they were opening businesses in the basement, and that’s were they were going to put it. Luckily for us, the last lease had been signed before they could get to it, and [Sadler] had already promised them a space. So he made the decision to take Lodge 2, kick the residents out, and take the place. Overall, they did a really good job, it’s a really great choice. It’s central to the campus. I would say business has grown about four hundred percent since I’ve been here. And I could attribute it to things I’d done, or I could just say it’s because it’s been here longer. You know, I would like to think that the Grind has offered something people like. When I came here, it was funny, because when Todd introduced me to the Powers That Be here on campus, they were frightened of me because I came here with all this business background, and the students who worked here were frightened because they thought I was going to come in and turn it into a Starbucks. Because they thought “Oh, no, Businessman’s coming in, next thing you know he’s going to have us selling teapots…”

GDA: I’ve found that most coffeehouses try to distinguish themselves from Starbucks as soon as possible.

Scott: Well, that’s not hard to do.

GDA: First off, don’t sell anything with the word “venti” attached to it.

Scott: *laughs* Actually, “venti” is a true word.

GDA: Is it really? I thought it was made up.

Scott: It’s “twenty,” it’s the Italian word for “twenty.” So a twenty ounce cup of coffee, they call it a “venti.” Nowhere in Europe would you ever buy a twenty ounce drink—that would be more like three drinks. But “grande” is a size in Europe…

GDA: Well, they’re selling coffee in three different languages—“tall,” “grande,” “venti”…

Scott: But if you look at it from a business standpoint, it’s actually pretty brilliant on their part. First of all, they trademarked themselves, not only in product and style but in language. Basically, you’ve got this product recognition—and when I say product I mean an overall product, not meaning just their coffee or whatnot, but this product, Starbucks. I don’t think there’s any place in this world where you could say “Starbucks” and most people wouldn’t immediately know what you were talking about.

GDA: They really grabbed the spirit of the times, latched onto it, got an early hold on it, the way some people got an early hold on the computer industry.

Scott: Oh, yeah. People say to me “You must hate Starbucks.” And I’m like “Why would I hate Starbucks?” Even if I don’t like their product itself, I have to appreciate the fact that they took something like this and made it bigger than the gods. I mean, they really did, they made it bigger than the gods. When they’re done growing, they’ll be the biggest retail food industry in the world. And it’s a real testament to the power of coffee, for one thing. It’s a real testament, too, that they were able to take the notion of a coffeehouse and turn it into something that was so socially acceptable. Everybody and anybody goes to it—grandmothers, children, the whole family goes to it like it was Baskin-Robbins.

GDA: And the cappuccino became as popular as a mocha.

Scott: Exactly. You have to give it to them, too, that the way they designed their product—“Charbucks,” as we call it…if you’re going to roast your coffee all over the world and have it taste the same in every single location, you’re going to have to burn it. There’s no way you could actually artistically roast the beans at lower temperatures and have them taste the same. The whole thing has to do with the type of gas you’re using, the roaster itself—you would never get the consistency to be the same. In order to do that you have to take it up to such a high temperature that it burns them—chars them.

GDA: So it’s consistency via mediocrity.

Scott: Yes! I would agree with that. Plus, if you think of it this way too, the only way to deal with the bitterness of that charred bean is to put milk on it, so you’re immediately tending towards the latte, the mocha—and that’s their high dollar drinks. They pulled more money in by burning their beans—they made more money by doing it that way.

GDA: The argument for any sort of high-level consumerism, it’s actually the argument I’ve heard people use for eating at the Caf [The Commons on the W & M campus]. “You’re more likely to get a really good meal or a really bad meal at the UC, but the Caf is always predictably mediocre.” Which is why a lot of people prefer eating at the Caf—not because the food’s better, but because…

Scott: You always know what you’re gonna get.

GDA: Exactly.

Scott: Consistency. That’s what Starbucks has got right now—it’s got consistency.

GDA: Do you have any advice for future small business owners?

Scott: I’ve actually been a consultant before…I’ve consulted for a number of small businesses. The last one was a Brazilian café in Richmond that I did for a couple from Brazil. Basically, she was cleaning houses and he had a yard service. They were doing really well, but they both felt like they wanted to run this café so they could be doing something together, and of course my advice to them was “You don’t want to do this.” And they said “No, no, we really want to do this.” I said “You don’t understand. Unless you’re willing to commit a hundred percent of your time and your passion and your love to it, it’s not gonna work.” And that’s always what I tell people, you have to be one hundred percent committed to it and be willing to fight the fight, because even the people that love you the most are going to become despondent about how much energy and time and everything you have to put into it. Even a place like this, sometimes I’m putting in thirteen, fourteen, fifteen hour days, sometimes seven days a week, for weeks on end. People say “Well, it’s just a little coffeehouse,” and I say “You don’t understand.” There’s a cost to everything that you do. This is a great space, but when they built it they never thought about putting storage. They never considered that it was going to become as popular as it did. And if they had thought about that, and if any of them had ever been in business, they would have known that there’s no way you can run a place like this without storage.

GDA: And if it’s a labor of love, it’s not like something you start at 8 AM and quit at 5 PM every day.

Scott: No, no. It’s with you 24/7, and it’s yours, and it has to be that way, otherwise it’s going to fail. And unfortunately for that couple, they decided to do it anyway, and eventually they failed about a year and a half. The guy said to me “This is the hardest work I’ve ever done in my life” and I said “It’s not work, man. If it’s work for you, it’s not right.” It should have been just like raising a child. It’s got to come naturally. You either are that kind of person or you’re not.

GDA: Well, for me—thinking about wineries for a while, I thought “You know, it’d be cool to work in the wine business…I like wine, I like wineries, I think they’re really attractive aesthetically…” I talked to a guy out in Chincoteague who runs a wine shop who said “Chemistry majors used to go into the wine business as vintners or even directors.” And I woke up one morning—I’d been talking to a friend of mine and saying “I’d really like to open a coffeehouse”—I woke up one morning and thought “Why not open a winery? Why not open a winery AND a coffeehouse?”

Scott: Sure. I mean, I think they go together hand in hand. I think that having a place where you can consume the wine—where you’re mixing the wine, and fermenting the wine, and casking or whatever you’re doing—I think it’s sort of like the microbrewery idea, but for wines. But if I were going to do coffee at the same time, I don’t think I would make it a byline. I think I would make it part of the focus of the business. Whatever level of quality was going into the wine, put it into the coffee as well.

GDA: Well, out at Barboursville, they have a restaurant, and it’s not “Oh, by the way, we happen to have a restaurant, too.” The restaurant is part of the whole experience, they serve their wine at the restaurant…

Scott: And it’s a good restaurant?

GDA: As far as I know, it’s incredibly good…it’s called The Palladio, it’s got a great view of the vineyard…But the thing for me, is that I’d really like to get involved in the wine business and work there for a long time so that I don’t just jump in and assume that all this stuff is going to fall into place.

Scott: My only suggestion to you, because you’re coming into this all green, is—first of all, financially, I tell people that they need at least three years’ worth of capital. That doesn’t preclude you from buying grapes and blending, doing house blends, before you get your own grapes growing. And you may always have to buy some of your grapes from others simply because you can’t get a specific type of grapes to grow…it doesn’t prevent you from going ahead and starting your business, and it doesn’t prevent you from opening your café and getting your coffee and that’s a way for you to make some money and pay for this while you’re getting started. You’ve got to have that money in the bank, because I can’t tell you how many people have told me “I’ve priced the oven, I’ve priced this, I’ve priced that, and this is what it all equals. This is how much money I’m going to need.”

GDA: Which is like looking at a box score and trying to figure out what the baseball game was like.

Scott: And I say “What happens when the oven that you bought, which was a great deal, what happens when you find out the core is burnt out and you’ve got to replace it? What happens when the inspector comes in and says “No, this is all wrong, you’ve got to rip this or that out” and it’s another twelve thousand dollars?” And all these things happen on a day-to-day basis. And if you’ve opened your doors and gotten that ball rolling, you can’t just say “Oh, I’m not going to do it now.” Because you’re never going to get back the money you already put into it. You’ve got to be committed to it, to make sure you’ve got the money so that you’re not worried about how you’re going to pay for the electricity next month, you’ve got to make sure that you’ve got enough money in the bank to safeguard against the fact that, for the next three years, you aren’t going to make a dime.

GDA: The pattern I’ve been seeing, sadly, in small businesses, is that the best of them seem to be inherited. At Scotland House, where I worked, it’s a great little store, but the owner isn’t the original owner. Or some vineyards, where it’s been in the family for a while. Things where the groundwork’s already been laid for you. So I’m going to try to skip that step by working in the business, trying to figure out exactly…

Scott: That was going to be my next suggestion: get some experience in the business.

GDA: Well, the thing is, I don’t consider myself to have really good business acumen. I have the ideals. I don’t necessarily have the…

Scott: Then you’re gonna pay for that. You’re either going to have to have a partner—

GDA: Well, that sounds like the kind of thing for me, like you were telling me about your partner. I work well in a business environment, I’m extroverted, I like talking to people, I like that whole aspect of retail. But…financial things worry me. They either worry me, or I’m indifferent to them.

Scott: I am too. I’m horrible at them. I’m not good at them.

GDA: Even when the financial situation favors me, I’m more likely to push it aside and say “I’ll worry about that later” than to deal with it in the moment. That’s what worries me about going into business.

Scott: And you can’t afford to do that. You’ve got to have somebody looking over that or it will walk out the door on you…I’m sorry to cut this short but I’ve got to get back to work.

GDA: No, no problem. Thanks a lot for letting me interview you.

0 Comments:

Post a Comment

Links to this post:

Create a Link

<< Home