Help me with my MBA project

[Numbers]

So, I'm taking my capstone class in my MBA program this semester. My team and I decided to do a consulting job for a small struggling business that contacted our school looking for some help. Our job is to provide a noticeable change that will positively impact the business over the course of the next two and a half months.

Here's the problem. The small business is a tiny little coffee shop in the bad part of town. If any of you have ever been to Syracuse, it's in what we call the "South Side." It's on a somewhat major road, and it's relatively close to the business district of Syracuse, but there's no parking at all outside the business, so people end up just driving by. And the only people that do walk by are generally poor minorities without much disposable income to spend on coffee. The people from the business district just go out and get some Dunkin Donuts or Starbucks... they don't go beyond the border that marks the business district and the South Side.

The concept behind the coffee shop is kind of an old-school poetry/jazz mellow kind of place. Every Friday and Saturday night that have open mic, where people can sign up and perform and do whatever. There's no cover charge for this at this point, but our team is thinking of suggesting one be put in place. The place is tiny, though, and can't hold more than 40 people or so. And while the people are doing the open mic, performing and listening, nobody's buying coffee.

At all other times the place is pretty much dead. The owner's got two people working for him, his daughter and a friend. He's not doing any marketing that we know of, which we plan to change. His customers are mostly minorities, and there also seems to be a large proportion of gay and lesbians.

Most of the ideas we have tend to do with marketing. Some radio spots, maybe some print ads, possibly flyers. We're also planning on getting some t-shirts printed out with the logo and address, and have them as freebies for the people who perform during open mic or maybe some contests. We're also going to see about hooking the owner up with a laptop w/cd burner, having him record performances, and offering them for sale for $10 to $15 each. Possibly put some neon signs in the windows. Contact some of the businesses in the business district and maybe form some contacts to have their coffee delivered by this place.

But other than that, it seems to be a pretty lost cause, at least in its current form. There's a mini-mart just across the place with parking, and if people driving by want coffee, they go there, park their car, grab the coffee, and speed the hell out of there before they get mugged or shot. And, like I said, the population in that area don't seem to be huge coffee drinkers. The place also doesn't serve food (except for pre-wrapped cookies,) so people can't drop in for a bite to eat.

They have an outdated website at http://www.soulofsyracuse.com/onajava/ (we want to update this,) if you want to see what it's all about.

The owner is being uncooperative, and we've been trying to get his financials for the past month, so we have no idea what sort of budget or revenue stream this place has.

Anybody have any input as to how the place could become a successful business? Any ideas, no matter how wacky, would be useful, welcome, and appreciated. My group is getting kind of tapped at this point, as we're not being given that much to work with.

[Kitsun]

Talk about being up against a brick wall. Most competitors have a few legs up on that joint in respect to a trademarked name and location it seems. Location in terms of placement for high traffic and accessability.

Fliers might be one of the cheapest ways to spread the news about the shop. Should try to bypass the parking problem by having a map with directions to the closest parking on the back.

I would think an entry fee would hurt the crowd gathering for the open mic. Maybe attack that in a round about way by making it a 1 or 2 drink mandatory to sit for it.

[ElanthianSiren]

When I lived in grand rapids, there was a club downtown called The Liquid Room (I remembered 5 minutes after I posted). Anyway, it was basically like this kind of place. They had no liquor liscense and appealed to a very small audience.

What they did was require that each person buy at least one coffee. Coffees were like 3.00 a piece. They also showed movies on old black and white TVs (this was obviously an alternative club).

As long as you bought a coffee, you could stay all night. In this club, I would drum up the coffee biz by having voting on poetry etc. The best open mic gets their coffee price refunded for the night.

Also what Tamral said -- serve food. Food that never spoils, like chips and candy has such a high markup if you can get it bulk rate, I have no idea why they're not doing this and instead going with a perishable like cookies.

-M

[Edited on Tue, October th, 2005 by ElanthianSiren]

[GSTamral]

If you cannot get the financials for the coffee shop yourself, do a time study and create estimates. Conduct a similar study of a coffee shop in a similar location (if you can find one) that is more successful, and note any and all differences. Try and take case studies from a supply and inventory standpoint as well. Study customer trends (for example, a coffee shop that has customers constantly running in and out vs customers that sit down and take their time and the impact on willingness to wait in line, serving times, and flow of traffic/money).

1) Estimate the rate of return on any type of investments (advertising, new products and services, etc.) before implementation.
2) Study the fixed and variable costs of being in business in the particular location.
3) Look at change and overhaul as a means of exit/redefinition, if you determine that a coffee shop cannot succeed in the given location (which is another viable answer). If they are right next to another shop that serves coffee cheaper and quicker, and has a parking lot, maybe they need to redefine themselves and add something unique to separate themselves from the competition.
4) Does the shop also serve food? If so, what kinds of food?
5) Of the customers that do actually show up (regulars), is there any partcular reason that this shop is their shop of choice?

The way you describe the situation, the best answer may be to close down the business and sell the land. If they aren't at least covering variable costs each month, they're dead in the long run anyway.

[Artha]

I intern at a place like that as a graphic designer. What they seem to be doing is holding events which are going to fund other things and raise awareness that they exist. This weekend, for example, they're having Carlton Blount play for a $35 ticket charge, but most other weekends they project old classic movies onto the side of the building. They have a thing for local high schools on Wednesday nights (sort of like an open mic night) amd do various other things, with the aim being to get enough money to have plays going all the time.

[Sean]

Most places I know, if possible, tend to do better if they can promote some sort of social outlet that extends beyond the walls. If you can get the permit to do so, assuming they havn't already in case I missed it, I suggest extending out to the sidewalk with outdoor tables and service. Although it might be somewhat moot at this point given the the time of year and the weather up there.

[Atlanteax]

So basically, it's about converting a liberal gathering place to a bastion of conservatism? :D

[Valthissa]

Originally posted by GSTamral

The way you describe the situation, the best answer may be to close down the business and sell the land. If they aren't at least covering variable costs each month, they're dead in the long run anyway.

Many small business owners are running an annuity with real estate as the primary long term investment.

It's the old fashioned way to plan for retirement. own a business, pay yourself a reasonable wage, work the store yourself (sometimes with your spouse) - and when you're ready to retire, close the business and sell the land. This type of business can provide a great deal of personal freedom.

oh, and good luck on your project

C/Valth

[Warriorbird]

a liberal gathering place

I don't think they've made it that far.

[Numbers]

One of the problems with this business is that it's a part-time thing for the owner. He's got a full-time job at the Veteran's hospital, so he's hardly ever there. Most of the time when you walk in one of the two employees is sitting in the back watching television. We think that this guy makes enough from the business to just barely cover his rent.

I'll definitely suggest the one drink minimum to my group members, thank you for that suggestion. We're trying to explore the possibility of getting an SBE loan, buying the clothes store right next to it, and knocking down the wall to expand. On Friday's and Saturday's it's packed... there's pretty much lines out the door. The guy's just not making any money off of that. Maybe a change of focus? Primarily a jazz/poetry club, with coffee on the side?

The owner also wants to brand his coffee and sell it in supermarkets, but we don't have a clue where he gets his coffee from (again, he's being an uncooperative bastard... we're wondering why he asked for help from our school in the first place.) We're a little concerned that he's just buying Paul deLima and selling it as his own, in which case we couldn't exactly trademark that.

This would be a lot easier if we could move the shop to the business district a few blocks down. There's even a storefront available there. The problem is, the only reason our school got involved was to help the economy of the South Side and get some successful businesses running there, so moving is kind of a restricted option for us, even though it would probably increase sales.

[Jazuela]

I like the idea of projects that take the business beyond its physical location. One idea could be a poetry slam, coordinated with the city, held in a less dangerous area - the city park closest to town hall for example..sponsored by that coffee shop. Sponsored would really just be a fancy way of saying "We'll make the fliers and find some headliners for this, but we ain't footing the bill for the cleanup."

By doing something like that - making it a public service, you can get free advertising on the radio and local TV, since PSAs don't cost a dime. It's free press primarily to promote the event, but with the added bonus of getting the coffee shop better known.

[Janarth]

Um...location location location? if there is no traffic stream by to buy coffee, you have to entice people to go there, they need a reason: I'm not drive to some place outta the way to buy my morning coffee, especially in a bad neighborhood.

So, you need to create a reason to go there. I think cover is something you charge to reap the profits on an already popular place. If you don't have a steady following already, a cover is just going to make things first. Think you need to get the clientele first.

[Numbers]

It's getting the customers that's the problem. Keep in mind this place is in a very VERY low income area. I'm talking about average income of $10,000 per YEAR. A $3 cuppa coffee just isn't something these people are gonna wanna spend their money on. We're still trying to figure out what kind of marketing would convince the locals to show up.

I know the location sucks. It's absolutely terrible for a coffee shop. But we don't have the option of moving it. The best we can try to do is to set up coffee stands on the street near the business district.

[Sean]

Does the owner have any ties to this particular community besides owning a shop there?

[Numbers]

He might. I think he told us he grew up there, so he probably knows some people.

We're going to see if he knows any local artists to see if he can put on scheduled shows for them. But, like I said, he's being very uncooperative. The other day our team liaison called him up to ask about the financials, and the guy said, "Don't call me at work," and hung up. We're going to try changing the liaison to someone more professional (we're having a group conflict with the current liaison,) to see if the owner would be more receptive to him.

[Warriorbird]

Cheap good coffee. Advertising. Community meetings...

...and you ought to network to local churches. I imagine they're a community force.

Then you can try to connect them to more affluent places. You also want to get the people who are listened to in the community into this place...I'd suggest reaching out to retirees...people with large families.

[Edited on 10-6-2005 by Warriorbird]

[Jazuela]

There used to be a coffee shop in a beat up neighborhood I lived in years ago. The hood was low-income, and dangerous, and mostly minorities (black, vietnamese, and cuban primarily). The strange thing though, it was THE hotspot for people to come to listen to the Blues at night. Thursday nights especially. That was like - the one night out of the week there were more white people on the block than any other racial group.

I don't know how they did it, it was like that when I started going there. But maybe that'll give you some hope. Such things have happened in the past, no reason why they can't now. You have to find a niche. If this area is loaded with minorities - which culture is predominant? What kind of music do they listen to most? And no - I don't mean what kind of music do they dance to - you're not trying to turn it into a club. I mean listen. As in - gospel, or american folk, or the blues, or jazz...anything that can be performed "unplugged" with just a few performers at a time could work in a coffee shop.

You could charge a cover just for those performances, and keep it open as just a normal coffee shop during the day. Or have special events only on weekends, and keep the workdays business as usual.

Or maybe there's some kind of cultural food favored in the neighborhood. Just one or two items - jambalaya by the vat, or rice and beans, or collards and corn bread drizzled with honey...anything they can make in bulk, cheap, and relatively easy. That could become a "feature" - that niche, that one thing that makes people say "Hey - ever hear of that place in that neighborhood with the awesome <insert food here>?"

Sometimes word of mouth is the absolute best advertising for places like this. But you have to have that one thing that makes it so different, so unique, that people just -have- to come to satisfy their curiosity. Once they get there, be sure that this one thing is so wonderful, that they'll not only come back, but they'll bring a friend or two.

[Warriorbird]

You want this to be identified in the neighborhood as THEIR coffee shop and try to reach out to farther places with the performances. That's an insanely difficult task.

[Sylvan Dreams]

Jazuela mentioned about doing events outside of the location. Could the owner of the coffee shop spring for one of those cart things with the logo on the umbrella and sides? What about during the day in a busier part of town use that cart to sell coffee somewhere else, like in a park? And of course the cart would be able to be used during events as well. The employee running the cart would need a good looking uniform with the logo prominently displayed. Some fliers and business cards would need to be available for those who want it. Menus too (see below about the menus)

On the fliers & menus you can advertise a "call in" service, where customers can call in their order and pick it up. Print out some menus as well. Hell, charge them an extra 25 or 50 cents for a takeout order.

Try to have events in the shop. Since the shop doesn't seem to have any specific crowd hanging out there you could run a variety of events. Poetry readings, movie nights, hire local bands, etc. Hold contests - poetry contests, karaoke contests and give out prizes. Charge a cover, a small one. Do a free ladie's night 1-2 a week if not always (if you do it always, just raise the cover for men a little bit). See if there's any local clubs in town that need a location to meet at, like a book club. Give them a discount on their meeting nights and to all their members that display some proof of membership. Can this guy get a wireless access point in his shop? Let people bring in their laptops and hook up to the network.