Corporate coffee chain Tully’s has made a radical change to its business model. Up until this year, the company has only offered retail store franchises in multi-unit deals, usually to restaurant management companies. Beginning this month, they will begin to bring single-unit franchises into the fold, opening the doors to small entrepreneurs who want to manage a recognizable brand name. Bonney Lake and Sumner have both been targeted as potential growth areas in the new push.
“We are an extremely well-known brand, the second largest coffee chain in the country behind Starbucks,” Tully’s Vice President of Marketing Scott Earle said. “Yet we still have a lot of ways we could grow, even in places that are close to our main offices.
“There’s a grocery store location in an Albertson’s in Bonney Lake, and from there the closest stores are one in an Albertson’s in Auburn and then you have to go all the way into Tacoma to get to our shops.”
Multi-unit franchise deals have the advantage of a franchiser dealing with experienced management companies to get new stores open and operating efficiently, but there are major obstacles to overcome when dealing only in bulk, Earle said.
Expansion into new regions becomes difficult because corporate has to take an all-or-nothing approach to setting up new stores.
“If we want to expand into, say, South Boise, Idaho, we have to deal with 15 stores in a short period of time instead of trying out one or two and seeing how they’re received,” Earle said.
The solution wasn’t clear until recently, when Tully’s executives reviewed patterns of growth in Japanese locations. Tully’s sold the franchising rights to a Pacific Rim company six years ago to handle overseas expansion. The company that handles the Japanese market deals primarily with single-unit franchisees. The average Japanese franchisee owns two stores, and the most stores held by a single owner is 12. Yet the country has seen an explosive growth of successful Tully’s stores in a short period of time, Earle said.
“They were able to do it because they could expand into smaller areas at a time without worrying where they would locate stores nearby,” he said. “It was also easier for the store owners because they could qualify for a small business loan instead of the large amount of capital needed for multiple units.”
Tully’s management has split a map of Washington state into hundreds of small regional footprints, each to contain a single standalone store. Bonney Lake and Sumner are each their own footprint.
“The other thing that’s missing from multi-unit chain managers is that local connection,” Earle said. “It’s a huge benefit to have a local partner engaged in that community.”
Potential franchisees need to have enthusiasm for coffee and be able to qualify for a small business loan. Franchisees are trained by Tully’s corporate and have access to bulk suppliers for stocking their shop.
The corporate office will hold an invitation-only Franchising Expo July 20, 7 p.m. Invitations can be requested at www.TullysCoffeeShops.com/franchise/apply-franchise.