A global economic crisis is not entirely bad, after all, is there an easier way to explain our own business failures and inadequacies without accepting personal responsibility for poor planning and management? Of course not! As the Dow Jones Industrial Average drops, the number of “the economy ate my business” stories rise. It’s a proven fact.*
…and let’s not forget the hours of amusement that comes from these claims.
Ever since the stock market began imploding a few weeks ago, I have been looking forward to a fresh batch of heart-wrenching coffee shop tales, with owners who will claim that despite their best effort to put the coffee shop in back of a strip mall next to the KFC and choosing “real Folgers” instead of that instant stuff, the business still inexplicably failed — clearly because of this new and unforeseen climate of economic hardship. Clearly.
I say farewell and good riddance to the substandard coffee shops of America. If an irrationally exuberant economy was the only thing keeping them afloat, then their failure was inevitable. Think of a a sudden dip in the economy as a form of euthanasia; had the drop not happened swiftly, these businesses would have been hanging-on, dying slowly and painfully for the next several years. Now those years behind the bar of an underperforming coffee shop are free for owner-operators to pursue new productive roles in society.
The economic pruning of dying and dead coffee shops is a necessity that allows our industry to grow and prosper. Once the questionable stragglers (you know who you are) are eliminated, consumer energy can be focused on the crafty and well-performing survivors, so that they can continue to evolve and survive. It’s nature at its finest.
So without further ado, I bring you our first casualty:
Owner blames economy in closing Maui Wowi Hawaiian Coffee business
The slumping economy and lack of what he called “name recognition” proved too much for Ralph Lobato to overcome.
Pause here for a second. If the franchise doesn’t have a recognizable name in your area, wouldn’t it be better to design your own business and own the brand name instead of rent? I can understand the appeal of opening, for example, a McDonald’s. Unaided brand recognition for the McDonald’s logo is among the highest of any brand in history and the products and systems used there create a consistent experience that is in demand, by some estimates, as much as 5% of the global population daily. But “Maui Wowi?” Hmm… seems like Ralph should have seen that one coming.
Lobato closed his Maui Wowi Hawaiian Coffee & Smoothies in Redding on Sunday. It was the second business in about three months to close in Hilltop Landing on north Hilltop Drive.
Maui Wowi, owned and operated by Lobato and his wife, Lydia Benham, opened in December.
This summer, TJ’s Barbecue in Hilltop Landing closed after a little more than a year. The owners also blamed the economy.
Lobato, 46, said Monday that business had been brutal the past two months.
In the industry, we call those months “summer.” Also shouldn’t have come as a surprise, which is why I professionally recommend that clients have enough capital in their budget planned to sustain operations for the first 12-18 months. In this case, however, I don’t think that was the only problem; read on…
“Consumer spending for the beverage industry has been at an all-time low,” Lobato said. “The bull’s-eye for retail food is lunch and breakfast.”
With people reining in their spending, Lobato said business for peripheral food items like coffee and smoothies suffers.
That’s funny, everything I have read this year proves the opposite. Maybe he meant to add “on Hilltop Rd. in Redding.”
Lobato called the decision gut-wrenching.
“This affects a lot of people – our family, our employees, the business owners next to us, the retail development,” said Lobato, adding that his four employees have found other jobs.
Retired from Hewlett-Packard after 25 years, Lobato used his retirement savings to start Maui Wowi. Lobato and Benham spent about $400,000 on capital costs and an additional $125,000 to keep the doors open.
“We’re not going to go in debt to keep the business open,” Lobato said. “… We can’t afford another two or three months of losing $10,000 to $15,000.”
With that much capital invested, it seems to me that the concept was doomed from the start. I’m curious what the franchisor would say about this situation; either this guy was completely mislead regarding the numbers or he completely failed to follow operating procedures. Not every Maui Wowi across the country can be hemorrhaging money like this, can they? Why would anyone invest?
While he likes the Maui Wowi coffee and juice smoothies concept, Lobato acknowledged the name was not recognizable enough to drive business, especially with the tough times.
…or, perhaps good enough for consumers to return.
What’s more, Lobato questions his decision to open a store instead of drive-through kiosks, much like the Dutch Bros. coffee model. Maui Wowi franchisees have the ability to operate what Lobato calls “smoothie shacks.”
Lobato said 80 percent of his business in Hilltop Landing came from the drive-through window.
Maui Wowi is one of several Shasta County businesses – many food-related – that have closed over the past year. Others include Taco Del Mar, Gringo’s, Smart & Final, Oregon Street Tea Co., Willie’s Famous Chili Dogs, the La-Z-Boy Furniture Gallery, Pellegrini’s Brazilian Steak House, the Cool Breeze Yogurt Cafe, Shasta Lake Health and Fitness, and two Starbucks coffee stores in Redding.
Meanwhile, a sign on the door of the former Maui Wowi says a new business will open soon. Lobato said the center’s owners are talking with two food and drink establishments that he wouldn’t identify.
Hilltop Landing developer Nathan Emerson wouldn’t name the businesses either because he said no deal has been signed.
“Ralph really put his heart into it,” Emerson said. “For whatever reason, it just didn’t work out.”
Yes, “whatever reason.” There is no way that the products were not attractive to local consumers, the rent far too expensive to maintain such a business, the location is inconvenient and perhaps the wrong demographic or that the concept was poorly designed or executed.
It clearly was the economy’s fault.
* This is a lie.
4 responses so far ↓
1 Joe Coffee // Oct 15, 2008 at 3:55 pm
While I generally agree with your perspective, I’m leery of someone quoting a May 15th article on industry performance from even earlier months. In case you haven’t noticed, a lot has changed since May. Most food/bev companies are reporting declines in the 20%+ range. No question however, only the strong & creative types will survive this downturn.
2 Andrew Hetzel // Oct 15, 2008 at 4:20 pm
Good point, but the May 15th article seemed relevant to me since the business was started in December, 2007 — giving the proprietor the opportunity to take advantage of at least 5 months of proverbial “good times” before the bottom really started falling out.
Interestingly, though, the National Restaurant Association recently released a statement indicating that restaurant sales were off .5% in September from August, a “new low since their seasonally adjusted averages in April.” So if April was the most recent low, would that not indicate that there was some sales growth during the summer months? Hard to say — every analyst has their own data and method of interpreting that data. We’ll only know for sure looking back at the 2008 in review next spring or summer.
3 seattle newbie // Mar 6, 2009 at 11:11 am
Mr. Hetzel,
I believe you to be overly harsh on the Maui Wowi owner in Redding, CA. I know him personally and although many of the facts stated in the article are true, they were extremely twisted by the writer of the article.
The owner admitted that there was probably a better route for his business, but did not blame the sole closing of his business on the economy. I believe he stated it as only one of many factors involved.
I was there. It was a cool store. I am saddened that it didn’t work out for him.
4 Facebook // Oct 5, 2011 at 10:04 pm
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