Wake Up and Sell the Coffee!. Martyn Dawes
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1996 – My Big Idea
In the spring of 1996 I worked three days a week on DRC clients and the rest of the week looking for a business idea. To be honest I probably looked for any excuse to pad the three days out a bit, the dark side of the week loomed up and I often had a sinking feeling about what I would do with my time in those other two days. DRC was my comfort blanket.
I decided I needed to physically separate myself from my old business so I rented a little office in Wardour Street in London’s Soho. This was a buzzing neighbourhood and it felt fresh and exciting to go there, even if I hadn’t a clue what I was going to do when I arrived at the office. The next step was to find the business idea.
TRM photocopiers
At the time I subscribed to a magazine called Business Age. It was part entrepreneur, part management. During the summer I read a small article about an American photocopier business called TRM, listed on the NASDAQ stock market. It had 30,000 photocopiers located in small retailers across America and the UK, and it was now expanding into France.
What caught my eye about the article was the way this business operated. It bought used photocopiers, refurbished them and then located them in newsagents and drugstores completely free of charge to the retailer. TRM supplied all the consumables and maintained the machines. A rep would visit each store and take a reading from the machines to see how many copies had been made. The revenue (we’re talking 4p a page here) was then split between the shopkeeper and TRM. The more the photocopier was used the greater the percentage of takings kept by the retailer.
It was a simple revenue-share model and somehow it attracted me. It occurred to me as being a win-win model – the retailer would benefit by offering an additional service to their customers and apart from keeping it switched on and full of paper they didn’t have to worry about anything else. The shopkeeper didn’t have the financial outlay for the machine or even the toner and ink cartridges; they were supplied by TRM.
What I also liked was the idea that these machines were working away generating revenue day in, day out. I wondered if I could find another product that would fit this model and then take it to Britain’s small shopkeepers.
A research mission to the US
Whatever business idea I did eventually land on, I was going to need to be able to fund its birth. Trudi and I talked this through and agreed that I take £50K from DRC to fund my new venture.
At around the same time, I attended a business start-up conference and exhibition and talked to the accountancy firm Baker Tilly, who had a stand there. I explained to one of their corporate finance partners that I had £100k – a small lie, but it sounded better than £50K – to invest in a new business. They were interested in working with start-up businesses, so now I had money, a business model and an advisory firm keen to work with me.
I just had to find the product. I asked myself where would be a great place to look for new ideas and before I knew it I was booking a ticket to New York. It occurred to me that great ideas often come out of the US and they inevitably find their way across the Atlantic.
I had never been to New York and here I was off to find an idea for a new business to start in London. I suppose this kind of thing is part of what makes being an entrepreneur such fun; it is an adventure that unfolds day by day and if you relish this you will relish entrepreneurship.
When in New York, each day I would head into town on the subway and pick a different area to explore. My tendency was to look at retail businesses, who sold direct to customers. From what I saw, three opportunities stood out:
1 A small retail outlet called Custard Beach. It sold tubs of frozen yoghurt for customers to eat in or take away.
2 A restaurant and cinema called The Screening Room. This was basically a large, casual restaurant with various cinema screens incorporated into it.
3 Filter coffee being sold in convenience stores (c-stores), like 7-Eleven. I remember seeing all types – suited business people, office workers, delivery drivers, builders, New York cabbies – buying cups of coffee to take away in Styrofoam cups for a dollar a go.
All of these appealed to me. Custard Beach was fun and the product tasted great. People were clearly buying and loving it; it could be a real success rolled out across London. But I had a nagging doubt – the British weather.
The Screening Room was just opening and I could see the concept working in the UK, particularly London. However, combining food and cinema seemed a big task and it was also reliant on the right kind of property.
This left the coffee in convenience stores. What appealed was the sheer volume of filter coffee in plain cups that was flying out of the door of these no frills convenience chains. There was no real estate, no staff and I was aware that coffee bars such as the Seattle Coffee Company had started opening in London. Maybe there was a new trend emerging for coffee drinking in Britain?
I was in New York for a week and then decided to visit the largest shopping mall in America – the Mall of America in Minneapolis – in the hope that I might see an exciting idea there. After a long day walking this enormous mall, one night I found myself flicking through the yellow pages in my hotel room. I reached ‘coffee making equipment’ and decided to call one of the companies listed. They were very helpful and I arranged to meet them the following morning at my hotel.
When I went downstairs to the lobby I was met by a representative of the company who took me out to the car park, where there was a very, very large A-team-type transit van branded in the company’s logo and colours. He slid the side door open and a fully kitted out coffee equipment showroom emerged, complete with leather swivel chairs and the most enormous coffee machine. He gave me the full demonstration and I sampled the coffee, which was amazing.
Three things occurred to me; the machine was huge, could I really see this in a newsagent? Also it was not a machine that a customer could use themselves. Finally, it was expensive, or at least I thought so, and I’d need to sell a lot of coffee to make this work. If this idea was to be the one I ran with I’d need a much smaller, lower-cost machine that was really easy for people to use.
My mind turns to coffee
I returned home thinking that coffee sold in takeaway cups was my idea and there were a number of positive trends I quickly picked up on:
Coffee and sandwich shops were expanding in the UK. Aroma and Seattle Coffee Company were making waves and Coffee Republic opened its first store in 1996.
One of these chains already had some concessions in Waterstones bookshops, so this gave me confidence in the idea of coffee being sold in locations other than standard cafes.
I discovered that fresh coffee was one of the most important elements of the American c-store product range.
I started to list the potential locations where takeaway hot drinks could be sold. I began with CTNs (confectioners, tobacconist, newsagents) and quickly decided that post offices, small grocery stores, opticians, doctor’s surgeries, chemists, tube stations and fashion stores could all be possible locations. If even a small fraction of these worked I’d be looking at thousands of locations.
Then I started to research the equipment and supply side of the model. I found a number of small table top beverage dispensers that were made in the UK, meaning it would be easy to deal with the manufacturers. These were also, I thought, a good price at less than £1000. They used instant coffee granules and powdered milk whisked together with water to produce a cappuccino-style drink.
I researched ingredient and consumable supply and met suppliers. I could produce a coffee for 4p and a cup, lid, sugar and stirrer were another 4.5p. Recognising that I wasn’t competing against coffee bars – this was a convenience product, not an indulgence –