Stars assisted in this cafe expansion...

by chee Leng (on coffee makers)
(Singapore)

Recently, I read an article about Caffe Bene in Korea expanding to 553 outlets in just three years. That is some fantastic growth and can probably be matched only by Starbucks in its heyday.

The interesting thing that caught my attention is the USP of this cafe (basically it is the franchising model, but more on that later).

CEO of Caffe Bene Mr Kim Sun Kwon highlight that his cafe would have a European feel, allowing people to feel at home and stay in his cafe for as long as they want.

Now, for folks that are operating cafe, this runs against conventional cafe management where turnover is important and where profit is measured by per square foot.

Currently, his strategy seems to work, I mean you don't get 553 outlets with just a vision, his model must have reaped healthy profits for many of his franchisees.

Of course, it helps that he has many big Korean stars doing the marketing for him and there is plenty of product placement in TV shows.

And it sure helps that he only runs 12 out of the 553 outlets. The risk are taken up by most of the franchisees.

Here is my $0.02

Personally, no matter how novel the idea, unless you sell entry tickets, I do not think per square foot turnover can be ignored.

No matter, how much a consumer can spend, there is a limit and more income has to come from turning that square foot.

And I do not think the charges for the coffee are very high.

So, I seriously doubt the business model of allowing people to spend as much time as possible is sustainable.

I have seen many business model with more franchisees than the HQ owned outlets, but never by this many.

It creates many problems, one is the difficulty to control the quality and operation of the stores. In fact, even if the store would to flout the rule, would they know it?

Therefore, my thought is the marketing and the big Korean stars that assist in the promoting of this chain works.

Koreans are very passionate about their favorite star and it is no wonder that they would support the outlet simply because it is linked to some of the their favorite TV show or actor/actress.

Starbucks has done and seen it during their rapid expansion years and they have to do some serious trimming just a couple of years later.

So, while Starbucks is not expanding that fast in Korea, maybe it is because of something they know.

In addition, Angel-in-us that is managed by the Lotte group are also expanding cautiously should highlight the danger of too rapid expansion.

Anyway, I don't think the "homely feel" of Caffe Bene is the success factor that is driving its growth, it is likely to be the backing of the stars -what is your thought?