Despite being a part of an industry that continues to face a variety of headwinds, Scooter’s Coffee continues to operate in the fast lane.
Joe Thornton, President, Scooter’s CoffeeBy keeping the operation simple and focusing on unit economics, the 25-year-old chain is on track to achieve a major development milestone in 2024. The chain reached 600 locations in April and shows no signs of slowing down. Here, Joe Thornton, president of Scooter’s Coffee, explains how the chain has evolved in recent years and what’s to come.
Q: What are the development goals not only for this year but for the next few years, too?
A: About five years ago the executive team set a big hairy audacious goal, and it was to get to 1,000 stores by 2024 and to get to $1 million annual unit value per store. At the time Scooter’s had just 137 locations, so that goal may have seemed like a stretch. Earlier this year, we just crossed 25 years, and we will be at 1,000 units in 2024. It’s because we have a brand and a growth model that’s resilient. And we are even more proud because we are doing it with franchising.
Q: Some concepts have mostly corporate locations, while others have gone the franchising route. What’s the significance of franchising for Scooter’s?
A: The founders, Don and Linda Eckles, franchised fairly early on. And the uniqueness of franchising is, it’s so personal. We average about four stores per franchisee. Even among those franchisees that have grown in size and in scale, they have taken years to get to that place. What makes franchising so unique, though, is that it’s their store in their community. It’s their culture. That creates a level of personal touch that other stores don’t have. And we think that helps differentiate our brand in a positive way.
Q: Scooter’s has some pretty aggressive growth plans. This is the case during a period where the industry continues to deal with supply chain challenges, higher costs and even longer times for permitting. Are you encountering any of those issues? If so, how are you addressing them?
A: Scooter’s opened 158 locations in 2022 and will open more than that in 2023. In other words, our growth has accelerated beyond 2022’s level. Part of what fuels this model is vertical integration. We have a company in our structure called Harvest Roasting. It’s a wholly owned unit that has its own bakery, roasting, warehouse and distribution. So, 99% of what our franchisees get each week comes from our drivers in Scooter’s trucks. We feel this is a competitive advantage for us. There are no green-and-white Starbucks trucks on the road. During the pandemic, our franchisees did not run out of any products. There’s a lot of things that keep franchisees up at night, and we don’t want supply chain to be one of them. So, on the whole, we are not seeing a lot of supply chain challenges. There will always be one-off issues with a general contractor, or concrete might cost more in one market than another, or permitting might take longer in an area. But on the whole, we did not experience too many of these challenges. There’s certainly some of it, but I believe we have less than what other brands are experiencing.
Scooter’s Coffee emphasizes interactions with customers in its drive-thru format.
Q: Thinking about your development plans, your concept is mostly drive-thru locations. Will that be the case moving forward?
A: We have pivoted exclusively toward the drive-thru kiosks. We have some places with cafes, but most are legacy organizations. We may build a few more cafes, but the focus is on the drive-thru, where we generally operate 664-square-foot kiosks. We believe in this model because during COVID, there were four levers operators could pull when doing business: catering, delivery, mobile order and pay, and the last is drive-thru. The clear winner was drive-thru. The demand has always been there for drive-thru, and the issue has been whether brands could satisfy that demand. History shows us if you invest deeply in it, you will be rewarded.
Q: How will drive-thru evolve as consumers continue to show they prefer that service style?
A: I am not sure it needs to evolve as much as people think it needs to evolve. In certain markets, McDonald’s is testing artificial intelligence in its drive-thrus. But what’s the trade-off? The question for any brand is how important is that human touch to you? For us, that human touch is very important. We are not a QSR. We are a loyalty business, and the difference is, what triggers QSR visits is often very unpredictable. When you go through a Scooter’s coffee drive-thru, the barista will know you by the sound of your engine. They will know what your order is because you see them three or four times a week. They will give your dog a pup cup. So that’s a completely different kind of experience compared to QSRs. We do want the best equipment inside to drive speed of service, and we will use timers and metrics to measure how well we are doing. But giving up the human connection is not something we are willing to sacrifice.
Q: It sounds like after 25 years in business, Scooter’s continues to operate with a fairly simple yet impactful approach.
A: Two things we emphasize are our core values and unit economics. Our core values are integrity, love, humility and courage. We don’t have a long statement behind each of those. We want these values to be embedded in every franchisee and employee. The outcome of those values is kindness. We want to help people get their day started by getting a fresh cup of coffee so they can be on their way. We are not actively promoting customization. We believe in the simplicity of the business. You can slow down your drive-thru line and increase your cost of goods sold. Sometimes people want simple. For a drive-thru concept, the first gate to pass is speed of service. And the key we keep at the top of every decision is unit profitability. When franchisees make money, we make money, and it’s good for everyone. We try to control the things we can control and unit economics is part of that.
