Welcome back you guys. This is part two of us interviewing Wes Herman, owner and founder of Woods Coffee. Just the equipment, $25,000 versus us starting the whole business for $23,000. We're still moving forward, planning for new stores and our growth and our expansion. It's super important to us to make sure that we're profitable and growing and that they kind of dovetail together.
We've actually been in grocery stores and that didn't prove to be a great model. From day one, the thing that has sold the most in our coffee shops of our baked goods... I love my coffee guys.
How do you stay competitive? You know, everybody talks about what the markup is, what your profit is, what your net is. We always like to say, what is the last amount of money? Make sure you check out part one in the description below. Check it out first, then come back and watch part two.
This episode is about growing and scaling your business. The question I have, I guess, is what's your approach to scaling? What are your tips and secrets to scale quickly?
Is that a good idea? Walk us through your evolution of scaling from 1 to 19. Right. You know, people will look at that oftentimes and say, that's what I want to do. I want to grow just like you did.
I want to have multiple locations and things like that. And I always advise them the same way. It's not necessarily the best approach. It has to be part of your business plan. And, you know, back to the business plan.
If you follow your business plan and have it laid out exactly what you want to do, then follow it. You can't just change midstream. Some businesses are much more successful with just one location. In our case, it just happens to be part of our growth plan and part of our experience that we have multiple locations. And it was part of that original plan that we're executing today.
But the idea of, you know, how do you scale? How do you grow? It's really important. We don't put a lot of money into real estate and buying things. We really like to keep our capital fluid and moving.
And if we can open more stores, we feel that that's better for us. So by not owning your locations, it gives you a greater opportunity to start up new locations. Right, yeah. Because we build based on profitability.
So it's not like we're going out and borrowing a ton of money to build new locations. We build based on... what we've made and how we've been profitable. And so if we're not profitable, we can't grow.
And so we try and be very profitable, sustainable and able to continue what we're doing. But if that gets all wrapped up into real estate and doesn't allow us the flexibility to start new stores, then that's not what we're about. We want to start as many locations as we can. All right, I can't wait to order the delicious woods coffee. Great.
What will you have today? You know, I've got my favorite. I like the iced cedar latte, please, with light ice and a little bit of caramel chisel.
Yeah. I'm going to watch my sugars, Wes. Oh, that's cool. Yeah. What about?
you what's your favorite drink? You know I usually have an Americano but we're here in the afternoon and I really want to sleep tonight so I'm just gonna go with a mango Italian soda with no cream or no whipped cream please. Mango. That's it. Perfect.
Be right out for you. And you know what? I can't forget to give you a tip. So let me make sure we take care of you really well.
Always, always tip your baristas. Right? Yeah.
Oh, it's culture, right? Absolutely. Thank you, Wes. Pleasure.
Cheers. What basic coffee shop equipment can you start with? And where do you go find a good deal on them? Good deal.
I don't know that you can find a good deal. There are a few. There are some good deals.
I mean, you can go, when we first started, we bought everything used. It's all we could afford. I told you about the budget.
It was $23,000. Right. And so we had to use that very, very carefully.
So we bought some used equipment. And the critical parts are an espresso machine, a grinder or two, depending on if you're grinding two types of coffee, regular or decaf. And then it's...
It's a drip coffee machine so that you're serving great drip coffee. And those are really critical to have the right machines. And then a blender, you know, it's an ice maker because there's a lot of ice beverages, right? And so you put all that stuff together.
I mean, you know, with refrigeration and point of sale machine and, you know, it all adds up in a hurry. So. But somebody can get away with finding a package for that kind of stuff, you know, your basic equipment.
You might be able to do that for $25,000 today. So you think about that, just the equipment, $25,000 versus us starting the whole business for $23,000. Yeah, times have changed, 18 years. Absolutely. Makes me feel old.
Wes, what's your markup on variety of the snacks that you offer? and what's your best seller? Yeah, we try to, like if you boil everything down in a business, you know, everybody talks about what the markup is, what your profit is, what your net is. We always like to say, what is the last amount of money that you end up with after everything's all done, right?
And that is oftentimes not as big as you might think. And especially in the coffee business, it doesn't matter what kind of business you're in. If you... end up with five to ten percent left after everything's all said and done that's probably where everybody ends up you know some some make a little bit more some make a little less but uh you know we uh i don't know what necessarily a markup is because we're taking raw ingredients and we're building it all through the process so it's kind of hard to make that reference so back to but the best sellers i can certainly talk about that from day one the thing that is sold the most in our coffee shops of our baked goods has been the white chocolate raspberry scone.
I mean, that is just a surefire local favorite and everybody loves that. If somebody wants to start a chain of coffee shops, Wes? How do they go about it?
I know that that's a long process, but if you give it to us in a nutshell, I think it would help. Yeah. It'd be the same as starting any chain of anything, right?
You start with one and you grow. In our case, You know, it was one and then six months later, the second one. And then, you know, it was just kind of compounded from there. But again, it goes back to what is your business plan and how are you going to accomplish that? And that is also then the.
part that leads you into how much capital is that need to make that all happen and then what length of time and then probably most importantly what's your level of risk you know how much risk do you want to take you can try and push this and go really fast and we've seen that lots of business where you go really fast and then they go really fast out the door so ours is built on sustainability and that's really the key you know when I talked about building from profit It's super important to us to make sure that we're profitable and growing and that they kind of dovetail together. So, you know, starting from one to the next and then how many do you want to do? You know, we could easily say, hey, we want to go after and do 100 stores.
But what's that mean? What's the toll it's going to take on, you know, our family in particular? And then what's the best way in which we grow?
So it's all about that. You've got a new concept, too. So in a way, it's got to be proven first before you start. Scaling it. He did that really, really, really well.
Thanks. How important is Wi-Fi in your locations? Do you have it in all locations?
Yeah, Wi-Fi is critical and, you know, it's been critical for a long time and becomes more important, right? So we have IT guys that work for us that, you know, constantly working for us and getting all the stuff in the right place. And it's got to be at the right speed.
It has to be, you know, in a right geographic area. And then... You know, it's controlling content. You know, there could be some people that are in our stores. We don't know what they're looking at.
And it would be totally inappropriate for them to be looking at something that's inappropriate in front of a family-friendly environment like we have. So you do have some walls there. Yeah, filters to keep that.
So Wi-Fi is super critical. You know, traveling, people are on the move now, right? There's not as many people in an office.
And so the Wi-Fi is super critical to us. And anybody who comes into our stores. Because people love to sit around, drink coffee, and be on their laptop. That makes sense.
So as you grow from one shop to the next to the next, I would imagine you have the need for more employees, more staff, certain roles need to be filled. Can you walk us through that in one to two minutes, what that looked like for you? Yes. What do our viewers who are starting a shop with one or two and now they're scaling, what do they need to plan for when it comes to staff?
Yeah. Who are the crucial ones? Yep. Yep. So the first one, We ever hired that was really a key part of what we do today is our CFO and he was a guy that volunteered his wife was our first manager and she said she actually volunteered him and said hey my husband he's an accountant and loves coffee, he'd be happy to set up his book, you know, and he'll just do it, you know, as a volunteer.
And who would have known that 18 years later, you know, he's our CFO and runs all the finance. So that's number one, the most important thing, you know. somebody who's going to run operations, and then who's going to do all the stuff that goes into whatever business it is that you're in. In our case, we have various managers that run roasting and baking and distribution and truck driving and all those kind of things. But that didn't happen from day one.
You kind of evolutionarily grow into each one of those as you go. And it started very, very small, and we never had an office. until about 11 years ago. And we were just meeting in stores and we'd just kind of meet up as we needed to and kind of quick huddle and then we'd go. And now today we actually have an office and we're running out of space because we have more people in the office and all that kind of stuff.
Really cool. Yeah, very fortunate. You've got that set of people that are just crucial to your success.
The core family members are the key, right? Yeah. One of the things we're seeing and people are enjoying is cold brewed coffee.
And I see you've got that here. So tell us a little bit about the process and how that's different from what's behind us. Yeah, so hot brewed coffee is what everybody is familiar with, right? it in your home it's where hot water goes over ground coffee and creates the magic of coffee.
Cold brewed coffee is simply taking those grounds and then letting them sit in cold water for a bit. period of time. And in our case, we're letting them sit for about 16 hours.
And it gives you that opportunity for gathering all the great taste out of coffee with a very low acidity. So whereas hot coffee has a higher acidity, cold brewed coffee is 67% less acidic. So it's super smooth.
It's unbelievable. And one of my favorite ways to drink coffee. And it's becoming, you know, I'm a real thing that people love.
And this is this is everything cold brew right here? This is all cold brew related. This is a 300 gallon tank system which allows us to not only create the cold brew over a 16 hour period but then move it from one tank to the next by filtering and giving us that opportunity to have some real fresh cold brew here. And this is the end product right here?
That's it. Loving it. I love it.
Yeah. We bottle that in gallons and then it's shipped out to our stores and served fresh to our guests. You know, I've got to get one of these for my garage, Wes.
Yeah, you should. Everybody needs one of these. It's got to be set for how long do you think?
A couple months? Yeah, probably. And it would still be good, too.
Still be good? The crazy part about this system is that this looks like a microbrewery, right? It does. And that's what we're doing. We're microbrewering cold brew.
How do you stay competitive? You know, we try and keep up with what people want, right? If we can, our business is based on service. You know, we love to serve others. And so if we can create something that meets the need of someone, then that's what we're about.
We just happen to be in a great space where people are addicted to coffee and they love it. So you know they've got to come in here and they have to get that experience every day. That part's taken care of.
Yeah, that part's taken care of. Nothing you can do about it. No, nothing I can do about people's habits that way.
But all we can do is influence them as best we can by creating great experience and great products. So, it's fresh beans that are roasted right here at this facility. And then it's our fresh bakery that is delivered straight to our stores every single day and is fresh every day. Those are difference makers for us and things that we can do.
can do that help us control the marketplace. Yeah, I think that's really cool. I think nowadays people are catching on to local homemade, quote unquote, and I can't see the big box, you know, Starbucks and a few other chains doing what you're doing.
Well, you know, especially in the bakery area. Yeah, exactly. You know, this is all fresh every day. It's the best ingredients. It's artisan baking.
It's not like, you know, we're buying mixes. and putting them in something. Everything is mixed at about 4 a.m.
in the day. It's all prepared during the day. It's baked off that evening, goes onto the trucks, gets out to the stores, and served fresh the next morning. So it's quite the process.
Wes, I love these cards. I see them all over town. I've had a number of clients hand them over to me as a gift card.
Yep. So, is this a gift card or does this have a loyalty program behind it? Tell us a little bit about that, how that evolved, where it is today.
I'm glad you asked. You know, that's a really vital part of our business. People are in the habit of coffee on a daily basis and sometimes multiple times a day.
And so they want to feel like they're getting. some advantage from that. And we're happy to give that to them.
So you can go along and drink 12 small cups of coffee, regular black coffee that, you know, isn't going to cost you very much, and get 12 of those throughout a certain period. And then you get a free drink. And on that free drink, you go big, man, you know, and you can get whatever you like. So it's a lot of fun. People love that part of it.
It's also a gift card. We see them loaded with all kinds of money on them, and they're giving us gifts. And then people translate that into usage and then loyalty and on and on and on. So it's a great program.
We've been very happy with it and allows us to keep in constant communication with our guests. That's awesome. Do you have any person specifically buying 12 just so he can get to that 13th one? Oh, yeah. That happens all the time.
I can see that happening. But then you've also got the ones that have thousands of points that they've gathered. And they keep telling me that they're going to...
Free coffee for life. Well, now, they actually think... that they're going to get to buy one of our stores with some a certain amount of points and i keep reminding them that that's probably not possible but they get a billion points that's awesome Some people want to do the hands-on, they want to have start out you know exactly doing the roasting as well as serving coffee and you can do that in a small scale and just serve for what you need but as you grow and in our business we had to have some bigger equipment and it was easy to scale without roasting ourselves because we could just put the demand on somebody else and order as we needed but now it's you know really a part of our business and a big part of our business yeah so it goes back to what you talked about about earlier that's a business plan yep and whether roasting is part of that plan or not absolutely well this is kind of an open-ended question i mean what's next for woods coffee you know i don't know uh you know we have all kinds of plans uh currently we're sitting in a unique time in history uh 2020 you know known as the corona year and uh we don't know how that's going to impact our business you know what are the changes changes that will happen when we reopen on a bigger scale and how does that impact us for years to come you know does the virus come back at a later date so for us it's we're still moving forward planning for new stores and our growth and our expansion but you know some of that is just on pause for a moment while we kind of evaluate things but even saying that we were evaluating property yesterday to see if that would be another great site for us and we keep that pipeline constantly moving because we've got lots of competition for sites and we we want the best sites and those aren't always available to us because we're not starbucks and so we have to take what's left and figure out great places to go and find properties that maybe somebody didn't think would ever be a coffee shop and how do we repurpose those and so that's what we do yeah and so we're right now we're retooling you know how do we do things better how do we do things more efficiently uh what gets us down the road further and uh what makes us better at our craft and so we're we're doing that and preparing our stores uh for that time when we can be back in a new dimension yeah i think it's tough for all of us during these uncertain times but it's amazing to see how much innovation comes out of these moments in our history and uh innovation personally innovation business wise.
It's amazing. I'm sure that many of us are going to come out more innovative, more high tech, more efficient, more lean. Yep. I hope so. We're working hard on it.
Yep, absolutely. And I know you guys, if you haven't watched Lean, I always bring that word up. That's from our two episodes, Paul Akers.
Scroll down in our videos and do check them out. Amazing principle of being lean in your life, in your business. It'll change you forever.
You guys, thank you so much for watching our channel. Two episodes of incredible. information from Wes Herman. YouTube promotes channels that are engaging where you're asking comments or providing feedback. So we ask you that you please do that.
Comment below. Ask a lot of questions. We've got our blog in the description below.
If we didn't answer your questions in this episode, we will answer them in the blog. Come back to us, share the channel. We appreciate you and we'll see you next time.
We've got some great things coming.