Episode 418: Lessons Learned From Scaling Local Cafes

Welcome to another episode of the Above the Business podcast. My name is Bradley Hamden, your host. On today's episode, we have Jean Bernstein. She's the owner and operator and founder of Flying Star Cafe, a next-gen casual restaurant group that operates 6 locations and additional 5 satellite locations in and around Albuquerque, New Mexico. I wanted to have Jean on because like we've not had an entrepreneur come on and talk about what it's like to kind of expand a coffee shop to multiple locations. You may say, well, that sounds a little strange for the podcast, but I really do believe this, that you can learn from everyone. So we talked to Jean about how she's designed the coffee shops to have and create community. We talked to her about what it means to kind of expand to multiple locations, and of course how she got started. I think you'll along the way pick up a couple nuggets to be able to apply into your business. Without further ado, here's my conversation with Jean Bernstein. Jean, welcome to the Above the Business podcast.

Thank you for having me.

Excited to have you. Well, we'd love to start with background and origin story, so why don't you take our listeners back and bring them to kind of, uh, present day, uh, for where you are now.

Okay, so, uh, Albuquerque, New Mexico, 1987. Uh, my husband and I, Mark, uh, had a business. We were doing quite nicely, but We were frankly feeling unsatisfied. Money's money, but you have to like what you do. So we, but we were making money and we wanted a place to go. We were always looking for a nice, you know, in those days, coffee shops as we know them today didn't exist. Usually a coffee shop was like a diner, maybe a Village Inn, places to go. There were a few little odds and ends cafes, but we were looking for something more satisfying. We wanted, you know, nice bakery. We wanted fresh, good coffee, good coffee. I emphasize good. And also, we wanted a neat place, kind of modern, not dorky, not at the whim or the will of whatever owner had a dive. And we were on— we in Albuquerque, we have Old Route 66. Central Avenue that goes right through it. That was the old I-40 long ago. And we lived in that neighborhood that it was in called Nob Hill. And we were looking for opportunity. And one night we saw an old building with a charming brick front with a for sale sign in it. Turned out the building's roof had collapsed. The previous owner was in bankruptcy and we bought it. And then after that, it was like, okay, Here it is, now what? We have to make this happen. We weren't chefs, we weren't restaurateurs. I would say we were eaters, people who really like good food and know good food. You know, we both grew up in, he grew up in Brooklyn, I grew up in Connecticut in a very Italian factory town. And you know, that's the place where great cuisine is born. Simple, good things. We always were spoiled by all the wonderful simple foods and bakery and something as easy as a coffee cake was delicious. But out here, there wasn't such a culture. So we bought the building and figured out how to get the money. And at the same time, we bought a franchise called Double Rainbow Ice Cream, which was a really cute little company out in LA that had lovely shops. Their ice cream was good. Their concept was good. Turns out, as franchisors, they were very weak. But they got us— they gave us an architect. We sold their ice cream, and of course we added the things that we wanted to add. People kept asking for food, so we made sandwiches and did other things. And little by little, the neighborhood— we became a hotspot for the neighborhood. There we were, only 1,900 square feet. That's pretty small. And we were doing almost $750,000 out of that back then when dollars were a lot cheaper in 1987. Uh, and so we realized we had something going. It was a place for people to come. We had magazines. They could order just coffee, or they could have a little meal. Um, and it grew and grew, and we bought the building next door and the building next door, and we expanded that. And then we went on to, to build other locations. So essentially, we created more than just a place to eat. We created a place to, to be.

How do you think that, or when do you think, I should say, that things began to change around with, with coffee shops? And now, I mean, even after, at the end of this podcast, I'm going to go and work from a coffee shop to get myself into a different, a different environment. But what do you think spurred that on?

Well, I think it was a convergence of a number of things. Um, by the way, everything I just told you about was pre-Starbucks. We actually were— Starbucks had one store in Seattle, I think, at that time. So they were— I think they were one of the big change agents of coffee. The idea that coffee could be franchised or duplicated into a chain format, just like McDonald's. I mean, remember, it was burgers, that idea of replicated facilities serving the same product with the same name around regions or country. Was really a burger thing, right? Maybe ice cream, maybe Arbel or something, but not coffee. So Starbucks definitely took that out. I also think there's one other thing that changed, and that was the internet. I remember when we used to sell a lot of magazines. We had a beautiful wall, all kinds of great publications. We had a gentleman that came in and ordered them and monitored them, and people would sit and, you know, they'd buy a magazine or they just read it and put it back. However, then came Wi-Fi and laptops, and that killed the magazine business for a business like us. You could still buy magazines at Barnes Noble, but not in very many places except for what, Walgreens, maybe the grocery store. They're really an afterthought. The idea of sitting and reading became something you do on your laptop or your cell phone. And I think about it, there weren't even cell phones. Uh, we had pay phones, uh, in our places. Um, there weren't even cell phones back then, way back then. I feel so old, but I'm not. It's just that there's been so much technological change over the, what, last 15, 20 years?

Yeah, for sure. Yeah, there definitely has. I remember the first— well, I, I don't know if it was the first, but I remember one of the first times that I was able to connect on Wi-Fi from a McDonald's of all places. And I was like, oh, this is so cool. I'm working, you know, Wi-Fi from a McDonald's. I mean, this is obviously years ago, but anyway, I'm curious, how does a, you know, we talk about small business a lot. And I've always thought about marketing as, you know, marketing's job is to get leads, sales' job is to convert the leads. But in a business like that, You know, you don't have presumably re— like recurring subscriptions, but you do have reoccurring, right? Where, where do you have your regular people that come in? But how does a business like that continue to, to grow, to get more customers, to get people to come back multiple times? What are the things that you all did to get new customers, but also to get customers to continue to come back again and again?

This is the whole heart of our business, I think. But what I wanted to mention is back in the olden days, you know, marketing was just not even a logo on a cup. Starbucks started and McDonald's started the whole idea of a cup with personality. We just had plain cups, right? White cups for coffee or whatever. It's really interesting how marketing has become branding. Marketing is something that has to be like staking out your territory and then telling people why you should, you should should be their choice. In our case, we can't compete nationally. Marketing has been an evolution for us into something more. One of the things that we do is we've always been about creating loyalty. Long before there were loyalty programs, we had little stamp cards, you know, with a little, you know, coffee cup on it. And you came back and you could, you know, get— if you bought 10, you'd get one free. We did all those types of things, especially since we roasted our own coffee, wanted people to buy the bags as well. But it's evolved now into something more sophisticated, but it's really pretty primal. It's really about— it's loyalty. So yes, we have a great loyalty system called Thanks and we reward our customers. We can track them. The more they come, the more frequent they are, the more they're rewarded. They become VIPs. It's very easy for them. It's all— it used to be a little card we swiped and you got a chip. Off the register. But now, of course, it's in your smartphone and it's a breeze. But more than that, it's the idea of why would you want to be loyal? And we make it easy for customers to like us. So we're not one of our— we've had a number of little taglines that we've played with over the years. One of them is fine cuisine in a coffee shop scene, and it probably describes us rather well. We have really good food. We have over the years, we've had a number of chefs and it's not fancy food at all. This is is probably just above fast casual, somewhere between— I think our top menu item is $20 for a plate, and then everything else is somewhere below that. But you don't have to buy dinner. You can come in and have coffee with your friends and get a pastry or not. We have study groups that come at night, even during dinner hour, which is awkward sometimes because we don't have breakfast, lunch, and dinner. We just have the whole day. Breakfast starts at lunch, starts at 10 AM, and it's breakfast at 7 all day, and everything else starts at 10, and that's it till we close. And it just— we make it so we're useful to you, you know, whether you're feeling like, oh man, I really need to eat a big dinner, or I'm meeting some guys for lunch, or I just need to hang out and do a bit of work. That's really, I think, our thing. We're like Starbucks does that, Panera does it, but we offer more. And the other thing that we do, we keep it counter service. So there's no stress on waitresses or waiters. We don't want people to feel like, oh my God, this poor woman, you know, I need to buy something. And the other thing that's really big is the way we design our cafes. We've always loved— I have a BFA in art and a Bachelor of Fine Arts, and love, love environments. I think that's a thing. You know, we've always been house flippers and, you know, bought old buildings and renovated them and flipped them. That's how we made some money initially. And we like that because we have that, that ability, I guess you could say. And so we make our places really cool. The seating is— we have banquettes. You know, most places are just hard chairs and tables, very echoey. We're really worried about the echoes and the acoustics. We're worried about the lighting. We make it cozy, we make it comfortable. We also give you zones. Like if you wanna hang out on a slightly upper level in a comfy baguette, a banquette with, you know, your table, you can. If you wanna have a big table for a group, you can either put, all of our tables are interlocking. They can come together or not, you choose. Or we have big, big, big community tables too. We also have beautiful patios. We've made a major, major effort into making our patios as an extension of dining room, not like a lot of chains do, a slab of concrete with a little railing and, uh, you know, a cover. We make our patios cool and we've used good architects over the past and we, we invest in comfort. We make it so that it's, it's fun for you if you want to bring 6 friends and have a a Bible group or something like that, or a knitting group. We have knitting groups, we have mahjong groups. We also just have customers that get together for dinner. So we've got all kinds of choices. And I think that's huge for us. We make it so you want to, to, you think of us for various things.

I'm curious and listen, feel free to not answer this question directly, but I'm going to ask a direct question because I think our listening audience are small business owners doing, you know, half a million to you know, $5 million or so in revenue is who listens to our podcast. And so I know you've been able to expand that to, I think, 6 locations now. Is that correct?

For this concept, we also have a concept called Satellite Coffee, and that was spun off because we roast our own coffee. We have since, uh, we didn't start out roasting our coffee. I had a guy in town that was a roaster and he retired. So We essentially took over what he had, uh, and we started roasting in 1998 and in '97, and we started Satellite Coffee, which is more Starbucks-like. We only, we have 6 of, we have 5 of those.

Hmm. Well, so again, feel free not to answer this question or dance around it however you want to, but I think I'm, I'm just gonna ask it and then we'll go from there if you, if you don't wanna divulge. What, what is it? What is a, what is a coffee shop average in revenue? And then what's the general, you know, profitability on a coffee shop location? But, and the reason I asked that directly is because I think it's, it's helpful. I was just came off of a retreat from our business with our business owners in Missouri. And, you know, I invited and I didn't ask people, I just invited people to consider to get in their small groups when we broke out to share some of those things. And what ended up happening is whenever people shared that, they were like, oh, you're right where I am. And it starts to normalize these numbers because at the end of the day, it's just business, right? Whether it's $10 million, $1 million, $500,000 or whatever, it starts to like, okay, that, that, that makes sense. And then you begin to kind of see it in terms of, of, like, of levels of, of scale. So any insight you can give us into that?

It's a, it's a real journey. Uh, it takes a lot of time, um, and a lot of continuous investment to decide where your set point is or if you even haven't reached it. So when we opened up our cafe the first year, which was 1,900 square feet, I'll just give you the story of the original one that we have, which is still in on Route 66 in, in, uh, Nob Hill. Um, we did $300,000, which was exceptional. For a place that really just had a few sandwiches, coffee, you know, coffee and ice cream and a couple of pastries. At that point, we realized, though, the demand was higher than we could meet. And that's when we started adding more things and realizing that we needed to expand the space. So you really have to let your business guide you to some extent. And there's so many factors like, is it a good location? Is it, you know, I'm in the right place and I have the right products. We tweaked our menu endlessly. Uh, listening to demand, but also watching trends and, and, and being interested in certain things ourselves. Um, and we grew it to 750,000 in 1,900 square feet, and we were dying. We couldn't make it. So that's when we bought another building next door and we started to remodel it. And requests were coming in from Albuquerque is a very, not a huge population density, but very spread out. Typical Western city and post-war World War II city. So we had requests, so we built another one and we went a little crazy on architecture. We probably spent a bit too much on the buildings and the look. That's just our thing. But we were mobbed. I mean, it was just like unbelievable. So we've let the business guide us. Now, we had at one point Instead of 6 cafes, we had 9. And we had one in Santa Fe, but there were— we've had in— after 2000, just before 2009, those were the good old days. After 2009, we had what, major financial crash roughly. We had a big government shutdown, which deeply affected this particular city in 2013 because we are government. We are— I think our economy is 75% government. I don't know. And we just had a number of things that kind of made it hard to expand to certain areas that we did. We were in an area where Intel had 7,000 employees and there was a whole bunch of development. It was a town of 25,000, 30,000 around, and Intel just about shut down. So we had a number of issues that happened to us, which has made us more growth adverse in this area. I would probably have to sell the company in order to grow it out of this market. But everywhere I travel to other regions and metro areas, I see the market for this. So the market right now, I could expand it. What I would probably do is expand Satellite Coffee with food because we also have small food offerings there that are very nice and fresh. We have a lot of options. So we follow the business's trajectory. You know, you have to, you have to make your changes. See how they go and then let the business guide you. That's my opinion.

That's good. Yeah, that's good. What is your best recommendation or the biggest, maybe, maybe biggest thing that you've learned in expanding to multiple locations? And the reason I ask that is because I believe that a lot of people that listen to us, if they are a brick and mortar location, and they think about scaling and, you know, even that definition of scaling is kind of left up to interpretation, but people want to grow. They want to grow and they want to scale. And so you've been able to expand to multiple locations, but my guess is the, probably the biggest growth that you had was from 1 to 2, let alone 2 to 3 to so on and so forth. And because you, you know, you learn a lot whenever you have 2 locations as opposed to, to one. What's your biggest recommendation and the biggest maybe thing that you learned in growing to multiple different locations?

Oh, well, let me tell you, it hasn't been so easy. So the idea of growth is wonderful. And when you see the demand for your business and you realize that you could take 1 or 2 coffee shops and turn them into 5 to 10 almost immediately. The problem is how to do it because you need a structure. And this was when we were newer. We didn't do a very good job. We just built a location and we had some managers that we had trained that worked for us and we, we stuck them in there and we were not, you know, I don't have an MBA. I never went to business school. We were just self-made entrepreneurs who learned how to become better business people. So let's distinguish between the two. Entrepreneurs and business people are not the same thing, right? So we had to step back. I had a number of false starts with, uh, uh, when you have two locations, and especially with the one that we had, the second one was so insane. It was just like a bomb dropped. We were so busy. We just had to work it and, and find some good people along the way. But later I realized I needed more structure for management. So when we opened a third one, which was crazy, but I knew I wouldn't be able to afford somebody at a higher, like a district level or like a supplemental level if I didn't. So we opened up actually almost 2 other locations within a couple of years. And then so that made us to 4, 5, and then 6. And then I had closed a few, like I said, during— oh, the pandemic was the other one. We just had a number of issues, but we've had to find the right people. We had to improve our training system. We had to get all of our stuff in manuals and, you know, put together all of our recipes that we had, had to go out of a paper book and into a computer program for costing, uh, and tracking inventory. Think about the amount of details in our business, right? Uh, I had to have, um, later on I had to have an HR manager when we got up to, you know, 100 employees. It gets complicated, right? So I had somebody that did double duty, but still, now we have 450 employees and we couldn't live without an HR director plus an assistant. So our, our overhead has gotten significantly larger, but our management and details have gotten better. So we have recipe books, we have training manuals, we have standards, we have everything had to be even money handling down to the last penny. And then of course everything's changed, right? We have new software programs that are updated. We've had to make a lot of investment in infrastructure in order. And then our registers. When you're little, you have a little register, right? It's a cheap little Square or one of those little things these days. These weren't available in our day. We didn't have Square. We didn't have systems like that. We had, you know, the National Cash Register, button-pushing thing. But now those systems can be expanded or you can buy the next level up. So you have to continuously be up on your expansion and what it may mean the next time. It takes some planning. Not that we did it as well as we could have today. I would be much more sophisticated than I am, than I was then, rather.

Well, I gotta ask, uh, before we let you go, what is your— what's your— other than drip coffee, what's your top seller?

My top seller is food. We went from a coffee shop to essentially a cafe, uh, the Flying Star our food is so good. It really is. So food is 70% of every dollar or every month, our revenue. From there, coffee is about 13% and drinks are, I'd say, 20%. No, I'd say about 13%. And the rest is our bakery. We have a really good bakery. So top seller can be anything from our breakfast Southwest Benedicts to, you know, I don't know, our iced java mix that we make, which is like frappuccino, only better. So yeah, it's, it's, we have a broader thing. Our satellites do wonderfully with some of our signature coffee drinks. Their menus are very simple. You know, again, you're always, this is the thing about if you're talking to entrepreneurs, You're always changing. You can't stop improving. You can't stop listening. You can't stop reacting and adjusting. It is an endless— some of my managers used to complain, they're not with us, why are you always changing things? Because you have no choice.

Yeah, that's a good point. That's a great point. And I totally agree with you for sure.

I don't care what business you're in. Because there's so much market competition. There's so many consumer trends that are changing. You know, we do have now a pretty set menu with specials because we found a lot of the favorites. But people are under financial pressure right now. The inflation and other factors have all taken a toll. So we've adjusted to that. We can't lower our prices because our prices are higher, our labor costs are higher, but we can offer certain items that are maybe lower price, but a nice value. So you just can't stop. And that's the exhausting thing about business. Also the fun part, if you like that.

Yeah. Yeah, for sure. Well, Jean, people want to connect with you. Where's the best place that you would point them to?

Well, they can go to our, our company, flyingstarcafe.com. That's the big one. There is satellitecoffee.com. Um, and then, or it's just Jeanne@flyingstarcafe.com. That's my, uh, email. Happy to hear from anybody.

I love it. I love it. Jeanne, thank you so much for coming on the podcast.

Thank you. Appreciate it.

Bye-bye. You know, I wanted to have Jeanne to come on the podcast because, look, we've not had somebody who has taken one coffee shop and expanded into multiple locations with now into a cafe. And I think that this goes as an example is you can learn from anybody and business is simply business. There's one thing that I really loved about it. Sure, you can see her passion and love for coffee and for food, good food, but also the intentionality of the stores themselves, meaning that they, and maybe at times, I think she even self-admitted that They may be overspent on some of the design and architecture of some of them, but, uh, it's certainly some, a place that whenever next time I find myself in Albuquerque, I'm gonna try to go and, and stop by. But I think for all of us, there's an intentionality with how she's gone about designing the stores and the cafes for people to, to stay there and want to be there. Also, the multipurpose use where it's not just a café in the morning, but there's also dinners and places that people want to go. And when we think about culture, we tend to think about it and talk about it on the podcast, and rightfully so, from the perspective of culture within our teams. And that's a part of culture, but there's also a culture kind of as a customer, as a consumer. What's the culture that you want your customers or your clients to, to be a part of whenever they're with your community. I think about that with, with Blueprint. I think about the culture and the community that we've created, and she's obviously created a great community with her cafe. So connect with them on social. But if you're also in Albuquerque, or if you're an inspiring cafe owner, or maybe you own a coffee shop cafe, now, or a restaurant, connect with Jean. I'm sure she'll be able to help you to kind of learn some of the things that she's learned over the years. A big shout out to our podcast sponsors: Coach B Consulting, Today App Pro, and Club Capital. If you are a business owner, you know the importance, but yet it's real easy to put off your financials. You know the importance of having financials. Jean was kind of mentioning that in her podcast, but it's easy to kind of put it off and just not do it. And sometimes it's also hard to know where to start. Club Capital can help you. Go to club.capital. As Jean was talking about with all of her, you know, the systems it takes to be able to run— she talked about Square, etc., of running her coffee shop. I think the tech stack that we use now, there's some incredible tools, but if you're an insurance agency owner, a tool to put in your tool belt is TodayApp. Go to todayapppro.com. TodayAppPro.com. One of the best investments I've made myself is in my own personal development and in the development, development of my team. But oftentimes that usually comes in the form of two different things from a third-party source. There's nothing wrong with that, but with Coach P, you actually get both. Go to coachpconsulting.com. Coach P consulting.com. All right, everyone, till next episode, lead well and go be great. Here's the intro, team. Welcome to another episode of the Above the Business podcast. My name is Bradley Hamner, your host. On today's episode, we have Jeanne Bernson. She's the owner and operator and founder of Flying Star Cafe, a next-gen casual restaurant group that operates 6 locations and additional 5 satellite locations in and around Albuquerque, New Mexico. I wanted to have Jeanne on because like we've not had an entrepreneur come on and talk about what it's like to kind of expand a coffee shop to multiple locations. You may say, well, that sounds a little strange for the podcast, but I really do believe this, that you can learn from everyone. So we talked to Jean about how she's designed the coffee shops to have and create community. We talked to her about what it means to kind of expand to multiple locations and of course how she got started. I think you'll along the way pick up a couple nuggets to be able to apply into your business. Without further ado, here's my conversation with Jean Bernstein.