Not enough customers to break the daily grind at Beanscene

A couple of weeks ago Beanscene, one of Scotland’s leading chains of coffee shops, was put into administration. We should find out soon whether the business has been saved by a new buyer…

On my annual trip to the Edinburgh festival I thought I’d drop by at a Beanscene location to see what the business is like. Beanscene has generated a lot of publicity in Scotland in the last year or so and I was intrigued to work out why a fast-growing coffee shop chain with a strong brand should find itself in the hands of accountants KPMG.

I chose the Holyrood branch - literally outside the Scottish Parliament, BBC buildings and numerous other offices. A good flow of tourists pass through the area, although the shop isn’t in what I would classify a “honeypot” location (e.g. halfway up the Royal Mile).

As it turned out, I spent almost five hours in Beanscene, working hard on some new materials (business studies, that is, not my comedy routine for the Fringe). I’d been attracted to the promise of free WiFi. However, the administrators have obviously stopped that freebie - you now have to pay!

So what were my findings?

I must declare an interest in coffee shops. About 10 years ago I got involved in selling what is now Starbucks in the UK. My client had opened 30-35 coffee shops in London almost overnight. He sold the business to Starbucks for £50m. The business model wasn’t perfect, but it worked and I remember it well. Small rented space + high customer throughput + busy staff = high sales, cash flow & profits.

Based on my 5-hour visit, Beanscene is none of these:

Customer throughput - negligible. The local coffee shop in tutor2u’s home village gets 2-3x as many customers per day as I saw walk into Beanscene. I appreciate that Beanscene tries hard NOT to be like Starbucks, but you still need customers to make a decent contribution what must be high fixed costs

Space - substantial and expensive: actually far too big. I was able to spread my laptop and papers out, as were several other people there. It was like having my own office!

Staff - very, very quiet (even bored). Two of them spent most of the morning looking at the staff computer - there was little for them to do

I dread to think what rent Beanscene is paying for the branch I visited - a prime office location. A much higher customer throughput is required to make that kind of fixed cost work.

So I think I now have a better idea of why the business ran out of cash. The question is - can it be refreshed?