Wednesday, January 31, 2007

How did we get here? Sept/Oct '06

The SBA has approved our loan package (it's an SBA backed loan, which means that the bank makes the actual loan but the Small Business Administration guarantees it to the bank, kind of like a co-signer)! Though we had been somewhat assured that if our bank had approved it, the SBA probably would to, after our experiences so far, we have learned to be pretty cautious (or as we've come to say, 'cautiously optimistic'). There's still a bunch of forms to put together and sign, and we can't close until we have the actual signed lease, but this is a huge relief and a great step forward. I start working on all the bank requirements, like getting business insurance and documenting all of what we've spent so far.

While we're still waiting on getting the actual lease to sign, we work on the revising and solidifying our budget estimates. We get bids from a few architects. We visit flooring showrooms. We refine the design. We start talking to the health department.

We've lined up a real estate lawyer to review the lease for us, but we still haven't received it. We're starting to get a little antsy (is there a problem?), but the news comes back that there was just a mix-up and we'll get it soon.

Meanwhile, we get some disappointing news that a partnership we've been working on and that we've been really excited about has fallen apart on the other end, reminding us that even companies with good reputations can sometimes let you down. Deals are definitely not done until they're done.

At the beginning of October we finally get the lease and despite it's length, we have only what we see as a few minor concerns with it (with some things that seem inconsistent to us). We work on it with our lawyer, who communicates our desired changes and we wait for the response.

We continue working on finalizing the design. I also head downtown once a week for three one-day classes to be certified as a Food Service Sanitation Manager (ServSafe). We figure getting this out of the way now is probably easier than while were racing to complete the build-out and getting ready to open.

Then, without warning, at the very end of October, we receive a curt message through the lawyers... the offer to rent us the location is withdrawn. We've lost our location.


We don't know why, and can't get any answers. Everyone tells us to forget about it, 'let it go'. They try to cheer us up by reminding us that it's probably for the best. Maybe. But it sure doesn't feel like it right now.

Next up, starting over...

Tuesday, January 30, 2007

How did we get here? July/Aug '06

Could you guess what was coming?

Yes, we get back from our weekend away to find out that despite every indication from the people we've been working with, the bank has turned down our loan. Why? The underwriters don't like the industry (they will not recognize specialty coffee retailing as different than "restaurants") and don't like that we're independent (not a franchise). Obviously there's nothing we can do about either of those. They also would like to see more collateral, but the first two reasons are the big ones. Our banking team says they're just as surprised as we are. Unfortunately, it's little consolation.

It seems that we are now in the situation of having a (pretty firm) location, but no financing. We take a deep breath and set up some meetings with new bankers and make some adjustments to the plan based on what we've learned, hoping that this delay won't cause us to lose the location. We forge ahead and as soon as possible, we submit a new loan application to a different bank (actually represented by the first banker I had spoken with at all during this whole process, whom I had met the previous Fall at one of the SCORE workshops where she gave a really informative presentation on banks and financing).

Meanwhile, the graphic designer we had previously met with recommends a colleague and we begin working with the two of them on the brand identity process, meeting up over coffee after work every couple of weeks for reviews. We also forge ahead with the layout and design of the space, which is an intensive process of exploration and revision using a variety of tools including sketching, paper cutouts, Adobe Illustrator, Google SketchUp (image at left... SketchUp totally rocks!) and even ProE, while working back and forth with the cafe layout consultant.

Early in August we get the great news that the loan has been approved by the new bank (Yay?), but... the package still needs to be separately approved by the SBA, so we start preparing for that process.

We meet with a couple architects and become alerted to some potential code and zoning issues with this particular location and have a flurry of back and forth communications between different representatives and agents until it is determined that there really is no problem after all! Finally, after much back and forth we reach mutual agreement on all the terms for the LOI/lease which is then signed by both parties in late August (phew!). Now we just wait for the lawyers to write up the legalese and the location is set. We're back on track, with lots of work to do!

Next up, counting the months 'til we open...

Monday, January 29, 2007

How did we get here? May/June '05

By the end of April, we've been seriously looking for locations for a couple of months and though there have been a few hopefuls that we've gotten excited about, in the end nothing meets all of our criteria and we go back to the drawing board.

On my way home one day at the end of April, I pass a corner location in our neighborhood that's been vacant for a while. It's in the north end of the neighborhood about four or five blocks up from the more central pedestrian area, though it's an area with a couple great businesses and a lot of potential. We'd been under the impression that our own neighborhood, although we adore it, would not be able to provide the kind of morning sales volume that we would need to build a strong business, as the closest 'el' (train) stop is a good 8-10 minute walk. We'd always assumed we'd need to be by the el. Rather than shrug it off though, we start to do more research along the same lines we've been doing in other areas and we're happily surprised by what we discover. So while we keep looking elsewhere, we check out the interior of space.

It needs A LOT of work, and we're still not sure. We continue looking for other locations but start trying to figure out if, and how, we could make this neighborhood location work... what walls are structural (we get a structural engineer in), how much space can we get (we get feedback from the owner's agent), what kind of rent could we afford to pay for this location (we crunch the numbers)...

Within the next month, we decide to go for it and by early June we've put together our Letter of Intent (LOI) for the landlord communication the terms of our offer. The feedback is pretty good. We (through our agent) begin negotiating with the landlord's agent to determine the agreed terms for the "final" LOI that will be the basis for the lease.

We find out that we're also going to need an architect to help us get our building permits (Add that to the budget!) and set up some meetings. We update the business plan with the tentative location and make the formal application to the bank for the loan. Things are moving! We continue working on the development of the interior layout and take care of a ton of little things, like learning about City Sidewalk Cafe Applications and applying for life insurance (a requirement for the loan from the bank)!

At the end of June I go in to meet with the the team from the bank, and this time the underwriter too. The meeting goes really well... he says they'll have an answer for us within a few days and it looks pretty good and here's what will happen next, what they're going to need from us, when we'll be able to close, etc. (YAY!!!!!) We breathe a big sigh of relief and go away for a long weekend (picture at left from a bike ride in north-central Illinois).

Next up, rollercoasters...

Friday, January 26, 2007

How did we get here? Mar/Apr '05

So we start the official location search. We spread a wide net, trying to figure out which neighborhoods make the most sense for us. We've got seemingly millions of criteria for the right location... principles and guidelines we've gleaned from all these information sources: rent should be less than 8-10% of sales, a .5%-1% traffic count capture rate is a good calculation start, space should be on the commute side, easy parking and easy in/out accesss is super important, visiblity is a big deal, it's worth it to pay more for a location with a higher volume potential, don't get a spcae that's too big (or too small), etc, etc. Then, we have our own additional criteria.... pedestrian neighborhood, proximity to public transport, demographic fit to appreciate our high-quality offering, independent-minded community, opportunity for outdoor seating, rent range, lease length, terms, etc.

This is a process of scouring the internet, working with our agent, visiting tons of locations, and when they look promising, sitting in the car or in a local establishment counting cars and walkers and where they are and when they are and what direction they're going, what coffee they're getting, etc., making notes, sketches, calculations. Sometimes something will start to look promising, but eventually, nothing stands up to the criteria (in terms of rents, I don't know what kool-aid some of these property owners have been drinking), and we keep looking... driving around, talking to people, searching, searching...

Meanwhile, we start talking with a cafe layout consultant for some advice. We know we want to do most of the design ourselves, but we decide that it will be helpful to have someone who can help us understand the process and collaborate with us when we're ready. We also debate whether we should design the brand identity on our own or look for a collaborator. After searching the portfolios on the AIGA website, we contact a talented young graphic designer and begin a conversation about working together on the project.

We also meet with a lawyer and discuss our options in terms of business organization types. We move ahead as an LLC, and register the business and do all that legal stuff. We now have to file Sales tax ($0.00) and soft drink tax ($0.00) forms every single month (despite not even being actually open yet).

Miguel is busy with client work (including a couple trips to Europe), so I head to Charlotte, NC, on my own at the beginning of April for the SCAA (Specialty Coffee Association of America)'s annual conference. I take more advanced classes on cupping and barista skills.

The US Barista Competition is being held on the show floor (pic of Jay Caragay competing to the tune of Miami Sound machine at left), so it's easy to stop over to watch (and be impressed) in between rounds of walking the show floor. It's a major trade-show with a lot of people there, including a lot of folks I'm used to seeing on the different coffee forums. Outside of contact with vendors though, I suppose I'm a bit shy and mostly keep to myself. For years I've been a part of the design community and am pretty comfortable in that context, so it's interesting to be jumping in fresh to what is, in effect, a "new" community. While it's fairly "easy" to join such a new community online, this experience is sort of a reminder that, in person, well, it's not quite the same! In any case, it's a productive couple of days and I head back to Chicago just in time for a slew of varyingly relevant local trade shows.

Within the next two weeks, I head to the Fancy Food Show (delicious samples!), the Retail Interiors Expo ("um, no, we're just ONE store right now"), and then the NRA show (not that NRA, the the National Restaurant Association). It's a huge show... on day two, Miguel comes along and, among other things (tasting, tasting...), we have a "free design consultation" with some architects from the firm that designed Tank Sushi in Lincoln Square (which we love, both for its sushi and its design). Most valuably, they recommend the general contractor (GC) of that job, who's also built other coolio stuff in the city (and whom we eventually end up hiring!).

Next up, "Could this be the location for us?"...

Thursday, January 25, 2007

How did we get here? Dec '05/Jan-Feb '06

Starting the business plan was a bit daunting. All the internet research and forum scouring and book reading in the world won't tell you how to do it in a way that makes sense for you. But one of the best pieces of advice we heard came from Kent Holloway of Fox Hollow Coffee who gave a great presentation at CoffeeFest. He recommended starting the (business plan development) process by writing a letter, like to a friend, telling them all about what you're going to do. I think it's really a brilliant idea as it takes a lot of the pressure of formality and format off the task and allows you to just get something down.

So I start that way and it isn't long before I just start copy/pasting the text into an outline format where I can just create placeholders for information that we would need to fill in later. Then I can see what needs to be thought through or researched more or just decided, in order to get the plan done. My graduate work in planning definitely comes in useful at this point, in terms of developing the framework for the plan and even putting it together in an effective format. I start putting together the financial projections and meet with our accountant to learn more about income and cash flow statements, balance sheets, etc., and of course I'm still reading anything I can get my eyes on.

While examples are super helpful, they're extremely hard to find. For those that are interested, here is a glimpse of an early outline I created for the business plan (click to enlarge). The black text represents content I had already drafted at that point and the grey represents that which I still needed to work on.

This, on the other hand, is a glimpse of the "final" outline that we developed for the business plan. I'm not too worried about whether it matches any particular "template", but rather that it covers all the areas we felt that we (and any others who would need to review the plan) would need to understand to make decisions. [Of course, this is the format and order that made sense for us to figure out and tell "our" story and isn't a good model for anyone else probably, but I always like seeing how other people think and work.]

So the first draft plan is coming together pretty well by the end of January, beginning of February. We have a much better sense of how much the endeavor is going to cost, and how much we'll need to borrow, but we don't have a very good sense of whether any banks (and SBA) are going to want to work with us, so before we start our more serious location search (we've been informally looking around for moths already) we need to know if we're wasting our time. So I contact some banks and set up preliminary meetings to discuss our plans in February. The feedback is great... very encouraging indeed. We seem a good fit with one of the banks in particular and based on their feedback, in early/mid March we meet with and engage our real estate agent.

Meanwhile, just before x-mas we upgrade the kitchen gear, we retire the espresso machine and the Pro-Line grinder and finally get ourselves a Rancilio Sylvia and Rocky (pictured). A new tamper, some basket adjustments and a new bottomless portafilter get us on the road to making better espresso (and better latte art) for the new year. Our friends start to mock our set-up.

In January, I volunteer at the Great Lakes Regional Barista Competition here in Chicago. I end up as a Scorekeeper, sequestered in a kitchen (the competition was hosted at a cooking school) tabulating the Judge's score sheets (technical.pdf + sensory.pdf). Though I miss seeing a lot of the baristas compete while I work, I get to read the judges comments and learn about the judging criteria.

We also move away from the MuJo [Coffee + Milk Bar] name. We really want to emphasize the craft... and the attention to detail, leveraging our design background. Within a few weeks and a few variations, we've got it: The Coffee Studio.

Wednesday, January 24, 2007

How did we get here? Oct./Nov./Dec. '05

The experts on financing say that banks laugh at money-seekers who have no industry experience... the fact that you like going to restaurants a lot is not enough to convince them to give you big chunks of change to open your own.

So I apply for a "barista" job at a new chain shop and quit after 30 minutes of the training day when I learn that it's actually a sandwich shop with a vending style coffee machine with a big button that gets pushed by the "barista" (read: cashier). I feel bad about going to an indie when I don't really intend to stay that long, so I go ahead and manage to get a job at a real coffee chain (ok, THE coffee chain). We worry about having to sign the promised non-compete and waffle a bit about the whole thing... is it worth it... what are we really going to learn? We decide to go for it (in the end I was never actually given the non-compete). In retrospect, it was going to be a long while before we were going to get open, so the non-compete was probably a moot point, but we didn't yet know how long it was really going to take to get open.

I work there part-time for about three months. Meet some really nice people, listen to coffee-seminar MP3s on the bus trips, earn some cash to pay some of our research expenses. Worth it? Absolutely. I learn a ton about operations, equipment, processes, etc. I also learn how not to do a lot of things (and where the chain struggles, IMO). Now, can't imagine not having done it (and the banks we're very happy to see it too).

At the end of October we head to CoffeeFest, a big specialty coffee industry trade-show in Seattle. We walk the show floor, talking, tasting, comparing, go to seminars on every possible subject and participate in cupping workshops.

We visit renowned and coolio shops, taste lots of espressos, and still somehow end up gorging ourselves on yummy crepes outside the convention center. We also visit (scenic) tourist traps, check out our first barista competition (the Northwest Regional- AWESOME!) and head home.

Right after we get back, we go to our first "Barista Jam" at Intelligentsia where we meet some really nice people, learn about coffee origins, pull (espresso) shots with other baristas (including Phuong Tran, the reigning US Barista Champion at the time), get a tour of Intelly's Roasting Works and cup even more coffees. Our heads are ready to explode.

Next up, putting all the research to use...

Tuesday, January 23, 2007

How did we get here? (Sept. '05 - first in a series)

On a lot of the online forums dedicated to the coffee business, you see tons of first time posts of people asking, "How long does it take to open a shop?". The answer is usually a frustrating (and accurate), "Depends". (The same goes for, "How much does it cost?"). Everyone's story is different. Here's ours:

Once upon a time/September 2005: A particularly unhappy commuting experience leads to a long conversation about how we really want to live, now and in the future. We become more serious about starting the new business, finally realizing that it doesn't have to be all or nothing... Miguel will continue the design business and provide current income; I will spearhead the new coffee business. Can we really make enough to live? We think we can.

I start the serious research. I'd already recently gone (for kicks?) to a panel discussion on starting a restaurant at the WBDC. I start going into the loop (Chicago's "downtown") to a weekly series of SCORE workshops on starting a business and spend the afternoons looking stuff up at the coolio looking library. I also buy some sweet books on restaurant and bar interior design at the Prairie Avenue Bookshop. We get excited and talk a lot about all our ideas all the time.

We buy an espresso machine, return it, and end up spending (what at the time seems like) a lot of money on a "better" one. We try to find a good inexpensive burr grinder... the grinder exchanging will go on for months. The "pro-sumer" (yuppie) espresso machine will last for three.

Next month, we become professionals...

Tuesday, January 09, 2007

Busy, busy...

It has been a very busy week. It really seems like this whole process so far has been "wait... wait... RUN!" then "wait, wait..." again. And we're definitely in the middle of a "run". We've been working on finalizing the design of the space, so we can apply for permits, and also figuring out how to get the identity design process wrapped up.

Here's a version of a logo we did way back when with one of our early naming concepts that eventually got the axe... just one of many, many design ideas that will never see the light of day.

Anyway, we took our last opportunity this week to step back and look at the interior layout and design for the space to see if it was really meeting our initial and primary criteria. It seemed like maybe we had lost some our initial design intent in all of the evolutionary practical decisions that had been made over the last six to ten months, so we made some changes to the layout and design, in some ways going back to earlier designs and adapting them to where we are today, and I think it's much better. It certainly feels more "right".

Seeing things coming together (on paper at least) is definitely encouraging though. The constant work on the project does sometimes get a little, well, constant. We haven't really had a break from working on it (or other design projects) in a long time. While I work on stuff for the shop during the day, Miguel is out working with clients, so we almost always end up spending the evenings and weekends together reviewing or working on some other aspect of the project. Sometimes at least we get out of the house/office, like Saturday we went to check out woods and veneers at a hardwood supplier and then went to look at furniture for the shop, but I have to admit I wouldn't mind a little vacation (or even a "real" weekend). I somehow don't think that's going to be happening anytime soon though!

Anyway, I don't mean to complain.
I just want to let you know why I haven't called a lot lately, Mom...

[Note: If you've already read the "How did we get here?" series, you can click here to skip to the next chronological post, otherwise, carry on...]

Tuesday, January 02, 2007

A happiest of new years to you all!

Well, 2007 has sneakily arrived.

We passed the highly emphasized tick-tock moment curled up on the couch, being aware and thankful for what we have. I hope this new year will find you all well, safe and secure, and laughing often.

This next year promises to be an exciting one for us with the opening of the coffee bar. We're embarking into what is for us uncharted waters with the hope that we have prepared well enough to handle the waves as they come.

I was just saying to Miguel yesterday that this venture seems to require more faith in the unknown than what I'm used to. Reason, logic and calculations only get us so far, in the end it seems we have to trust that 'if we build it...", they'll come. We are definitely putting our heart (not to mention our savings) into it. The result though is that every decision feels critical... that it's the end of the world. I suppose if there's anything that I might resolve to work on (for the new year, of course), it's keeping perspective and a good sense of balance. I know The Coffee Studio will not be perfect, just as individually, none of us will ever be "perfect". Yet I suppose we all still manage to get along pretty well anyhow.

And so with a new eye on the new calendar, it's time to figure out when we'll be open. As a superstitious soul, I'm always terrified of jinxing myself, so for now, let me just say that we'll be open this Spring. Since it's almost time to be counting in weeks... I will say that ten weeks would be miraculous, fourteen very good, sixteen a bit depressing, and more than that, well, I don't want to talk about it. The rent and loan payments have to be made whether we're open or not, so the sooner we start bringing in some revenue, the better I'll sleep!