It’s not often that my local London area, Crouch End, gets into the Guardian and the Daily Mail in the same week. In fact, other than press shots of Shaun of the Dead or Peep Show, I can’t remember a time when Crouch End’s ever got such coverage as it has this week. The reason it has? A coffee shop.
Now I’m going to put this one to bed quickly – Harris+Hoole is co-owned by Tesco (they own a 49% share, so are very, very influential shareholders) and this seems to have got people rather excited. However, now the “secret” is out, I’ve a few questions to anyone who thinks this may be a bad idea.
If Tesco is going to invest money in other businesses, if you don’t like them investing in a coffee shop, what would you prefer them to invest in?
If large businesses like Tesco are going to choose a model for new businesses to back, what models should they choose other than independent-feeling, friendly, “quirky” ones, with an emphasis on high-quality product (the H+H model is an antipodean coffee shop. Anyone who’s been to Australia or New Zealand knows how good those are).
Lastly, if anyone is going to revive the tired coffee shop market, until now dominated by Starbucks, Costa and the like, it’s going to take a business with deep pockets. Who would you prefer to make this investment?
Because the economics of running a coffee shop in Crouch End are frightening. And that’s what this blog is mainly about.
Just how many coffee shops are there in Crouch End?
Doing a quick head count today, there are 18 cafes and coffee shops within a 500m radius of the Clocktower (Haberdashery, Cafe 23, The Blue Legume, Coffee Cake, Honeycomb, My Kind of Coffee, Coffee Circus, Nivan, Spiazzo, Riley, Starbucks, Costa, Gails, Hot Pepper Jelly, Sable D’Or, Rocking Chair Cafe, Unlibrary Cafe and lastly Harris+Hoole). That’s a serious amount of beans!
Why are there so many?
The simple answer is they’re one of the only things we can’t do online. It’s no coincidence that Crouch End’s full of nail bars, coffee shops, restaurants and hairdressers. The estate agents are only there because people haven’t got used to buying a house online only. But they might even go eventually too. No, high streets exist today as experience rather than retail centres. So our eighteen coffee shops is a sign of the times.
I went to the Office of National Statistics and pulled out some data to play with. To find our local population (so the potential market for coffee shops) I took data from the 2011 census for the five Haringey areas surrounding the Clocktower (if you’re interested in this stuff, it’s MSOA 020, 022, 028, 033, 034). We’ve got around 34,500 souls living here. If you’re sick of seeing dead Christmas trees at the end of your street, it might come as a shock to see that’s exactly what our local population pyramid looks like. There’s a bulge of 0-4 year olds (that’ll be the 3 wheel buggies accounted for), then another bulge between 25 and 44 (that’ll be the parents pushing said 3 wheel buggies).
Crouch End’s Population (2011). Click on image to enlarge
So how much coffee do we have to drink to make these eighteen coffee shops enough money to survive? The short answer is I don’t know, but I’ve an idea of how much CrouchEnders need to spend to give them all so,ething approaching a break-even turnover.
Let’s explore the numbers assuming every coffee shop in Crouch End turned over an average of £500,000 (yes, not a lot is it – especially with rent at around £35k p.a. for a shop and £20k of business rates, let alone utilities, staff and stock, but it’s as good a round number as any). To make this, every single adult in Crouch End would have visit our coffee shops and spend £27 per month, every month.
If you assume that this coffee doesn’t come cheap – and it’ll need someone not drinking it, but away working to earn the money to allow someone else to be drinking the coffee, let’s half the number of people in Crouch End in the daytime available buy coffee between the ages of 20 and 65 (so the other half are away working). This means that every person able to buy coffee (that’s every single person who’s not at work and every single person over 65) will need to spend just over £50 per month every month in coffee shops to guarantee this £500k turnover.
Not going to happen, is it?
So how can they all make a living?
The answer is, I don’t think they can. Crouch End is saturated in frothy coffee, and its economy is a similar bubbly frothy confection. The coffee shops that will survive will probably be a mixture of the best and the ones with the deepest pockets. The surest way to survive is to make the ones with the deepest pockets the best. QED – Harris+Hoole’s probably going to be around for a while.
So what to do? Well, either get used to it, and make sure the standard of Harris+Hoole’s coffee doesn’t drop (it’s currently excellent), and enjoy this as a golden age of coffee drinking in Crouch End. Or boycott Harris+Hoole totally – and while you’re at it, boycott Tesco and all national chains and only shop locally – and only buy your coffee in independent shops.
If you’ve got a view on this, I’d love to hear from you.
Addendum (12.01.12)
After speaking to a couple of cafe owners in Crouch End, I’ve revised the turnover figures downwards to an average of £165,000 p.a. This of course has to encompasses business models that can have deli/retail offers (Spiazzo/Sable D’Or) or are very small (Unlibrary Cafe). One owner told me: “We make most of our money as a restaurant, with higher value items but the economics of a chain cafe mean they can make as little as £10,000 a year – that’s why the chains have to be so extensive”.
However, even when revising the spend figures downwards (£9 per month per person or £16 per working individual per month), it would be a brave or foolish person who’d open another cafe in Crouch End – but I’m sure one will have a go…
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