QSR Innovators: Biggby Coffee’s Co-CEO Mike McFall
When the pandemic hit last year, the co-founders of Michigan-based Biggby Coffee were worried that consumers would stop going out for coffee. Mike McFall, Co-CEO of Biggby Coffee, talks about how going out for coffee became a special treat in difficult times.
When the pandemic hit last year, the co-founders of Michigan-based Biggby Coffee were worried that consumers would stop going out for coffee.
Despite being able to remain open, the coffee chain’s revenue plummeted by about 40% during the first three weeks of lockdown. However this decline didn’t last long. In the following weeks, the company saw negative growth and by Mother’s Day of 2020, they actually crossed over into positive same store sales growth from 2019.
“From that point forward, throughout the year, we had record growth. It’s been a pretty remarkable ride,” says Mike McFall, Co-CEO of Biggby Coffee, a 240-unit franchise. “We had a moment there when we thought revenue was going to go down to zero, just like everybody else in food service. But coffee became something that people sought.”
With sales growing, the company looked for ways to expand its operations and partnered with BCubed Manufacturing who developed a new modular drive-thru design that made it easy to build 350 square foot locations and install them quickly to help serve consumers looking to go out for coffee in a socially safe manner. The brand opened 19 units in 2020 and has plans to open even more by the end of 2021.
“This opportunity is providing us with the ability to land drive-thrus efficiently and put them in places where we couldn’t put them otherwise,” says McFall. “It’s amazing. Our business model struggles to support freestanding buildings, a full drive-thru model, 2,000 square feet. This new unit allows us to land the drive-thru without the stress and anxiety of a freestanding drive-thru because the investment is much lower.”
McFall attributes the industry’s ability to survive the pandemic on the brave store employees and that didn’t stop showing up despite COVID.
“I think that the courage shown by minimum wage employees in the QSR throughout the pandemic needs to be dramatically applauded,” he says. “It was really a scary moment, and these people kept showing up to work. That is incredibly impressive, and we should recognize that. It’s inspiring. You had people still showing up to their QSRs for work, it was incredible.”
Brand Innovators caught up with McFall from his home in Ann Arbor, Michigan, to discuss how the coffee chain has been pivoting to survive during the pandemic, this new model of drive-thru and why coffee will always matter to consumers. This conversation has been edited for clarity and brevity.
Why do you think people still came out for coffee after holding off initially when the pandemic first hit?
It is one of the phenomenons that we are uncovering now. People saw a momentary glimpse into normalcy with coffee. After grocery shopping or running errands, they would come by our store to grab a latte, and they have a momentary seven minutes of normal. With that, we have seen record growth with franchise contacts and new store openings. It sounds counterintuitive, but franchising in this industry has a direct inverse relation to the economy. When things become unstable, franchising does well. People want to take control of their lives. They are tired of being subjected to the whims of organizations and corporations. Our second biggest year in our 26 year history was 2010, coming out of the Great Recession, which is completely counterintuitive. We had a great year in 2020 as well from a new contracts franchisee perspective. That’s an overview of where we are right now as a business. Right now we have 112 contracts signed but not yet opened, and we are only a 245-unit chain.
How kinds of innovations have you been doing to make people feel safe when they come out for coffee?
This is where the strength of franchising becomes really apparent. At the beginning of the pandemic, we did daily Town Hall meetings. Early on, we had a franchise owner come to a Town Hall meeting, where over 100 franchise owners were there, and he showed pictures of the plexiglass barriers he had put up in his stores. And this was before anyone was talking about plexiglass. I had not seen or heard of plexiglass up until that point. This franchise owner brought photos to Town Hall, and he demonstrated how to build it, told everyone how cheap it was to buy, and how safe it made his staff feel. All of sudden, we had plexiglass in a significant majority of our stores within a few days. And that was before any other stores were putting up plexiglass. That’s just an example of our franchise owners taking care of their people, and also sharing that information with one another.
What is your brand purpose and how are you executing on it?
The purpose of our company is to support consumers in building the life they love. And that is across the board. It speaks to our franchise owners, to our employees at the home office, to the first-time baristas, to our customers who are delighted every morning when they happen to get a cup of coffee. That’s our purpose. We are waking up every day with that in mind. The pandemic has been a dramatic example of how important that was. When the pandemic hit, we didn’t do anything really different than what we were already doing, which was demonstrating an enormous amount of care and love for the people in our organization. It amplified because of the danger, intensity, and economic risk of COVID. But for the most part, it wasn’t anything different. We were living our purpose through the pandemic just like we are living our purpose today and we were living our purpose 2-3 years ago.
What is the outlook for the coffee business in the coming year?
I think coffee is in great shape. We’ve demonstrated once again that this is a product that people need and love. For us to show growth rates of 25% month over month during a pandemic, it really speaks to the power of the product. That’s across the coffee industry. We are outperforming many of the other coffee shops out there, I believe that it has to do with our franchise business model. I think internally, from a safety perspective, a lot of procedures are going to stay. It has to do with self-serve products, but there are things we have always done that probably weren’t the safest, but we never really realized it. Procedurally, there are a lot of small things we’ve changed which will stay. Technology is going to take over. Technology is going to be the massive shift in QSR. You have to be prepared to execute online ordering and mobile ordering. We are just at the beginning of all of that. It’s not like online and mobile ordering are going to be done. It’s going to continue at warp-speed in that environment. I think a massive investment in technology is underway. That’s not a surprise to anybody, we all knew this was coming, and coming pretty aggressively. The pandemic highlighted its importance and there’s no question anymore of what to do. That’s a huge shift.
You are investing in these drive-thru units, do you think drive-thru will continue to be important as the world reopens?
The importance of drive-thru in QSR is blatantly obvious. We have some stores out there that are really suffering in the pandemic, and they’re all non-drive-thru. We have some non-drive-thru locations that are doing okay, but the stores that have really gotten banged up in the last year are non-drive-thrus. The consumer is interested in the convenience and the safety of drive-thru. I think we are going to see a significant uptick in curbside delivery, because it’s even more convenient than drive-thru. I believe that we will see more of that as sophisticated companies figure out the curbside pickup model. It’s extraordinarily efficient. Some people have concerns about safety, but I don’t think curbside is going away, as it’s so efficient. I think it will continue to blossom.