Xanadu Coffee at a Glance: 2021
Why hello there. So… usually when I write up a blog I spend a great deal of time typing, editing, formatting, etc… in an effort to make them look polished, clean and easy to follow. Unfortunately , we have a lot to get through, so this blog is going to be a bit more conversational in tone, a little less formatted, and will definitely contain less cool pics and graphs to look at. But I do want to drop this here, It’s been on my mind for awhile, I get these questions frequently, and I would like to get this out there. If I spend too much time editing and trying to make it perfect, I fear I won’t finish it at all. So excuse any typos or wall of texts, but lets dig in.
Alright, so where are with things? Let’s break things up into parts and tackle each, one at a time.
Roastery and Wholesale
This business is under the LLC, Xanadu Enterprise, and is the bread and butter of our business. It encompasses our wholesale clients, fulfillment of website orders, wholesale of syrups, teas, and other shop supplies, the sale and service of machines, and the roaster co-op (currently the roaster coop is under the umbrella of our Xanadu Enterprise LLC, more on that later).
Wholesale clients: So, real talk, the pandemic really did a number on our wholesale clients and sales. While applying for the PPP loan, I was asked to shows our sales had fallen by 30% or more. After going through the data, turns out it was over 50%. That’s a yikes. I think the fact we have been able to maintain our employee hours, as well as continue to provide service to our clients un-disrupted is a testament to the robustness of our business. We did receive both waves of the PPP loans so that also helped to a certain extent. On a lighter note though, we have picked up a few clients (wholesale, service and coop roaster) over the past 6 months so things seem to be picking up in momentum for us. I remain very hopeful we will get back to 2019 sales by the end of the year at our current pace.
Machine service and sales: so… this is one part of our business that continues to grow, however, it has and continues to be severely choked by … my physical capabilities as a human being lol. I really don’t know how else to say it… It’s so much work. I still put in about 50 hours a week fixing machines, in addition to the other job duties I have. And what’s worse is… I’ve burned myself working on machines, I’ve electrocuted myself, I’ve left jobs where leaks sprang up and did damage to the counter tops... It’s ok when happens to me because I feel like I understand the risks and liabilities, but putting an employee at risk for those things makes me uncomfortable. Also, working on machines takes a lot of different skill, its plumbing, its electrical, it’s using tools the right way, its being a competent barista… it’s a lot to train and is not something one can learn in a few days, weeks or even months. I was lucky, I started after being a barista and roaster for 10 years, I used to work construction with my stepdad, which included a lot of plumbing, I also took electronics classes in college and know how to use a multimeter and read a schematic. I am worried about set of skills it takes to send someone out to troubleshoot and fix a machine.
I have done a lot of work with my brother over the past 2 years and he is getting better, but service work is not really where his heart is. I have also taken on a part time apprentice from the coffee shop. We are going to do a few full machine rebuilds and see where things go but its a big hill to climb from here. It really feels like this needs to be a separate job for 1 person to focus on and work on all these things, but … who? On top of all that, I think machine sales and service is a completely different company that coffee roasting, so technically, this kind of needs to be a separate business than the roaster LLC.. I guess these are kind of good problems to have? I like fixing machines. I do enjoy the satisfaction of troubleshooting, fixing, and making great coffee with machines. I just struggle with being able to work on and grow this part of the business as well as I would like and know it deserves.
Shared Roastery: In the past 3 months, we have lost Mythical Coffee as our largest share roaster client, but have picked up 2 new clients, Estos Manos, and SPCE coffee. It’s gonna be hard to replace Eric and Mythical Coffee, they were strong clients and brought a lot to the table, but they grew out of the space and have grown to the point where it just made more sense for them to open up they’re own roasting space. To me though, it just confirms the validity of the shared roaster space as a workable business model for young, up and coming shops and I remain positive on its viability moving forward. One thing to be concerned about is I am hearing of other shared roasting spots opening up here in Phoenix, which may reduce our client pool somewhat, but sharing our roaster and warehouse is just one faucet of our business. I think as long as we are expanding at a level sustainable by the wholesale side of our business , we will be just fine. the shared roaster will continue to be just an added feature of our business.
2. Coffee Shop
Current Outlook: At the shop, we are currently 6 months in operation. We expanded the hours to 6:30 am - 5 pm ( to see if we could catch some of the 7 am working crowd on they’re way to work) . We have 5 employees, all very strong and reliable behind the bar. We lost our original manager a few months ago but we decided to give one of the employees, Adrian, a chance to step up and things are running really great. Adrian is very organized, intentional, and has a great eye for detail.
So far, the total bill of opening the shop and for carrying it thus far (as it is not making profit yet) is around $80,000. It’s hard to know exactly, as opening is always a bit of a scramble and a lot of expenses slipped through the cracks or were not kept track of properly (but it’s close to the actual figure). After starting with average sales in the $200-300/day range for months, business has been picking up nice and smooth to where we are currently doing $400-500/day. According to my latest assessments, we are currently losing about $4500/month at the shop, which is perfectly inline with our best estimates ( we opened a coffee shop without a drive thru in the middle of a pandemic so…) That means we need to increase sales approximately $200/day (~$150 profit and ~$50 cost of goods) to go even at the shop.
Future Goals/Plans: I feel like we are getting more and more traffic , even though we are in the throws of summer here in phoenix, Az. It’s 104F outside today, and usually that’s when shops and restaurants are experiencing significant drop-offs in customers (can be as high as 30-40% for some coffee shops). We will see how things progress through the summer and into the fall, but sustainable profit/loss for the coffee shop by the end of year is perfectly reasonable goal .
We made a promise to our employees that the first thing to happen once we reached sustainable sales would be pay increases. We currently pay $15/hour (barista) - $16/hour (manager) so we’d like to get everyone $1/hr raises. After that, the plan would to raise employees wages concurrently with a payback to Xanadu Coffee Roasters for the original amount ($80,000 currently, remember ? ) used to open the shop and carry it through the first year. That’s if everything goes according to plan, lets cross our fingers.
As far as plans for the actual shop go, we assumed the lease for the lunch café (Tasty Box) next door to our coffee shop, and are currently working on utilizing the kitchen for breakfast and food items to sell at the coffee shop. We are installing some convection ovens and hope to have that up and running in the next few weeks. After that we will work on converting the commercial space to a food safe building for storage and, perhaps, cold brew production, or maybe an addition to our shared roasting space, we are still working on plans and ideas. We also plan on adding an outside patio section and hope to have that completed by end of summer.
