Independent coffee shops are especially vulnerable while chains tap into their larger resources to stay afloat.

By Mike Pomranz
October 13, 2020
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The coronavirus pandemic has completely altered America’s business landscape, and that’s true for coffee shops as well. Whether it's restrictions on holing up inside a coffee shop as your de facto office or no longer grabbing a coffee because you’re not commuting to your real office, people are still drinking coffee, but many of the rituals around the beverage have changed. As a result, coffee shops are being forced to either adapt or face closure.

In fact, this year is slated to be the first since 2011 when the number of coffee and tea shops in the U.S. will decline, with Euromonitor International suggesting that 7.3 percent will have closed by the end of 2020, according to a report from Bloomberg. For large chains, that number may not feel so daunting—especially when, just last month, the National Restaurant Association stated that the percentage of restaurant closures at-large is likely twice as bad. However, for independent coffee shops, every potential shutdown could be disastrous for business. And concern is growing that local cafes could suffer, giving way to the increased prominence of national brands.

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Specifically, Euromonitor’s data pegs the yearend number of specialty coffee or tea outlets at 25,307. According to 2019 numbers from QSR Magazine, Starbucks alone had over 15,000 locations, with Dunkin’ accounting for another 9,630. And during their most recent earnings call, Dunkin’ was specifically asked about whether the closure of independent stores could further shift those numbers in their favor. In response, CEO and president Dave Hoffmann was pretty straightforward.

“We really like what's going on in terms of, if you call it culling of the herd during all of this, yes, we are starting to see closures, and we are starting to see pain points out there,” Hoffmann told Barclays analyst Jeffrey Bernstein in July. “And you would expect that there's going to be opportunities for our franchisees to either relo a site to take advantage of sites, new store openings, etc. But it’s too early to give you a sense of how much that's going to impact us, but we are starting to see that out there in the marketplace.”

Meanwhile, Bloomberg writes that, during a presentation last month, Starbucks Chief Financial Officer Patrick J. Grismer was less explicit about the chance to benefit from the decline of independents, but he did speak to the potential opportunities of the COVID-19 pandemic. “We are rapidly innovating in order to capture new demand, new occasions that we didn’t have before that are tied to how customers are currently living their lives,” he was quoted as saying.

None of this is to fault the large chains: A chain is going to do what a chain is going to do. But the consensus seems to be that, though independents can theoretically be more nimble, chains simply have more resources and strength in numbers. For instance, back in May, The Seattle Times reported that Starbucks had sent a letter to multiple landlords stating that the chain would “require concessions to support modified operations and adjustments to lease terms and base rent structures,” signed by COO Roz Brewer. That letter probably just doesn’t have the same weight when it’s signed by mom and pop.