Future of Coffee Shop Models

I want to talk to you guys about how automation could be killing or saving the specialty coffee industry. When you look at a coffee shop model, how much of that model is predicated on crafted by hand , manual approach versus how much of that model is predicated on convenience and speed . And so I'd love to just pick your brains on something that I saw online recently of this coffee shop that was pre batching all of their espresso. See what y'all think. Let's dive in. We haven't all been in the same room in a little while. You know, Ethan and I were traveling last week while you were doing your coding sprint. I thought we could just catch up on some things that we're excited about right now in the coffee industry . The state of things in twenty twenty six, Q two . What do you guys think? I'll start . There's a trend going around online on Instagram that has been around for a while, but there's some chatter of pre batching your espresso And specifically, there's this clip of a coffee shop in Australia, of course . Oh , it's always them . That is it's a bunch of taps in line and there's different coffee on each tap and it's pre batched espresso . I don't know if it's hot or cold. Do you know? It's cold. It's cold espresso. Oh yeah . And and the whole g is you walk in, you order your flat white because you're in Australia . And how would you order it? What? How would you say it? Flat white? Well, I just wouldn't like appropriate that like you would. Like a flatty? Well, you gotta immerse yourself in the culture. It's better not to say flat white . So that was like a good accent, you think? I mean, an accent as good as the language feel immersed in appropriation right now. Geez, all right, whatever. You order flow white, then what? Somebody presses a button on one of these taps and it dispenses ready to drink espresso and then you take that and then you walk it over to your I believe it's called Uber milk. Come on. It is just a machine that dispenses microfamed milk . No latte art, but the upside is you get your drink in fifteen seconds from ordering it because it's just bleep bleep . And the clip on Instagram has generated a lot of thoughts from people . Most of them are like you're taking the soul out of the craft of specialty coffee . Some of them are like why would I go to this shop when I could just make it at home there's some like I recorded something that was like kind of reacting to it and somebody was like, this completely takes away the need for your coffee shop. I would never come because I can just get it from a gas station . And so that's sort of its own topic and we could really dive in on that. We did. Yeah , but the thought process I had is like number one , we just did a blind taste test yesterday here on the bar that was , okay this is a cool trend and there's a lot of thoughts around it, but what can we get out of it ? What can we actually apply, if anything to our business model ? And one of the core themes, I would say, like, of our company is don't listen to what the industry tells you you should do or not do . Like that's why you have a company is to like be different and distinct . So just because the industry is saying, that takes away the soul of the craft. It's like, well , let's actually like think critically about this and explore this for ourselves because we're in charge of us and we can do whatever the frick we want . Yeah . And if the true North is like serving guests well and giving them an excellent product consistently while also having employees that love their jobs and really enjoy serving people and feel proud of the thing that they're making. If those are the goals , then nothing else matters . So we did a bl ind taste test of iced lattes two ways . The first was just a plain iced latte, espresso and milk, or coffee and milk. And then the second was a flavored latte with some syrup . And we did rested espresso , which was like brewed five hours before the tasting and batch together. You said it was eight different shots of espresso all pulled at the same parameters , combined together. So as rest of espresso, cold brew concentrate, and then fresh espresso . Can you taste the difference? So before I continue on this line of thinking, what were your takeaways from that tasting? Oof . Yeah. Well, a we have some more of the rested espresso, so it'd be great to do a next day follow up for sure . But But and then a caveat too was I really wanted to introduce Colbert concentrate into the experiment because I know a good bit of coffee shops use coldberg concentrate for ice lattes . And we do in some of our kegged drinks like the Nitro Oat Lab has colder concentrate. And our coffee cart does exclusively cober concentrate for ice drinks. Okay, yeah. And it's always really good, but it's tricky to comp are with espresso because I think normally espresso is just stronger than cold bru concentrate, right? So typically if we're putting that in a drink we're doing like sixty grams of coldber concentrate to match what could just be like a forty gram espresso . So I put in like forty five grams so and those were the weakest ones for sure . Not in a like super bad way. It's just like a really B plus experience, like especially the lavender vanilla one. It was just like, oh, this is really nice, sweet coffee milk, you know? And maybe we're not latte enthusiasts anymore . But I would say very, very little difference between pre batched and fresh . And then we did it blind and legit like the, I think the pre batched edged out the fresh one on both results. So like Like small yeah like a ninety six versus a ninety eight they're both really good more complexity but I think IMO I think there's just a little bit of like raising the floor when you combine a bunch of espresso in the same parameters. And then I think you probably get some value add from integrating a cold product with cold milk . Yeah. And there was some guy in my comments that was kind of like hating on the video saying like why would you taste test flavored lattes? Like what is this video But why wouldn't you taste test the exact drink this is gonna go into most of the time? Yeah, and I'm like your biggest seller. It's your biggest seller. Yeah. So why would you not apply the same degree of intentionality to your biggest seller drink than you would a pour over that you're probably not selling a lot of? Well to that it's whenever you we post something that is going to take off in terms of views, it's just about guaranteed that like a portion of the comments, like it hasn't really developed this yet, but I would say within the day there will be a comment that's like stupid Americans and like all this stuff. And she's like, we're trying the Australian thing here . But it's just really funny that it always it's always from Australians that like stupid Americans. And it's like and it's like, okay, it's our market. So like whatever. But to your point, it's the it's like put it in the drink that you're gonna serve it in because it's like why the hell does it matter what it tastes like plain if we're not gonna serve it straight up that'd be crazy. Why why would we even waste our I mean sure like we can do it just because I don't really care. Yeah like. It' yous're tasting your building blocks. Yeah, that's fun. It's like it tastes it in the drink it's gonna go into. And we even tried it in a hot cappuccino, like off camera, but we were like, okay, maybe we won't do it in the hot cappuccino. Yeah . But it's just really funny. I was just gonna reference something. Scott Rayo posted about a magazine that he was just in called Still, it's their first publication . Him and Kirk Pearson gave some quotes within this article, so very industry professionals on this subject. And there's a block that says much like the long held biased against rested beans. This is one of those moments when most who have blindly taste tested a method hold one opinion while most of those who have not tried it hold the opposite opinion. I have my money on those who have done the blind taste tests. Well, Bro, I was literally about to jut in to say like, doesn't this just make so much sense that we are talking about gassy coffee, resting coffee to get the best out of coffee . And then one of the most popular coffee drinks is a very gaseous, volatile product. Yeah. I'm like, there might be some value in testing like what's the best expression of this ? It reminds me of the craft cocktail world too. Whenever you try to make an espresso martini or any drink with coffee, you're not reaching for a specialty coffee high,er acidity hot espresso , you're reaching for something like Mr. Black Liqueur. Yeah , or like Kolua that is like coffee flavored product. Yep . Because you're in, you have these other ingredients in that drink that are competing against such a volatile product such as hot espresso. So it's the same thing with an iced flavored latte. Yeah. Okay, so our takeaway from the tasting was rested espresso is awesome. We need to figure out how to implement it at scale in our cafes and beyond that be able to recommend it to wholesale partners that serve our coffee because we believe it will benefit them if it's benefiting us. But the deeper point after this was I watched that video of the Australian Cafe just pouring coffee out of these taps and pouring pre steamed microfam milk out of this machine and I'm like , what exactly are these briefs being paid for ? And there's comments that were asking the same thing, understandably , there's so much chatter online and in the real world about how we can raise barista wages because people love working in coffee and they want to do so for a long er period of time and make a living wage . And I think a big argument for why baristas deserve more of a living wage is because they're like, well, I have this skill that I've learned and it's making coffee drinks and making them efficiently, quickly with a clean bar flow, operating on a team, serving guests . But what happens when automation and batching gives the customer a better individual product and your skill actually becomes more obsolete . And it reminds me a lot of AI . What? In that no , like so many parts of our business, like, okay, yesterday , Riley was showing our marketing team a report of the Memorial Day sale. And it was like, we generated this much in revenue . We had this conversion rate for every email or SMS text we sent out. And I was looking at this like behemoth of a report and I was like, man , in years past, a company would have to pay an entire department of human beings to put together a report like that. Is that what data analysts do? Like some of that like hire an agency even to like I was looking at this report and I was like, dang, this is so valuable for us to look at . And I don't know how long it took you to whip that , but you made it with Claude. And you had Claudia. Yeah. You had Claudia, sorry. You had Claudia connect to our Shopify, connect to our Clavio, and connect to all the different apps that we're using and just generate this report and it took him a fraction of the time . And what if coffee machinery and coffee drink making does something similar ? Where baristas are like I am doing such a valuable thing. I'm making latte art. It's handcrafted . But then automation comes in and actually makes that skill obsolete . And that is a hard pill to swallow up front. And I'm not saying that every coffee shop next month is going to be automated in the same way that like every company is using AI now . It's like AI came on really quick . But when you think about think about how AI has like hijacked the creative process too . Like you can just create an Instagram account or a frickin YouTube channel right now, like and subscribe and just say chat GPT, make me fifty seven podcasts and then you can read them off a teleprompter and it'll you can read them sorry it can read a television prompt promptor and it'll suck, right? Yeah, because AI is just slop in a lot of ways. And the more you feed AI, the better it is, the better output you get . But how are people skills being compensated ? And how do you value a skill is really what it comes down to ? So to close the thought and I want to get y'all's reaction to this . Again, I was watching that clip of these baristas pressing buttons and you might think like, oh, you could pay those baristas minimum wage plus tips and they could still perform that task. But as we were talking about this yesterday, Ethan, you were like, in a world where automation continues to grow in coffee shops, what is the skill actually that Barisos are being compensated for . And ooh, it's hospitality and knowledge of your product experience experience, which is what we've been trying to tell y'all for years . So if you have a highly automated coffee sh op, and you only need one or two baristas to run it, and it's really high volume, what if that is actually the path to more sustainable careers for baristas ? Is less of like I know how to pour good latte art or I know how to do the perfect espresso and more of like I give really good hospitality at my automated coffee shop and we have less people on the team but I can make thirty dollars an hour plus tips because there's more room in the PNL for higher labor costs. Can I say my thing now to piggyback off of that? Is that okay? It's great . So my thoughts are automating the products where batching and automation doesn't affect the outcome leads to being able tailor your equipment and space in a way that points towards things that can't do that yet . So such as I, we were just talking before this and I was saying we should sell our espresso machines at both of our cafes when this happens. Facebook marketplace and we should get modbar. We should get multiple decents because they're , you te knowch,nically lower volume machines that probably can't hang the way our other machines can, but they won't be getting stressed as much . And they will be able to do more fun, advanced brewing than what our current commercial machines can. So you get your iced flav ored latte faster and it's still just as good. Which demographic wise is probably perfectly in line with expectations . And then you get your even your cappuccino or cortado, but like definitely your espresso, your by the cup coffee, delivered at an even more excellent rate because it's using a machine that's highly optimized for those brew methods. Exactly. And you can probably look at pulling, you know , and then to that point, it's like you can use single dose grinders . You can pull several different which single would you like Espresso ? Yeah, exactly. So I think it heightens the experience for literally everyone, if you can look at it in that way. And then the knowledge side of it, you know, maybe less barista's higher knowledge, higher pay comes in because they understand the workings of what the pressure is going to do to the espresso and how to dial in those recipes and so on and so forth . So I think really to the point of some people in the comments, it's like no one getting an iced lavender vanilla latte is probably going to complain about batched espresso . And to that point , yes , why wouldn't everyone do it if it tastes just as good or as better . And then you can tailor the rest of your space around better drinks for the people that do care. I think it's just and I get it. I'm a little bit of a risk averse guy , but I think it's good, man. I think it's a good thing. Just take this whole conversation as it relates to valor in a vacuum and it's like because we did the tasting. We didn't do the tasting just us C sweet owners back, oh we're doing it. But we brought in our head coaches and our leadership to be like, hey, what do we think about trying something like this? And in their minds they're like, oh my gosh, if we can batch this and stock this, our production floor goes way up in these high volume times . And something we're trying to do is serve more people quickly to give them a better experience . And so you can make the guests have a greater, faster experience in your cafe. You can sell more drinks per hour. And then when we have the financial when we're getting the financial clarity to look at labor and be like, oh my gosh , like looks like we got a good problem here, you know? Do we take less people off so that they can make more? Do we just give people more money? But it's like understanding the metrics and the goals of your cafe . And that's us and that's coming from like a heart of people that are trying to take care of their like team . I totally understand the person that's like, well , this could just be a at gas station. It's like maybe maybe a gas station could use that same technology, but they're not . But again, that person is in the ivory tower of their opinion of specialty coffee and they're sitting at the top of like , I understand specialty coffee and I really like it, but that person is not the one that sets the value of the product. The person who buys the product is the one that sets the value of the product . So to say like might as well go to a gas station, I mean, that sure is your opinion, but it's just definitively not true if people still come in and buy the product itself, you know? And that's goes back to the whole concept of like don't do what the industry tells you because if you do that, then where would we even be at this point? You know? Yeah, I owe man, this is the power of searching something out for yourself. Yeah, you know? I just wonder, you know, like when AI first started to be in the conversation , it's like everyone is saying this is an inevitable outcome. Like this is a tidal wave that is crashing on the entire world and it's still obvious ly we're still in the early phases of it is that are we going to experience a similar effect on coffee shops where you know Starbucks , of course they,'re they're just sort of their own thing. But let's think specifically with specialty coffee shops. Are there going to be a critical mass of specialty coffee shops that are doing this method of batched low tier products that are high velocity and then higher specialized products that are higher excellence vis the decent model, you know? Is that just inevitable and people are going to have to live in that world, whether they like it or not ? Similar to AI, right? Like if we wanted to have that Memorial Day report , like we just wouldn't have had it if we didn't have AI because it would have taken a lot of your time that you don't have to give or a lot of money to pay a person that we don't have money to pay. So I just wonder how inevitable this whole thing will be. I don't know. We have questions now. Just I just, again, I go back to what he said about like, we're trying to serve drinks faster . And I think that there is a large , not a large or still definitely the minority of the group, but it's like there's people who think that that is inherently a bad thing . And I think it is the most silly thing in the whole world to be like people to like cast your vision on people of like people need to slow down and enjoy the coffee. And I'm just like, that is the most lame they can slow down and enjoy it once they have it in their hands. Yeah, they want . And that may be true that people need to slow down. Or like people need to be patient and wait fifteen, twenty minutes for their coffee. And I'm just like, that is that's dumb. My number one question to that person who says that is are you a business owner? Well, no, they don't. And they don't understand the just like they've never read a PNL. It's just like the same exact situation of like, you know, just being able to definitively say like Brista should make higher wages without understanding of how the model itself works. It's this exact same correlation . Yeah . If so we're going to go to New York City for our owner's retreat soon. And probably one of the best cocktail bars in the world we're going to go to called Attaboy. What if you walked into Attaboy and all of their shakers were gone , all of their bar spoons were gone, their fresh citrus was gone, and you just walked up and it was all their cocktails were just kegged and you chose between these different options. They were still really high quality , but those bartenders that used to be squeezing every l ime for every drink and hand making their all their stuff , just pulled a lever down . You know, of course that would be disappointing to some degree. Maybe you'd get your drink faster. Well, let's just say you said they're still really high quality. Let's be completely clear that in this comparison they would we would have to say that they are the same exact quality. Yes, yeah, if it was still the same quality, but you got it faster , to me that would be a little bit of a disappointment because like part of the reason I go to Adamboy is like these bartenders really are skilled and they are they are indulging in their craft in almost an unnecessary way. Russ, Russ, Russia. It's simply just a model . What's the model? You know what I mean? Are you going to a coffee shop for a destination and you want an experience like you'd go to Ada Boy the one time you go to New York in the last ten years . What's the average order value at Ataboy versus an FN coffee shop though? Yeah. Or are you just on your way to work and you need a coffee before you get to work . That's even just the model of the coffee shop being close to Adboy. So we would have to talk about they can slow down because their product Add New York's cocktails are twenty dollars apiece and people get three of them . Our product is seven dollars and people get one of them . And so just with that, it's like, okay, you maybe can open a coopffee sh where you're charging twenty dollars a cup for coffee . I don't think that that is as culturally accepted in the United States as the cocktail bar who's doing that. Yeah . Another thing about Adamboy is that again back to model, their entire model rests upon we don't have a menu, the bartender helps you find the drink you want to find. And that's a skill. If you had a limited number of kegs, then that model is completely different entirely. Right. Yeah, it's definitely not comparing apples to apples , but I'm getting at the point of what percentage of the guests that come in a typical specialty coffee shop value the craft so much that they would be disappointed . And I don't think it's as high as some people would think. I would say it's very rare, but as something that we can relate to you're a coffee lover . You just can't get enough. You hear about this really cool coffee shop called Valor and you're like, I have a list of every coffee shop I want to go to. I live in West Virginia , I'm going to drive eight hours south to go to Valor. You go in, you wait in line. The best thing on the menu looks like the nitro oat lab latte . And then the concierge goes, Oh my gosh, great. I'll just turn around and give for you right now and get you on your way. And then you're like , I guess I just did the coffee shop, you know , versus what? Like order a cappuccino and you like go watch it get made . And to just to close this point, we can move on . When people come from out of town to try our coffee shops , it's the classic My Angelou quote that people will forget what you said and what you did, but they'll never forget how you made them feel. So and that also gets at when guests think about which coffee shop to go to , yes, they're thinking about the product, but they're also thinking about how they feel when they're in the space, which then gets at what are baristas in this new age, if we get to it, of automation? What are they being paid for? Is it their ability to make the perfect ice labor of no latte by hand , or is it to deliver an experience that makes the guests feel at home and feel like the rock star? Because when people come from out of town , they might talk about the drink. They might be like, Oh yeah, the coffee was good, but like they were so nice to me . And like the way that their operation flowed was just like just seamless and flawless. Like the interior design was like so bright and colorful and I just felt like I was at a party. That's usually what people say when they go to our cafes . Yeah, and the drink is not like the pinnacle. So there wouldn't there wouldn't be this like disappointment gap between expectation and reality of like , oh, I went here for the drink and they just poured it out of a tap. No one would say that. Yeah, I mean, to that point, you could then you could just be like, okay, we aren't a legitimate third, fourth wave coffee shop. And to that I would say , okay . Just respectfully , go check out the line out the door. Yeah, bro. Like if someone says you're not a legitimate coffee shop, no, I'm saying like we' defreinitely a legitimate coffee shop. I'm saying like we're not a legitimate specialty coffee shop that cares about the what other people are saying is like people aren't saying like whoa, I got this pour over that blew my mind. And I'm saying a lot of people in our comments who are commenting negatively , that's what they consider to be the pinnacle of coffee experience. And I wonder how quick that will fade, if at all. Yeah, I don't know . I would say the model is a lot harder to sustain. How quick will the classical model of third wave coffee fade into the into the ether of automation? I don't know. We'll have to see. I think it's just one one st,ep at a time because, the pre batched espresso, you can do it with all of the things you already have. You just make more espresso than you need and you store it. Now things get a little tricky if it's like I want to get an auto espresso machine. Okay, that means I have to change my most expensive asset for another super expensive asset . And then it's like, well, I also want to get this Uber milk thing. It's all right, well I need to change the gear here. So this seems like a really easy step, but I even think about I was thinking specifically about concierge and like taking orders . Like the square POS is such a easy, seamless experience . This is sponsored by Square by the way. I'm kidding. It could be Square if you're out there . But think about the archaic method of like someone you said to write everything down . They have to like beep boop bop or they had the in eighties had like the card that like you just elongated that thing by two minutes and someone could I could totally see in an era where we switched from that to that. Someone's like, but that's like part of my skill set is I know how to like do the card really fast . And I'm like, yeah, I'd probably be one of those people. I'm like, yeah, I'm really good at ringing people up and like writing everything down, but it's like what's the changes unto the guests like convenience and like the greater experience. Because the point of sale is so easy, I can focus on the person way more intentionally than like I got to like write it it down, charge, charge the card , make sure I pass off this note, but now I have a digital screen that sends the order that way. And so same with making drinks, like we can give our attention, our focus, have that more eyes up mentality to our guests. So I mean, we just keep getting back to like our heart is to uplift people through coffee by giving an amazing experience. And so when we think about batching something, automating something, that frees us up to do that even more , kind of a no brainer. Yeah, especially when the quality is better , if not the exact same. Which all goes back to culture and hospitality, because someone could say, I'm gonna automate things so that I can move more products and make more money whereas we would say like there's nothing wrong with moving more products and making more money at all . But our main heartbeat is like what kind of systems can we put in place to focus on the guest more because that's our true north. Yeah, I think it's yes, yes, and yes. We can offer more amazing products for the people that care. We can make a lot more money and we can make a lot more people have a better experience. What are you into, Ethan?