Business up at local espresso stands

If espresso stands are a barometer of the economy, don’t open your umbrella in Spokane Valley.

Starbucks Corp. has just reported a 28 percent drop in quarterly profit, but Spokane Valley espresso shop owners say their business is up, not down.

Starbucks said rising food and gasoline prices were draining customers’ latte budgets, according to The Associated Press.

“We continue to come under very heavy consumer pressure due to the economy,” Starbucks Chairman and Chief Executive Howard Schultz told reporters.

Starbucks’ loss may be Joe Williams’ gain. Fancy coffees cost less at his Cuppa Joe’s Cafe at 213 S. University Road.

“I do see more Starbucks customers lately, so that may be because of the cost,” Williams said, but he doesn’t ask questions when a customer walks in with a Starbucks mug.

“They sure have some nice mugs,” he said.

Several independent Spokane Valley espresso shop owners speculated that Starbucks may have caused some of its own problems, with rapid expansion and failure to give customers what they want.

“I think they just ran a lot of customers off,” said Steve Mather, owner of Galaxy Grind at 16th Avenue and Pines Road.

Mather said he offers 25 sugar-free latte flavors and 40 regular flavors, compared with a relative handful at Starbucks. Also, he said, his customers like the “very smooth” taste of his special Doma blend, roasted in Post Falls.

Christopher Arkoosh, part owner and general manager of two Wake Up Call espresso stands, thought Starbucks may have suffered by straying from its “culture.” People expecting a coffee aroma may be put off by the smell of fast-food sandwiches, he theorized.

On the other hand, Arkoosh, Mather, Williams and other local operators acknowledged that Spokane often takes months to catch up with national trends, including economic downturns.

“My experience with the Spokane economy in general is that we never really experience the high peaks of the boom or the low downfalls of a bad economy, and also that we lag a little bit behind,” Arkoosh said.

Jeff Postlewait was bracing for a delayed impact at his nine Spokane-area Rocket Bakery coffee outlets.

“It’s definitely the talk, like we’re going to be hit later in the summer or something like that,” said Postlewait, speaking from his flagship store in Millwood.

He said rising commodity prices are pressuring the bakery side of his business, but “things are on the upswing” at the coffee counter.

“I think it’s one of the small extravagances that people will continue – at least for the time being, we hope,” Postlewait said.

Angela Hoxie, owner of Para Dice Espresso at Sprague Avenue and McDonald Road, thought the rising cost of fuel already would have hurt her business, but it hasn’t.

“My business has been awesome,” she said, crossing fingers on both hands. “It’s growing every month.”

Hoxie said she started to worry earlier this year that, “if gas gets any higher, something has to go.” So far, though, it hasn’t been espresso, she said.

Maybe, Hoxie reasoned, it’s because customers figure they couldn’t get much gasoline for the price of a latte, anyway.

Mather said he and his wife, Kathy, were “really concerned” when gasoline prices shot up in early March and their business dropped about 25 percent. But it bounced back.

“Our numbers are about 30 percent ahead for the last six weeks running, and we haven’t seen a down day,” Mather said.

However, he said the economy has reined in some customers.

“We’ve had customers that would spend $400 a month with us, and that customer is no longer here,” Mather said. “They find they can’t do it in moderation, and so they just cut it off.”

Postlewait said he’s trying to hang onto customers by encouraging them to use his company’s “loyalty cards.” They’re much like gift cards except that items purchased with them go for 90 percent of the cash price.

“Me, personally, I’m looking for those kinds of savings, and I know that other people are, too,” Postlewait said.

Williams said he continues to focus on the things that have served him well for 20 years: quality and service.

If the economy gets too tight, Arkoosh has no illusions about customers forgoing medicine and groceries to sip Frappuccinos. But, if Federal Reserve Chairman Ben Bernanke isn’t ready to declare a recession, neither is Arkoosh.

Williams agreed: “I think eventually the economy will slow down here a little bit, but it may not. We may get lucky enough and it will go right by us.”

So far, Arkoosh said, his business is up 15 to 20 percent over last year.

He hopes that continues because Wake Up Call, which has shops at 1703 S. Dishman-Mica Road and 112 N. Evergreen Road, plans to open another store in September at 1106 N. Pines Road.

Mather said he expects a “survival-of-the-fittest” shakeout based more on market saturation than on a declining economy. He expects some of the “little mosquito shacks that are sitting on every corner” to fold because “we have more coffee shops per capita in Spokane than they do in Seattle.”

Those whose strategy is based mainly on having “a cute girl at the window” are in trouble, Mather thinks.

“Our girls are cute, of course, but that’s not the main focus,” he said. “The main focus is good quality food, drinks and customer service. We’re trying to build our business model so we’re not just looking at it for the quick buck.”

Given the current economy, this is not the time to open an espresso stand “unless you’ve got a lot of disposable income,” Mather said.

“This business is about habits,” he said, and it takes at least 1 1/2 years to get enough people in the habit of stopping – or out of the habit of stopping somewhere else.

Switching espresso stands is like cheating on a spouse, he said.

“Thank God we’ve got a big base,” Mather said. “We have 44,000 cars that pass us every day … but it’s definitely a tough business.”

Despite all the traffic on State Route 27, or on Dishman-Mica Road, where Wake Up Call has a shop, Mather and Arkoosh said they rely heavily on their surrounding neighborhoods.

“Our whole focus is on being a neighborhood coffee shop,” Arkoosh said.

The family owned business – Arkoosh’s mother-in-law, Christi Walsh, is president – establishes its presence with large red shops that look like a row of old-fashioned British call boxes. There’s inside seating for people who want to stop and smell the coffee.

Similarly, Galaxy Grind offers decorative fountains, indoor and outdoor seating, and play equipment for children.

“We’ve kind of catered to the neighborhood and I think, if we didn’t do that, we would have never made it,” Mather said.

Aside from the difficulty of building a customer base, the difficulty in finding good employees, the need to be open seven days a week and the threat of recession, running an espresso shop “is just a kick in the pants,” Mather said.