Editor’s note: This article is part of an ongoing franchise series, which highlights brands that are new to or aggressively expanding via franchising. Is your restaurant starting to franchise? Email us at [email protected].
Prior to starting its American franchising program in 2021, Caribou Coffee opened anywhere from 15 to 25 company-owned stores per year. This expansion pace lagged behind the rest of the U.S. coffee shop industry, said Matthew Walls, Caribou Coffee’s chief franchise officer. Franchising, however, has allowed the chain to shift its growth into high gear.
The company, which was founded in 1992 in Minnesota by John and Kim Puckett, had been growing organically throughout the Upper Midwest since its inception. Over the past 30 years, it layered in additional expansion strategies, including opening in non-traditional venues like grocery stores and airports and producing consumer packaged goods to sell on grocery store shelves, Walls said.
Caribou has international franchise experience, as well. For the past 15 years, the company has partnered with operators in Northern Africa, Arabia and in Europe in Turkey and Bosnia. When Caribou opened its first domestic franchise store in November in Wooster, Ohio, it had about 750 stores globally, which included 325 company-owned units in the Midwest.
The company has big goals now that it’s franchising domestically. Caribou would like to become the third or fourth largest coffee brand in the U.S. by size, which would mean it would eventually have thousands of units, Walls said. Caribou’s international franchised units also have the opportunity to reach the thousands, especially since the company has multiple markets where it could build hundreds of locations.
“We're not looking at this as an incremental growth program,” Walls said. “We're looking at this as being a true global development program that allows us to serve our coffee to millions of people across the world.”
Part of becoming a franchised brand within the U.S. meant bringing in talent where needed, such as within its traditional and non-traditional development teams. Caribou also created an ecosystem that would allow franchisees to succeed, including finding the right brokers and developers, general contractors and different vendors to support franchisees.
“Our mindset internally has changed from being an upper Midwestern company that happens to have some global footprint to a global company that is fortunate to be based in the upper Midwest,” Walls said. “So we’ve made that lens shift change.”
The company also needed to recruit franchisees that shared its common vision and growth goals,as well as its desire to give back to communities. Caribou focuses on sophisticated QSR operators not only because the learning curve would be flatter with these franchisees, but also because Caribou could learn from them, Walls said.
Since franchisees already understand the business, Caribou’s in-store training focuses on the day-to-day operations and how the company works with its franchisees, Walls said. The training program is at its headquarters in Minneapolis where operators are “elbows to elbows with our team members,” Walls said.
Caribou also offers another layer of training for a franchisee’s general manager who can then train their own colleagues without the franchisee having to send every other GM to Minneapolis for training as well. This would allow the franchisee to become more autonomous over time, Walls said. General manager training depends on their level of expertise. Caribou also has daily interactions with its operators and meetings throughout the year.
“We always are training and coaching our franchisees on the way that we conduct our business, with our vendors [and] with one another,” Walls said. “We want to make sure that we have a high level of trust with our franchisees.”
The company is also open to feedback from operators about how their experience with other concepts could improve Caribou.
“When we hear things that really resonate with us, we look for the opportunity to fold that into how we operate, because we want the franchisees to have a high level of ownership and feel like this is their brand,” Walls said “And the best way to do that is [to] allow them to give us feedback and incorporate that feedback where we think [it] makes sense.”
Development plans: The company has already signed multiple deals with franchisees to open 300 units within the next five to seven years, Walls said. These agreements were for stores in Missouri, Michigan, Ohio and Florida, which Walls said creates a lot of infill opportunities. Caribou is also talking to potential candidates in the Midwest and Southeast. The company is planning to move West and into the Southwest, as well, and has already seen some interest in Arizona, Texas and Colorado. Caribou Coffee offers two store designs: a drive-thru-only concept with no dining room that is about 600 square feet and a traditional store that is about 1,600 to 1,800 square feet.
Ideal franchisees: Caribou Coffee is seeking experienced, multi-unit operators that have sophisticated systems and knowledge of the areas they would like to develop, Walls said. The operators would be willing to develop 25 stores or more in an area where they already have successful operations and they are able to use other resources and knowledge to run Caribou Coffee units, he said.
Franchise quick facts
- Liquid cash assets: $3 million
- Franchise fee: $35,000 per coffeehouse
- Royalty fee: 5%
- Marketing fee: 3%