Local Chains Face Nearly Insurmountable Odds Competing Against Titanic Brands Like Starbucks And Dunkin – CoffeeTalk

Starbucks’ name recognition, lower costs, and expertise in real estate and employee hiring make it difficult for local chains to compete. In the past, Dunkin’ Donuts opened near local donut places, but people passing through had expectations of the brand. They assumed that Dunkin’ or another national brand would provide better service and cheaper prices.

To compete as a local chain, local chains need to find a niche that larger players don’t fill. Lucky Perk, a once-thriving chain in Boise, Idaho, leaned into its locality by offering a perfect study spot, meeting location, or lobby for meeting with loved ones. However, being local isn’t a competitive moat. Many customers will still go to Starbucks if it’s convenient.

Lucky Perk, which opened in 2017, grew into a six-location regional powerhouse but quickly shrunk back to a single location. In May, the chain had a liquidation sale at its Silverstone location, stating that while five of its six stores had closed, it would remain open on Cherry Lane and Linder.

The United States coffee shop market grew 8% to $49.5 billion over the past year, resulting in a 4% increase in the market’s pre-pandemic value. The annual report produced by the Allegra Group’s World Coffee Portal also said that the number of U.S. coffee shops has surpassed 40,000, which is approximately 7% above pre-pandemic levels.

The problem for local and regional operators is that most of the growth came from larger chains, such as Starbucks, Dunkin’, Dutch Bros, and Scooter’s Coffee. Starbucks captures 40% of the total market, and smaller chains are growing quickly.

While this doesn’t signal the death of the local coffeehouse, operating more than one store has become a very daunting model unless you grow very quickly.

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