Boise coffee shop chain sure market not yet saturated

BOISE, Idaho (AP) – The smell of coffee permeates the air at the Boise corporate headquarters of Moxie Java International.

Just steps from owner Rick Dean’s office is the company’s large warehouse, filled to the brim with bags and bags of coffee beans. For a coffee lover, this is sheer heaven. For Dean, whose coffee cup sits unattended through a recent interview, it’s just good business.

Associated Press Billings Gazette

Dean took over the 70-location chain last fall from founder Jerome Eberharter, who opened his first Moxie Java location in Boise in 1988. The new owner has high hopes for the small but growing operation, which grossed just under $1 million in 2001.

Moxie Java acts as a licensor, owning none of its locations, but rather licensing the brand name and providing training, equipment, and other assistance to independent business owners.

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By selling licensing rights rather than franchising, the business allows for a less-expensive entry for independent operators who pay a flat fee rather than ongoing franchising fees.

But that doesn’t mean a licensee works completely independent of Moxie Java headquarters. To ensure quality control and consistency, the company offers three-year contracts that include a stipulation that the company can cancel the agreement six months before its end for any reason.

Even with the explosive proliferation of coffee huts and cafes on every street corner, Dean said the market hasn’t hit its saturation point. His goal is to open hundreds of new Moxie Java locations worldwide, and he said the market is still ripe for expansion in the specialty-coffee industry.

That view seems to be supported by industry numbers. U.S. consumers spend more than $5 billion a year on specialty coffee drinks, according to the Specialty Coffee Association of America, and coffee consumption continues to increase.

More than 50 percent of Americans identify themselves as daily coffee drinkers, downing an average of 1.4 cups, according to a recent report by the National Coffee Association.

The popularity of lattes, mochas and other specialty concoctions in the ’90s has continued into the new century, revitalizing a coffee industry that was waning in the United States. Overall consumption here is still far below levels of the 1960s, when 75 percent of Americans reported they drank more than three cups of coffee on a daily basis.

Moxie Java’s aspirations are modest compared with the growth of behemoth Starbucks, which has 5,000 locations worldwide and opened nearly 700 new sites in the past year.

Eberharter has acknowledged that the company was growing more by word of mouth than from any type of marketing strategy. Dean has implemented an aggressive marketing campaign, hiring a Los Angeles company and substantially increasing the advertising budget.

That focus appears to be paying off, with gross sales up 80 percent since December and seven new locations opening since the first of the year. Another site is set to open in Florida this month and two more in South Carolina by the end of the year. A contract is being negotiated with a potential licensee in Germany.

"In December, we had an average of four inquiries a week about licenses; now we’re averaging 30," Dean said.

The company also has a contract to put two or three sites in the new Boise Air Terminal scheduled to open in spring 2004 and is starting an e-commerce element to its Internet site this fall, allowing consumers to purchase Moxie Java coffee and other branded items such as T-shirts and mugs online.

David Holman bought his first Moxie Java store just over two years ago. Now he has three more locations in prime Nampa areas, including the Nampa Spectrum theater complex and a cart inside MicronPC.

Owner of Northwest Technologies Inc., a construction company, Holman was looking for a way to diversify his business interests. The buy-in to a licensing operation was less expensive than buying a franchise.

Moxie Java offers three options: Cafes cost between $150,000 and $250,000, drive-through huts cost about $75,000, and kiosks at around $35,000. Costs include license fees, training and equipment.

"It’s a local brand and popular in this area," Holman said. "The coffee is not as bitter as some other brands, and a lot of people like the flavor better."

Copyright 2002 Associated Press. All rights reserved. This material may not be published, broadcast, rewritten, or redistributed.

Copyright © The Billings Gazette, a division of Lee Enterprises.

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