Give Me Coffee or Give Me Death
Ranting on Coffee Reward Systems
Founded in 2020, Blank Street’s model was based on reducing coffee shops to the bare bones and becoming the opposite of Starbucks. They envisioned shoe box coffee shops with almost no seating and super limited hours. This would keep real estate leases to a minimum while only needing to employ one barista per location on a daily basis. Was I happy that I couldn’t get a coffee before 8 am or after 4pm? Nope. Did this model get venture funds interested? Yep.
According to Pitchbook, they’ve raised $100 million and as of March 2023 they reached a valuation of $177 million (down from $218 a year earlier). The founders never wanted people to pay by the cup, they wanted more members paying the recurring $10 or $18 (premium membership that includes muffin and croissant discounts). On their social media, I’m sure they’re saying something about members having a convenient way to get their caffeine fix. But the reality is they’re preying on the suckers like me- people who think it's a good deal, but don’t live near one of their shops and can’t pay a visit when they’re open. I couldn’t get my coffee on my way to work or when I wanted my late pick me up, so was I taking advantage of the membership or were they taking advantage of me? This makes more sense if I explain how they went from a single cart on a Williamsburg corner to 74 store fronts.
While mom and pop coffee shops struggled to make ends meet during the pandemic shutdown, the Blank Street guys took their $100 million war chest and bought out the shops at overwhelming discounts. Optimists might say they were the guardian angel of the struggling cafes, but not when they’re taking advantage of the circumstances and low balling the local shops when they have few options at their disposal. So where does this leave Blank Street in 2024?
My Midwest/Texan friends are familiar with Foxtrot or Dom’s, a chain of boutique grocery stores and coffee shops. I admittedly don’t know much about what their stores looked like, but I understand they had a similar rewards system for their coffees. When they hired new executives focused on scaling growth, they took on too much debt financing and as of today they’ve filed for Chapter 7 bankruptcy. Blank Street’s challenge is that their desire to grow is the antithesis for what makes them profitable. More locations means their coffee is more available which means more people are suckling on the free coffee membership teat.