Cafes Are Perking Up to the Membership ModelMemberships — and their guaranteed revenue streams — aren't just for gyms anymore.
Membership models — think gyms and even the Dollar Shave Club — provide a guaranteed stream of revenue. And now some coffee shops, appealing to java junkies, are getting into the game.
Mobile app Cups provides a platform for cafes to join a “virtual chain” that so far includes more than 300 specialty coffee shops in New York City and San Francisco. Consumers who use the Cups app can receive discounted pricing within the app or subscribe to a pre-paid coffee plan that can be used at any Cups member location. By joining the Cups network, an independent cafe owner can leverage the purchasing power of a larger chains.
At least one coffee shop is taking the membership model a big step further.
To stand out in New York City’s saturated coffee market, Fair Folks & a Goat offers all-you-can-drink membership to the shop, which also sells apparel, gifts and home decor. For $35 a month you can get “all the coffee, tea, lattes and espresso you can handle.” There’s an ala carte menu for non-members.
Owner Anthony Mazzei said memberships are managed through their website, FairFolks.com. New members create an account and add a credit card. When they order, they select their free drink, and if they want anything additional, like a granola bar or retail item, they add it to their account. “It’s that seamless,” he said.
“We have small additional charges if you add a mocha or an extra shot of espresso. If you want to buy something for a friend, you can buy a la carte or pay for your friend’s drinks through the app. And then we discount everything else in the shop for our members.”
The cafe is similar to an online business but in a brick-and-mortar setting. “A lot of other online businesses where you have an account can mail you out anything in one click. In short, we are doing that. We are just processing the order right there in the shop.”
Are members abusing the all-you-can-drink system?
“We’ve sold thousands and thousands of memberships in the five years we’ve been at this. Of that number, I honestly have to say we’ve only had four or five people that have just been beyond bold in terms of their consumption rate. We’re not pricing things on individual transactions — we’re pricing the way an insurance company does. We’re looking at a pool, and the pool is big enough to handle these outliers. You’re always going to have them.”
In fact, the occasional “super user” doesn’t necessarily translate into a negative financial relationship, he said. “They can be a huge advocate for our brand from a marketing standpoint.”
Mazzei said a big challenge was finding the right software, since most subscription software is built for highly scheduled mail delivery. “With us, our transactions are random. Someone can walk in any minute and get a coffee, so we had to find a way to track and stay on top of that.” Eventually, he said, they built their own proprietary solution.
Mazzei predicts membership-based cafes will take off. “We think this trend is really on its way — especially with millennials and people moving towards this kind of frictionless, mobile payment, which is how our stores are run. I think five years from now, you’ll see a lot of these membership-based cafes as they adapt to the rise in mobile technology and are able to connect with these younger customers in a new way.”