We tested the idea in 3 days and changed our minds about opening a coffee shop in Turkiye

The ex-CEO of Coffee Like tells how to quickly check if the business model will work in another country and why it is better to open a coffee shop in Georgia or the UAE, and not in Turkiye.

My name is Kirill Popov, I am the ex-CEO of Coffee Like and co-founder of the self-service coffee chain Lifehacker Coffee. Now I am developing the Lifehacker Coffee model in the world, but under a different brand. Big Smile Coffee — global franchise of self-service coffee houses in Georgia, UAE and Singapore. We are constantly looking for markets where our model will be most effective. Thanks to the mobility of coffee shops (‎we can transport a coffee shop from place to place before it melts)‎ it is enough for us to sell 20-25 glasses of coffee a day to be in a big plus, having a profitability of more than 35%.

When partial mobilization began, many people around me began to leave for Turkiye, including subscribers of my telegram channel. They asked in a personal: "I'm moving, is there a franchise in Turkiye?". And she's not there, although the idea seemed a thousand percent cool. And we decided with the team to quickly test whether our model will work in this country.

The hypothesis was tested in three days: I'll tell you how it was.

How we usually analyze the market

First, we conduct desk research, and then we go to the city (country) we want to start with. In general, the analysis looks like this.

We study demand, competitors and suppliers. We look at both automated coffee shops and Starbucks. with Costa Coffee. We find and communicate with suppliers, look at prices for coffee and equipment.

We look at the locations. We evaluate the centers of gravity of people — shopping centers, transport hubs and hospitals.

We look at the legislation. We evaluate the ease of opening and running a business, taxes and risks. When we analyzed, for example, Brazil, we realized that local consultants themselves do not know how much taxes we would have to pay. But everyone stubbornly spoke figures of at least 20% of revenue — we immediately refused this.

Assessing the income level of the population. We look at whether people have enough money to buy coffee. Large cappuccino — it's still overkill for many.

But most importantly — assessment of the consumption pattern. Takeaway coffee varies from country to country. Somewhere it's an American dream, somewhere — tradition, somewhere coffee — a completely different drink. Therefore, it is important for us to first answer three questions:

• What kind of drinks and in what situations do people drink in this country?
• How often do they drink coffee and are they ready to take it away?
• Can we reproduce these drinks in our machine?

Based on the answers, we must understand: do we need such a market, do we break it for ourselves or integrate into it.

For example, in Brazil people drink coffee rather at home and at work, but they don't take it with them and don't walk down the street with cups. Moreover, the employer in this country is legally obliged to provide employees with coffee. If everyone has access to free coffee at work (‎whatever the quality)‎, then they just won't make it to the coffee shop.

After desk research, we come to the place and check whether everything we found on the Internet is true. Just to find behavioral patterns in places — main task of project managers. They see with their own eyes where people really go and what they buy every day. Only then can we formulate hypotheses on drinks and accommodation.

It usually takes four weeks to analyze a country, but with Turkiye we decided to act as quickly as possible. On Friday, we discussed the idea, immediately loaded marketers and lawyers to collect analytics, spent the weekend in coffee shops and embankments in Istanbul and Antalya, and on Monday we decided that we would not develop the company in Turkiye. Now I will explain why.

Why we didn't open a chain of coffee shops in Turkiye

Turkish Coffee — a completely different drink. He. Highly. Strong. And very. Small. And our model — large glasses of americano and cappuccino. However, we would also prepare Turkish coffee, but…

People don't drink coffee when walking. Turkiye has a lot of Starbucks and European coffee shops, and many cities are saturated with tourists who love classic cappuccinos and Americanos. But only tourists take coffee to go: locals prefer to drink coffee or tea while sitting at a table, on the veranda or in a cafe. There are sooooo many of them in Turkiye.

We realized this by opening broadcasts and videos from popular embankments and manually, with a clicker, counting people with glasses in their hands. The project managers at the local level were finally convinced and confirmed this fact.

Too cheap coffee. The main trouble — lira rate. It is so low that a cup of cappuccino in a traditional coffee shop costs 80 rubles in terms of rubles. It is much cheaper than in Russia, for example. Based on such a price, we will not have any margin of safety, and any deviation in purchase prices and leases will kill margins to zero. For comparison, the indicators in those countries where we already have in our coffee shops: in Singapore a glass of cappuccino costs 240 rubles, in Dubai — 170 rubles, in Georgia — 100.

In Turkiye — the lowest Starbucks index, which is calculated on a large latte. Half as much as in the UK, three times — than in Russia or Singapore

Location restrictions. On the one hand, Turkiye has a warm climate and outdoor verandas. On the other — low storey. Yes, there are many tourists, but the density of the lobby, permanent residents — very low compared to the same Moscow or Singapore. In Antalya, for example, buildings have a maximum of eight floors, most — four. Well, nobody canceled the risks of vandalism.

Ambiguous conditions for starting and running a business. On the one hand, everything is fine: Russian citizens can open a business fairly and inexpensively, and there is no need to make a Turkish resident the founder. But on the other hand — high taxes:

• corporate tax — 22%
• dividend tax — 10%
• local equivalent of VAT — 18%
• income tax — from 15 to 40%.

In addition, for a company that wants to do international business and hire foreigners, the registered capital grows to 250,000 Turkish liras. And this is our case, because we need to purchase raw materials, equipment and transfer money. It's too expensive for a MVP. One consolation: there is an installment plan for up to two years.

And another important point, watch your hands. You can open not an LLC, but an individual entrepreneur. But for an individual entrepreneur, a business visa is required. And to obtain a business visa, you need to hire at least 5 Turkish citizens. At the same time, IP has no tax advantages compared to LLC ¯\_(ツ)_/¯

***

These reasons were enough to abandon the idea. I think that they did a great job: they got a lot of information and rolled back the hypothesis in just three days.

Even if a coffee shop in Turkiye sells 30 glasses a day (which is unlikely), compared to other countries, it looks losing: the monthly profit is 3.5 times lower than in Dubai, and it will pay off for more than four years.

Now we can fully focus on those countries where we already exist and are scaling: these are Georgia and the United Arab Emirates, and plus right now we are conducting field research in Singapore and Kuala Lumpur. In these countries, the Starbucks culture has already been formed — many people buy takeaway coffee at a high price several times a day. And in Dubai, we can offer not only coffee, but also karak — tea that everyone drinks. We already have 25% of the total volume is occupied by this position.

• If you're there right now and can give you some insight into the coffee industry — we will be happy to chat in the comments, perhaps it will be useful not only to us.
• If you want to develop coffee houses with us and become an investor or a franchisee (we guarantee under the contract from 20% per annum in foreign currency, we predict 40-50%) — you can immediately write to me in telegram PM or visit visit us for details.

All the details on the development of Big Smile Coffee — in telegram channel "Come in, it's open)".