Dunn Bros Coffee Elk River Franchise Marketing Plan

By Student Team A For Marketing 2142 December 4, 2004

Executive Summary This marketing plan is for a franchise branch of Dunn Bros Coffee located off of Hwy 169 in the city of Elk River. Dunn Bros is one of the fastest growing local small franchises in Minnesota. Founded in 1987 by Ed Dunn who opened a store on Grand Avenue in St. Paul. Skip Fay and Chris Eilers, two local owners, bought the rights to sell Dunn Bros franchises in 1998. Dunn Bros prides itself on providing a community atmosphere in their stores that are open and offering great tasting fresh cup of coffee to the coffee drinker who truly appreciates a good cup of coffee. The marketing goal is to promote the health benefits of drinking coffee on a daily basis. We want to make the consumer aware of the benefits and increase sales by 3% and profits by 2% for the year 2005 in the Dunn Bros franchise located in Elk River, Minnesota. Dunn Bros will attempt to increase consumer awareness in the health benefits of drinking coffee by promoting through a variety of advertising, personal selling, sales promotions, public relations and direct communication. To promote, Dunn Bros plans to print brochures with health benefit information for the consumer to read at the location or take with them. Dunn Bros plans to update their billboard advertisement along Hwy 169 between Zimmerman and Elk River with the added slogan of advertisement of A Great Cup of Coffee a Day Keeps the Doctor Away.

Upon arriving at the store, Dunn Bros greeters will pitch the statement of the health benefits of drinking coffee and give the customer a brochure to take with them upon leaving the store. Dunn Bros also plans to promote the health benefits of drinking coffee to the local fitness centers in the Elk River area by leaving brochures for the fitness center members to review. The Elk River Star News will offer discount coupons in their paper for 10% off of a cup of coffee or specialty drink and every other week there will be a $1.00 off coupon for a cup of coffee with a lunch or breakfast menu item. This marketing plan will be launched to other franchises upon the monitoring of the sales and traffic flow in the store of Elk River. We should be able to tell upon the first two months of promoting the health benefits of drinking coffee whether it has sparked an interest in the consumers.
I. Current Marketing Situation

Company Dunn Bros Coffee, per www.Dunnbros.com , is a coffee house establishment that was founded in 1987 by Ed Dunn. Dunn Bros Coffee delivers fresh roasted, quality coffee to you, with prompt, friendly service in a clean, comfortable environment. Dunn Bros prides itself for the fresh roasted aroma of coffee beans that fills its establishments and creates a real, appreciated, consumer noticeable value that results in dedicated customers. Their customer base is for coffee drinkers who truly appreciate a good cup of coffee. Dunn Bros coffee has developed a sophisticated franchise system that provides its owners with the control and flexibility to roast their own coffee. Since 1987, when the first Dunn Bros Coffee opened up on Grand Avenue in Minnesota, Dunn Bros has become the fastest growing coffee retailer in the Minnesota. Product/Service Fresh daily roasted coffee at a reasonable price is what Dunn Bros strives to provide their customers. A comfortable atmosphere provides a place where the customer can work, meet, relax or enjoy a conversation with a friend. Freshly brewed coffee, expresso drinks, frozen coffee drinks, specialty teas and other beverages, along with assorted bakery, lunch and desert items make this a place to go and relax anytime of the day. Target Market The target market is aimed at health conscious consumers in the cities of Elk River and Zimmerman. The goal for Dunn Bros is to educate current coffee drinkers in regards to the health benefits of drinking coffee. Dunn Bros wants to have a chain reaction happen through their customers. Through advertising and providing helpful educational health tips on the

benefits of coffee drinking regular customers will increase their coffee consumption and new customers will come in and try Dunn Bros for a great tasting cup of coffee. Demographics: Per the ESRI Business Information Solutions product report from the website of http://redlandsarcweb.esri.com the population of Zimmerman and Elk River is a mix tapestry of Gen X, Baby Boomers and Urban escapees. The Gen X are young affluent families with young children, Baby boomers are the blue collar workers with children age 6 17 years old and the Urban escapees are primarily families with children, college-educated and professionally employed, that have elected to commute to maintain their semi-rural lifestyle. The median household income is 61,200, and the median home value, 168,000, which is high compared to the U.S nationally. Elk River and Zimmermans population consists of the largest population between the ages of 20 to 55 years of age. Educational backgrounds are similar with the majority of the population in the two cities having some college but no degree. Geographic Characteristics: Dunn Bros Coffee is located off of Hwy 169 on the edge of the City of Elk River and just nine miles from the City of Zimmerman. It is located on a corner of a busy intersection with hundreds of thousands of cars passing with traffic on a daily basis. Dunn Bros is easily accessible to both cities and off the main highway makes it easily accessible for out-of-towners heading up North or coming back from being up North. The residents of Elk River and Zimmerman are commuters who drive to work with an average travel time of 30 minutes. It's a perfect opportunity to stop in off the highway for a cup of coffee. Psychographic Characteristics: Up and Coming Families and Sophisticated Squires was described for most of Elk River and Zimmerman residents per the ESRI business report through www.eribis.com. Up and coming families described these residents as the youngest of the family market. They are more Gen X than Baby Boomers. These are young affluent families with young children. Sophisticated Squires enjoy country living in new home developments at lower cost values. These urban escapees are primarily families with children, college-educated and professionally employed. These residents have elected to commute to maintain their semi-rural lifestyle. The family types that differ in the two cities are Green Acres for Zimmerman and Midland Crowd for Elk River.

Green Acres residents mostly blue collar Baby Boomers, many with children aged 6-17 years. Midland Crowd residents are at a median age of 36 years and average family size of about 3 children. These residents are located in mainly rural areas that are growing. Over 95 percent are single family or mobile homes. Benefit Usage Characteristics: Drinking coffee has become a favorite past time for the Baby Boomer and Gen X generation. The benefit usage of Dunn Bros is to deliver fresh roasted, quality coffee to the consumer at a fair price. Dunn Bros is targeting customers who truly appreciate a good cup of coffee. Dunn Bros concentrates on providing prompt friendly service in a clean, comfortable environment. The store targets customers at all hours of the day with coffee, expresso drinks, specialty teas and other beverages, bakery items, lunch items, and desserts. They are there for the college students, people on the go, customers who want to go and have a cup of their favorite beverage and surf the net or relax with a magazine or have a casual gathering and enjoy conversation. The store offers a coffee bean bar for customers to purchase coffee in bulk and grind fresh coffee in their home. Description of the Competition: There are several coffee businesses in the cities of Elk River and Zimmerman that provide competition to Dunn Bros in the Coffee business. The strongest competitor would be Caribou Coffee just down the block from Dunn Bros. The store is very similar to Dunn Bros and offers the same type of atmosphere and quality coffee and beverages. The Caf Expresso is located on Main Street in Elk River, but does not have the same type of atmosphere as Caribou and Dunn. The Rise N Shine Caf located in Zimmerman is a small coffee shop offering the same atmosphere and quality drinks and food but on a smaller local scale. The Java Hut is located on the other side of Elk River off of Hwy 169. This catches traffic coming into Elk River, but is not as easily seen as Dunn Bros or Caribou. By the time you spot it you have past it. Caribou seems to be the biggest competitor against Dunn Bros in Elk River. However, Caribou does not offer a menu of hot food items compared to Dunn Bros. Caribou offers bakery items and the wide variety of choices for beverages. Caribou tends to lure the breakfast crowd or the off to work clientele that want to pick up something quick as the head off to work. The also get the after church crowd for a conversation and a bakery item. I have seen in other Caribou Coffee

branches where cold pre-packaged sandwiches have been offered, along with pre-packaged pasta salads. Dunn Bros, besides focusing on the customer looking for a great cup of coffee, expands out and tries to lure the customer who is looking for a hot breakfast sandwich or a cup/bowl of soup and hot/cold sandwich for lunch. They limit what is offered such as hot panini sandwiches and two types of soups that are offered during lunch, but besides bakery and fresh fruit they appeal to customers looking for other quick items. This may provide an edge for Dunn Bros against Caribou. A one-stop shop for a great coffee and something to eat. Rise N Shine Coffee located in Zimmerman tries to keep the customer in Zimmerman rather than drive nine miles to Elk River. They have a similar set up to Dunn Bros but they have a wider variety of hot food to offer during lunch or dinner. For the most part they are successful when the customer is in Zimmerman. However, when they venture out to do grocery or other shopping that is located in Elk River a stop at Dunn Bros might be inevitable. SWOT ANALYSIS: Strengths: The strengths of Dunn Bros stems from being a relatively small franchise. Dunn Bros targets the area they want to start a business and then researches the demographics of the area to build their store to reflect the customers in the area. No two stores are the same in design in various areas across Minnesota. Dunn Bros concept steadily remains consistent even though the atmosphere of their stores differs depending on the location. The atmosphere of their stores creates the feeling of familiarity with the surrounding area. Their concept consists and thrives on delivering fresh roasted, quality coffee to the consumer at a fair price. The fresh roasted aroma creates a real, appreciated, consumer noticeable value that results in a dedicated customer. Dunn Bros concentrates on providing prompt friendly service in a clean, comfortable environment. Open all hours of the day with coffee, espresso drinks, specialty teas and other beverages, bakery items, lunch items, and desserts. Dunn Bros is unique in that it is able to roast their own coffee beans for resale in their own stores. This is becoming a trademark of their stores. Weaknesses: The fact that Dunn Bros is not nationally known as some of their competitors such as, Caribou and Starbucks may provide for some competition as far as financing new store openings. But, Dunn Bros seems to think that by keeping the dcor simple and making the store fit in with the community that this may not be such a weakness after all. The franchise of Dunn Bros consists of two local owners Skip Fay and Chris Eilers who bought the rights to sell Dunn Bros franchises in 1998. The fact that Dunn Bros has not brought in any outside investors to influence any changes contributes to the current vision

of Fay and Eilers to keep the stores their own way of using familiarity as one the the keys of a successful franchise. Opportunities: There are endless opportunities for Dunn Bros. Per an article from the Star Tribune by Jim Buchta, published Sept 19th, 2002, experts state there is tremendous growth potential for companies that distinguish themselves from others. Market research by Pam Goldfarb of Litbrains for Riley Hayes Advertising in Minneapolis states that the most important reason people come to Dunn Bros is because the stores offer a sense of community, more like a European coffee shop. Even with reports out from health magazines stating how coffee is not good for your health the demand for a good cup of coffee still grows. Dunn Bros plans to expand outside of Minnesota to South Dakota and other surrounding states. The stores have a strategy to open several within the same surrounding areas to penetrate the market. Threats: Health concerns could become a threat for Dunn Bros as the consumers concern with coffee consumption and its affect on ones health pending health research reports. As Dunn Bros grows the uniqueness of their stores reflecting the community surroundings could become more homogenous. This would have an affect on the concept Dunn Bros is trying to initiate which is a great cup of coffee in an environment that feels like part of the neighborhood. Competition with Caribou and Starbucks as Dunn Bros grows with expanding their market the competition could turn up the heat to become more competitive in the coffee market.

II. Marketing Objectives

The following marketing objectives are the focus of this marketing plan: 1) 2) Increase consumer awareness of the healthy aspects of drinking coffee by 5%. Increase sales by 3% in Elk River Store promoting the health aspects of drinking coffee. Increase profits of store of 2% using health benefits of coffee drinking.

3)

Marketing this concept of the healthy benefits from coffee consumption will lead to increase sales and profits for the store. It will also make consumers more aware of their health and some the benefits they can gain from drinking a cup of great tasting coffee a day.

III. Marketing Strategies

Advertising
To achieve the stated objective Dunn Bros plans to publish brochures that will be left on the tables for customers to read. There will also be a brochure display right up front where the customer orders their coffee. While they wait they can view the brochure or take it with them. Dunn Bros will create posters to post in the windows promoting the health benefits of drinking coffee. CoffeeScience.org has established a website that states the benefits of drinking coffee. They offer literature and other materials to help the consumer become aware of the health benefits. This website is monitored by Scientific Advisory Group (SAG), this is a committee of scientist and doctors who monitor and analyze the scientific literature on a regular basis on this website. Some Billboards promoting Dunn Bros coffee will include a statement referring to coffee as a healthy hot drink. Something like A Cup of Dunn Bros Coffee a Day Keeps the Doctor Away. This would catch the consumers eye and make them curious the next time they go into a Dunn Bros they will be curious enough to pick up a brochure and learn some the advantages of drinking a cup of coffee. Dunn Bros would not be adding too much additional costs in their advertising budget, they will just add on an additional informational tidbit in the publishing of coffee information in the brochures and posters that they print up to promote their stores.

Personal Selling
At Dunn Bros there would be the greeter at the counter when taking the customers order. Greeting them, asking what they would like to drink and stating by the way, are you aware of the healthy advantages of drinking coffee? The greeter could then hand them a brochure and then get their order. Consumers are big on health issues and this tweaking of their awareness can enlighten their curiosity. By having the consumer walk out of the store with a brochure or having read the brochure while in the store will cause a chain reaction of the consumer telling another consumer of what they recently found out about drinking coffee. By starting the personal selling while a current customer visits Dunn Bros and the consumer leaves with new beneficial knowledge they pass it on to others and this would create a new customer who loves drinking coffee.

Sales Promotion
Discount sales coupons in Elk River Star News local newspaper with the slogan A cup of Coffee a Day Keeps the Doctor Away come in and enjoy a great cup of coffee and find out more on the health benefits of drinking coffee.

These coupons would be worth a 10% discount on a cup of coffee or specialty drink. There could also be a coupon every other week for a $1.00 off of a cup of coffee and lunch or breakfast menu item. This would bring new customers in to try Dunn Bros. Maybe they have seen the billboards and have heard by word of mouth that coffee has some health benefits and this gives them the added incentive to try a cup of Dunn Bros Coffee or other items they offer. Everyone likes a discount off of merchandise or food items.

Publicity/Public Relations
Some Dunn Bros stores are located near Fitness Centers where brochures could be placed along with discount coupons to promote stopping by Dunn Bros for a great cup of coffee. The Elk River Dunn Bros is just around the corner from a fitness center. Dunn Bros could approach the Fitness Center and see if they would permit them to leave a few brochures for their members. Since Dunn Bros locations are mainly within the Minnesota area they will not be placing any national ads or publications. But they could promote Dunn Bros coffee through the purchase of radio ads through local stations. These spots that air will promote Dunn Bros Great Cup of Coffee theme that Dunn Bros prides itself on but will also include the A Cup of Great Tasting Coffee a Day Keeps the Doctor Away slogan to catch the local publics interest. Dunn Bros will use their local area publicity measures whether it is a news article appearing in the local papers, or a radio ad promoting their product of coffee but with the added health benefits to drinking a cup a coffee a day. Through these means, Dunn Bros is hoping to create new customers who love coffee but stayed away from drinking coffee because they saw as a means of not being healthy for them and old coffee drinkers to increase their intake of coffee.

Direct Communication
Dunn Bros has a website www.dunnbros.com where they can promote a piece to inform consumers about the health benefits of drinking a cup of coffee a day. They can also have a link to other areas of information in regards to health issues such as www.coffeescience.org to find out first hand where they would be obtaining new health aspects with drinking coffee. The website is on every cup of coffee holder that leaves with the customer. Dunn Bros promotes their stores within the community with the feel of part of the neighborhood that they establish in a new store and the fact they have the best cup of coffee around. The health benefits of a cup a coffee a day is just additional sales pitch to add to their information to fit in with the communities where they have established store locations. All communities are concerned with health issues, and the fact the Dunn Bros is concerned with the health of their consumers makes the customer feel good about the purchases they make.

IV

Financial Page

Dunn Bros is a chain of Franchises established mainly in the State of Minnesota although; they are looking at expanding to Texas, Iowa, Wisconsin and South Dakota. Dunn Bros is not only attempting to increase sales by promoting the information that drinking coffee has health benefits for the consumer in the franchise located in Elk River but also to promote this in the other Franchises located throughout Minnesota. To see if this additional information proves to be beneficial in sales to Dunn Bros they will put in their budget an additional 20,000 for the first six months of 2005. Dunn Bros Franchisees pay an additional 1% of gross sales to the marketing fund. Major Marketing Expenses: Local Newspaper Will advertise the local franchise in the area. It will also print the discount coupon for 10% off of a regular coffee or specialty drink. This will entice the consumer who has not tried a cup of Dunn Bros to stop in and will encourage regular customers to drop in to receive a little extra discount with their choice of coffee. This will be an added appreciation to the current customers who upon entering the store can learn/receive additional information in regards to the health benefits of drinking coffee. Cost will be $75 per week, 4 weeks per month for a total of $300 per month to run an ad in the local paper. Brochures/Billboards/Posters The initial printing costs of the brochure with regards to information on the health benefits of drinking coffee would be an additional cost in printing. This is the initial push to promote this idea. This will be the largest cost of the 20,000 allocated to the first six months of 2005. Cost to rent Billboard between Elk River and Zimmerman and posters with the slogan A Great Cup of Coffee a Day will Keep the Doctor Away, with posters reflecting the same image as on the billboard will be 1,500 per month. Local Radio Ad Radio ad through 106.3 Princeton for Dunn Bros Coffee off of Hwy 169 on the commuters way to work for six months will be 1,200 per month. Website Maintenance of website fee for all franchisees. Total for six months is $500.

Marketing Strategies
Local Newspaper Ad & Coupon Brochures/Billboard/Posters Local Radio Ad Promo Website Other Total Advertising Costs

Costs for Six Months

$1,800 $9,000 $7,200 $500 $1,500 $20,000

V. References Marketing Plan

1) Dunn Bros Website www.dunnbros.com 2) ESRI Business Information Solution Products Report Zip Code www.esribis.com Zip Code data Demographics 3) www.restaurantresearch.info - Dunn Bros Franchise Press Releases 4) www.coffeescience.org - Countless Studies Reveal Healthy Attributes 5) US Census Data 6) Star Tribune article by Jim Buchta, pub 9-19-02 Dunn Bros. Coffee Breaks the Mold With Every Store