The owner of the strip center where one of The Daily Grind’s stores is located recently reached out with a business proposition. The tenants in the unit next door are not renewing their lease, so the landlord has offered it to The Daily Grind to expand their current location. In light of recent changes in corporate tax rates, The Daily Grind has enough to invest in the expansion of this location. With this being one of the company’s two locations without a drive-thru (since it’s in the middle of a strip center), the idea of expanding their footprint in this well-trafficked shopping destination is particularly appealing. In fact, this expansion would make this location The Daily Grind’s largest by far. The executive team has decided to lease the unit next door but
is still debating the best use of this additional space. Based on their ideas, which option would
you recommend?
A.) Make this location into a specialty store. This direction would also allow for the expansion of
the current café’s seating area to accommodate more guests. The specialty store would sell
a wide variety of coffee brewing products, from single-serving French presses all the way to
high-end espresso machines, books, mugs, other coffee-related accessories, and branded
merchandise. The cost associated with this build-out would include additional tables and
chairs, shelving and cabinets for merchandise, an additional counter and register, as well
as the wholesale cost of the products for the store. Staffing for this location would need to
increase to employ cashiers in the new portion of the store.
B.) Turn this location into a training store. In this approach, the extra square footage would be
used to create a sort of mock café that somewhat mirrors the existing space but is used
exclusively for training all new employees. A second counter and service line with a register
would be added to the new area along with extra tables and seating for written portions of
the training, testing, and tasting—in addition to guest overflow from the original store. Two full-time trainers would need to be hired. The hard costs associated with this build-out would be
similar to a new store, minus the cost of the kitchen and deep storage for products.
C.) Add an in-house bakery to this location. Another way to utilize the space would be to turn it
into a bakery, which would provide products to this store and all of The Daily Grind’s locations
moving forward. This approach would also allow for a small increase in the size of the café
seating area for guests. The build-out cost would be higher than the other two options, as
it would include a separate kitchen with multiple ovens, industrial-sized mixers and other
equipment as well as baking supplies, utensils, etc. This would also require specialized labor
in the form of bakers to operate this portion of the store.
Welcome to the coffeehouse: A team accounting challenge