Thu, Jul 27, 2017 page4

• FEATURE: 85°C cafe celebrates opening of 1,000th store in Houston

  NOT AN OVERNIGHT SUCCESS: The bakery chain’s US manager said operations in the country contributed substantially to worldwide revenue, despite high overhead costs

  • By Yang Ya-ming and Jonathan Chin / Staff reporter, with staff writer
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  Cementing its place as a global franchise, Taiwan-based bakery cafe 85°C (85度C) opened its 1,000th venue in Houston, Texas on July 7, 14 years after opening its flagship store in New Taipei City’s Yonghe District (永和).

  In 2003, 85°C launched with the slogan: “Five-star cakes and coffee in the common person’s price range.”

  Burnishing a reputation for affordable quality, soon 300 stores opened under the brand throughout Taiwan, surpassing Starbucks in store numbers.

  In 2005, 85°C branched out into the international market. Today, the bakery cafe has stores in Taiwan, Hong Kong, China, Australia and the US, becoming the first Taiwanese international food and beverage franchise with 1,000 venues.

  “People do not give you any kudos for running your business well in China. Making it big in the US, where they have a different culture and speak a different language, now that is something people give you props for,” Gourmet Master Co president Wu Cheng-hsueh (吳政學) said.

  The bakery cafe chain was not founded by “some scion with a rich daddy” and everyone involved in the business at its inception had to do the work of several people, 85°C US general manager and acting chairman Henry Cheng (鄭吉隆) said.

  Compared with the Chinese market, which presents no language or cultural barrier for Taiwanese, business operations in the US are significantly more difficult, Cheng said, adding that one of the hurdles was the complexity of US laws and regulations.

  Opening a new store in the US takes two years of preparatory work and there were instances where a venue failed to materialize after 18 months of planning, he said.

  The bakery cafe chain entered the US market in 2008 and managed to open a new store every 12 months on average, Cheng said.

  Now, 85°C opens an average of two stores per month, with 32 locations in the US, he said.

  The US has a population of more than 300 million and US-based bakeries typically have manufacturing facilities that are bigger than those of 85°C, Cheng said.

  “However, those bakeries only know how to make frozen cheese cake. Since 85°C cannot compete in the quantity game, we try to best them on freshness,” he said.

  Few chain bakeries in the US use hand-kneaded dough or sell freshly baked bread, but making fresh bread requires skilled bakers and high personnel costs, Cheng said.

  An early 85°C store in the US employed 10 to 15 bakers, with each trained in the entire manufacturing process. Quality control was another problem and a high product rejection rate was reported across the board, he said.

  The answer to those problems was establishing central bakeries divided into four sections; dough stirring, European products, Taiwanese products and Japanese products. Workers then needed proficiency in making just one kind of product, he said.

  On-site employees received semi-finished cakes and bread to defrost, bake and decorate, Cheng said.

  The system more than halved personnel needs to four or five workers, shortened staff training from two to three years to less than one month, and reduced the rejection rate to less than 3 percent, he said.

  In contrast to Taiwan’s 85°C venues, which make most of their profits from cakes and beverages, the US stores make the most revenue from fresh bread, as well as cakes and beverages, with bread making 40 percent of all sales and the remainder split between the latter categories, he said.

  The 85°C group has a cautious commercial strategy and when it expands into a new city, it always builds its first foothold in the Chinatown area, Cheng said.

  However, commercial success has enabled 85°C venues to establish a presence among all US consumer groups. Just 20 percent of 85°C stores are in urban areas with Chinese-speaking migrants, and Asian-Americans now compromise 30 percent of its consumers, down from 60 percent nine years ago.

  US stores daily income averages between US$10,000 and US$12,000, about 10 times that of a store in Taiwan. Sales from US operations make up about 17 percent of the company’s revenue and are also the fastest-growing segment, he said.

  Due to high overheads in the US, 85°C was historically reluctant to open small venues; but having burnished its brand name in years past, it is ready to open an 85°C cafe beverage stand at a Seattle mall in November, Cheng said.

  The stand is being treated as a trial run for establishing 85°C bakery cafes in New York, he said, adding that in spite of the high rents and wages, the chain plans to have 150 venues in that city in five years.
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