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(CHRIS AMMANN)
(CHRIS AMMANN)

Case Study

How a small coffee shop took on the big guys Add to ...

THE CHALLENGE

Massimo Iafolla, principal owner and manager of Daily Grind Coffee Inc., and Tom Paquette, a supporting investor and assistant manager, looked out their front door and started counting the eating establishments within an easy walk of their front door. With a Subway literally next door, a Starbucks in the Safeway in the same retail complex, a McDonalds on the far corner of the lot, a Tim Horton’s, a Pizza Hut and a Joey’s Seafood just a short jaunt across the two streets the mall fronted on, the number of alternatives competing for the same eat-out dollar was formidable.

And these were big companies with lots of advertising support and high brand-name recognition. The two Winnipeg restaurateurs wondered: How could they differentiate their eating establishment, Daily Grind Coffee Inc., from the plethora of chains and franchises?

THE BACKGROUND

In 2005, Mr. Iafolla launched a specialty coffeehouse on west Portage Avenue in Winnipeg. Mr. Iafolla, who graduated in 1999 from the Asper School of Business at the University of Manitoba, had two passions: food and entrepreneurship. These two interests came together in his decision to launch a specialty coffeehouse, which he called Daily Grind Coffee.

Known informally by customers as The Daily Grind, the restaurant operated in a 1,500-square-foot space in a strip mall in the Winnipeg neighbourhood of Westwood and it had seating for about 40 patrons. The business began with the intent of offering specialty coffees, breakfasts and lunches, as well as an assortment of desserts and gelatos.

THE PROBLEM

Being a small independent like Daily Grind Coffee was not without its challenges. As the opening vignette suggested, there were lots of other eating options with a significant number in very close proximity. These restaurants had all kind of advertising support and brand recognition that little guys could only dream about.

Mr. Iafolla and Mr. Paquette could offer customers no smiling clown, no national spokesperson who lost dozens of pounds by eating the company’s sandwiches, no annual promotion involving rolling up the edges of cups in a search for prizes. Given all the things they couldn’t do, what could they do instead in order to compete against the prominent chain operations?

THE SOLUTION

Mr. Iafolla and Mr. Paquette have sought to define and defend their turf by doing what the big guys can’t, or at least can’t do as easily – began to differentiate themselves two years ago by offering an array of dishes that score heavy on the ‘home made’ element. Sales have increased every month since they were introduced.

Whether its offering home made soups, such as their special Hungarian mushroom or West African peanut, or specialty baked products, Daily Grind Coffee has sought and found a way to differentiate itself by offering something different and desirable. The efforts have met with approval from customers and local organizations.

For example, a local school recently contacted The Daily Grind to cater a staff appreciation day with soups and sandwiches. And a number of local church groups have made it a point to ‘congregate’ at The Grind after church for Sunday lunch.

Mr. Iafolla and Mr. Paquette have also made it a point to get to know many of these customers – by name and by palate. The common theme running through these experiences points to a larger lesson potentially relevant for all smaller players: Offer customers what they want, and what the big guys can’t, and you will create a basis for sustainable co-existence. And as the experience of Daily Grind Coffee suggests, you can get out of the ‘daily grind’ of competing against clowns, spokesmen and contests.

Or as Mr. Iafolla puts it: “Part of me is starting to believe that the three most important things to success are not ‘location, location, location,’ but ‘hard work, good quality and treating your customers right.’”

Special to The Globe and Mail

Reg Litz is a professor in the Asper School of Business of the University of Manitoba.

This is one of a regular series of case studies by a rotating group of business professors from across the country. They appear every Friday on the Your Business website.

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