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Businesses as Third Places

Jessica Sidman has a well-written story about Yola, the recently-shuttered yogurt/coffee shop in Dupont Circle. I'll admit that I didn't go to Yola especially frequently, though I don't work too far away. That said, it was the kind of business that people frequently say they want in their neighborhood - a warm, inviting shop with lots of seating and better than average food and drinks. (from Brother O'Mara on Flickr)

One of the store's partners is surprisingly open about the experience and the hardships that came with it. It's a story that makes me feel pessimistic about doing something as entrepreneurial as opening my own coffee shop in the city. She explains the problem about as explicitly as anyone ever has:

"We are a $5 average check size business in a close to $10,000-a-month rent location. It just doesn’t work. The math doesn’t work.”

It's easy for an observer to sit back and recount the ways the business was a failure, or how it was doomed from the start. The same thing happened when Mid City Caffe shuttered last year. These people would say "a businessperson who knew what they were doing would have never opened in the first place, because the conditions weren't right".

Unfortunately, that's the reality and the problem. The environment is such that either a bright-eyed entrepreneur tries, and eventually it doesn't work out; or the business simply never exists in the first place. So whether or not it ever gets a chance, it simply isn't a sustainable proposition.

To survive, the business has to make either the revenue side of the equation, or the cost side of the equation, work in their favor. The problem is a classic chicken and egg: in order to make revenue, you need volume, and volume is highest where there's a lot of foot traffic.  Rents are also highest where there's a lot of foot traffic. Given that constraint, how do you make it work?

When I researched and wrote about this last year, the owner of Peregrine Espresso explained it to me in pretty clear terms. You have to keep the rent costs down, which typically means having as few square feet as you can reasonably operate a coffee shop in. It means you do a lot of take out business, and dis-incentivize "camping" at tables. In essence, you make it work by not being a "third place".

Over at District Bean, coffee guru Jonathan writes:

In the grand scheme of things, though, there is so much activity in the DC coffee scene that the closing of one shop is but a blip in a wave of progress.

I think he's right, but I also think this points to the divorce between coffee and third places. We'll still have coffee shops, especially ones that serve good coffee, because more people are demanding it than ever. But these coffee shops will either be located in storefronts with virtually no space, requiring you to take your drink to-go; or they'll share space with a business that can successfully cross-subsidize the coffee side, like a bar.

At the end of the day, a business can only be a viable third place if it's also profitable, and I think the days of coffee shops being meeting places or studying places or blogging places are over. Good coffee will live on, but the space where we enjoy it will change.



In Praise of Southwest's 'C' Boarding Group

So You Want to be a Southwest Airlines Intern?

(from flickr user San Diego Shooter)

Good Advertising
