{audio:0:00:00} Paul, can you provide some context to when you joined Caffé Nero in 2006?

{audio:0:00:07} I joined as an area manager, actually, having had 13 years in the pub business. Having worked at regional manager level. I stepped down a level to join Caffé Nero. I really wanted to join. I’d had quite a long time in pubs and restaurants, really wanted to join the coffee business. I read about Caffé Nero and what they said about their culture. I visited a few of the stores, they looked a fantastic company to work for. I was interviewed and the people who interviewed me, they came across exactly as they sold themselves on the website.

At the time, there were only 235 stores only based in the UK. They’d expanded from Gerry Ford starting the business in 1997 when he bought a handful of cafes in London and turned them into Caffé Nero. When I joined, we’d expanded across to the UK. It was still very London centric of the 230-odd stores, 100 of them were based in London. Then we’d gone out like a spoke of a wheel, gone out to Manchester, Birmingham, Glasgow. We were starting to build hubs around the country. Also, for many of the market towns, as well. Yes, I’d come from a pub business that was over 100 years old. To join a café business that was still very young, it was really exciting.

{audio:0:01:40} How is Caffé Nero really differentiated from the larger players in the market like Starbucks or Costa Coffee?

{audio:0:01:45} We are still effectively a family-owned independent company. Whilst we are a big company and people see us as one of the big three, we still have that independent family feel. It’s still within the Ford family. Gerry is still the CEO and chairman. We know that we’ll never be the biggest. We don’t aim to be the size of Starbucks. We don’t aim to be the size of Costa. We are very much aiming to differentiate on our positioning in the market, which is to be the premium coffee brand and to be the best wherever we operate. It isn’t about being the biggest, it’s about being the best. That positioning is really around the coffee, the food, the people, the feel of the cafes. We’re incredibly confident in the quality of our coffee. We focus on that incredibly hard. It’s the bedrock of what we do. We are one year into a program of upgrading our food. Transforming our food for it to become far more of a deli experience.

{audio:0:03:00} You’ll see that if you go into different territories, as well, not just in the UK, the U.S. and different territories that we trade in, it’s a kind of evolution. Much of the food is produced in-store. I tend to think of Starbucks as the global giant, the American company that, for me, doesn’t feel too comfortable. Then you have Costa, which is the mass market. You see Costa everywhere across the UK now. You see them in petrol stations. You see them everywhere. Caffé Nero, we’re not going down that route. We don’t franchise any of our stores. They are all company managed in the UK. We have one master franchise out in the Middle East. As far as that, all of the stores are company-run and company-managed. That enables us to retain control over the quality of the brand, the quality of the coffee. The quality of the food.

Obviously, there are people who work for us, so we can be really protective over the brand. That in a nutshell is how we’re really differentiating ourselves. As you know, Costa has been bought by Coca Cola. We know that Starbucks are really focusing on the Far East and the U.S. and aren’t really focusing on the UK at the moment. You see drive through still being produced, but no real company-managed stores being built by Starbucks. This enables us to really focus on that premium sector of the market and really differentiate ourselves and establish ourselves as that premium brand.

{audio:0:04:40} You mentioned culture and the feel of the café, that’s really a differentiator. What exactly is it about the feel that is different to the other players?

{audio:0:04:53} It’s one of the reasons I’ve joined the company. I mentioned the family feel to it earlier, we work in a way where people always come first. I know so many companies will say that about themselves, but we’ve lived and breathed it for 23 years. Certainly, the whole time I’ve been there, it’s been really apparent. The way we build our business, we talk about the foremost important things, and this gives you an insight. We’ll say the foremost important things is build and retain a great team is the first most important thing. Then we talk about standards. Then we talk about service. Then we talk about the profitability of the business. With the other three following on from the first most important thing, which is build and retain a great team. That actually works as a circle because it doesn’t just mean we recruit great people and we’ve just got really nice fluffy people in the stores; everything will be great. It’s actually what we do to progress those people, which is so fundamental to Caffé Nero.

First and foremost, we’ll always look for people with a sunny disposition. People who smile, who are friendly. Experience is not what we look for. Often, experience can be a detriment to bringing somebody into Nero because they’re too wedded to the things they’ve done before. If we bring the right people in with the right personality who truly care about people, as opposed to coffee specifically when they come in.

{audio:0:06:30} Many people, they’re going through school, they go through university, they’re not just waiting for the day when they can work for Caffé Nero, they’re waiting for the day when they can work and earn some money and serve people. The passion for the coffee comes from us. If we recruit the right people in the first place and then put our heart and soul into developing them and giving them a career, so that every single barista knows, you can become a shift leader. Every shift leader knows, they can become the assistant manager. They can go on to become store managers. There’s this ongoing culture that just says, look, we’re here for you, we’re here to build your career if you want it. Then the way that then transpires to the feel of the company is the fact that we have over 80 percent of our store managers used to be baristas, and roughly 80 percent of our area managers used to be store managers. If you think in the UK market, we have 67 area managers, roughly 80 percent of them used to be store managers. You can see what I just said about we do truly do what it says on the tin about developing people.

{audio:0:07:39} The point is, every time somebody takes a leadership position within the company, well, 80 percent of the time, they’ve done the job of the people that they are then managing and leading. An area manager tends to not get the challenge from their store manager to say, “You don’t understand what it feels like to be a store manager” because they do. They do. They’ve come up through the ranks and they’ve done the job. The reason the 80/20 rule works for us is, we do obviously like to bring some experience in at times. When you look across the area manager pool, you’ve got 80 percent of them that have done the store manager job, but then you bring 20 percent in who have been area managers before. They can bring experience of bring area managers into the business, but they don’t really know the brand. They mix with an area team and a regional team, where the internal guys, they haven’t had experience of doing the role before. It’s the first time they’ve done it because they’ve been internally prompted. What they know is Caffé Nero. Then they can pass that onto the external people who come. That really generates that feeling of togetherness. The feeling of, I can go as far as my ability and my desire to progress will take me. There isn’t a glass ceiling. I’d like to think I’m a good example of that as well. I joined as an area manager and now working as chief operating officer in the U.S. It’s been several levels to go through.

{audio:0:09:05} It almost drives trust and credibility internally, because like you said, if I have my boss who’s gone through what I’ve done and been promoted, I trust him, I respect him in a way because I think that’s the other thing that larger companies typically miss, where they might bring a manager from a completely different industry or a different role, it’s hard to relate in a way.

{audio:0:09:32} Yes, absolutely. Whoever walks into one of our cafes at Caffé Nero and no matter what level they are, if you walk in, the tables need clearing and they’ve suddenly been hit with a wave of customers and the team needs some help. We just put down our bags and we help. We join in. There’s nobody walking around in a suit, walks to the back of the store, gets their laptop out and observes what’s going on. We’ll muck in. We’ll do the dishes. We’ll washup. We’ll clear tables if it’s needed. Obviously, if that’s a repetitive thing, then perhaps we’ve got the scheduling wrong, the rotaing wrong. It’s: Help out. We’re all in it together. Absolutely, you have that credibility to say, I’ve done this job, I do know how it feels.

{audio:0:10:16} How do you look for those sunny smiley people, especially for those front-line barista jobs? How do you look for that character?

{audio:0:10:30} I always say if someone isn’t smiling at you in an interview and they’re not making you smile, there’s no way they’re going to do it on a Tuesday afternoon when it’s raining and they’re feeling a bit miserable. That’s an absolute starter. They’ve got to be making you smile.
I always think when you look through C.V.s and when you’ve read enough, you know the standard things that you’re going to see in there. You’re going to see people’s education; you’re going to see what they say they’re good at. I always look for their interests and what they do outside of work. I can remember sitting through a C.V. and looking through one and you’re looking at all of the standard stuff that’s in there. Right at the end, somebody had put Camp America. I was like, right, that’s what I want to talk to you about, talk to me about Camp America, what did you do? Where was your camp? What did you teach? I did that myself when I was 18, so it was really fascinating to get into that.

It’s that personality, that people who genuinely make you smile and look like they want to work in the hospitality environment, I always think a good little trick, as well, is if you’re looking for floor staff, if you can meet them somewhere near the door or at least walk across the café with them and just look at their demeanor. Their demeanor as they walk across a café, do they walk with a sense of purpose? Do they look around? Are they engaged? Do they just naturally smile at people? Or do they drag their feet across the store and then they sit down. It’s a bit of a clue of how they’ll work. That sense of urgency. That pace. If you work in a café, there has to be a degree of pace to your own personality and how you move around.

{audio:0:12:03} When you hire the frontline staff, you hire for character, for how engaging they are with people, and then influence them with the brand of coffee. What is your process in really focusing and honing them on the brand of Caffé Nero?

{audio:0:12:28} When people start and they’re working in-store, the first thing they’ll do is the barista introduction, which is some classroom training and then some one-to-one training within store, where they work hip-to-hip with a person that we call the maestro, the coffee expert or the trainer in-store. They won’t be on core rota for the first few days, they’ll be extra. They won’t have to actually serve a customer unsupervised. We take them through that in their first week, so they absolutely learn the coffee and they practice, so they really get it nailed.

I think I mentioned earlier, the passion for coffee comes once you work with people who are passionate for coffee. Like I say, it would be great if you could recruit people who already were passionate of coffee. Many of them already are, but I find that if you’re immersed into that culture of, we talk about the beans. We buy the beans. We source it from the famers around the world. We send our own person out there who builds the relationships with the farmers in Nicaragua, et cetera. We bring the beans up and we roast them ourselves in our own roaster.

{audio:0:13:40} Once people become aware of that, they’re like, “Wow, you’re really serious about coffee, aren’t you?” You’re like, yes, because this is what we do. This is our absolute core product. You lead by example. Again, if you’re passionate about people, first and foremost, and this is the core thing that you’re making to hand over the bar to them, then you’ll become passionate about that product, as well. I think it’s one of those few industries where what you do, which is make a cup of coffee and serve it to someone in a friendly manner, it’s so visible to everybody. You literally hand it over and go, there you go. There’s the latte you’ve asked for and that’s the best I can do. It’s very visible. Not only to the person you’re giving it to, but the whole queue and your colleagues behind the bar. They can see the quality of the product that you’re making. It’s very visible.

{audio:0:14:30} There’s nowhere to hide.

{audio:0:14:31} There’s nowhere to hide. I did it myself. Everybody who joins in the operations team, no matter what job you’re joining to do, you go through that. Area managers, regional managers. You start off in store, you do the barista induction, you do the training, you serve people, you work in-store for up to three months. It’s a real induction. We’ve all been through it. There is nowhere to hide.

{audio:0:14:53} I’m so fascinated by this whole rigor of making sure people go through stages to progress. I know you mentioned how it brings a togetherness culture, but how do you think about shaping that culture?

{audio:0:15:15} I think if I just describe the culture in itself, because that then helps the conversation flow. If you think of cultural values, there are two sides to it. The family feel side of Caffé Nero is that we are warm, supportive, focused on each other, caring. Think of all of those things, the types of attributes that you would want your boss, your line manager, your colleagues to have. There are going to be times in life when you need to be able to talk to your boss when you’ve got issues, you need a shoulder to lean on, you need someone to understand what’s going on. If there are issues in your performance, you want a boss who’s going to point them out in the right coaching style of way, to be able to take you to one side and say, “Let’s look at how you made that latte. Talk me through it. Let’s try that again. Let me show you.” We want all of these softer elements to our team members.

Then when you think of the more business-minded employees. Relentless, focused, striving for excellence, restless. We want people who not only have those soft values but also want to be the best. We don’t want everything to just feel like a club and then the standards be poor. Everyone saying, “Yes, it’s great to work here but no one ever holds me accountable to the quality of my coffee. The store is dirty because no one ever comes in and points out the fact that the store is dirty and needs to be cleaner.”

{audio:0:16:55} You need people who have that blend of, I’m going to help you all I possibly can. I also expect you to meet me halfway and put the work in yourself and want to get better yourself. If we’re going to build a world-class brand, which is what we’re doing, we need people to walk in and go, “Yes, this is the best café in the area and because we’ve got lovely, wonderful people serving us, they really work hard on making the best coffee. They also work hard on making sure the store is clean, that they serve quickly to get through the queue, so I’m not waiting for ten minutes for my coffee.” You’ve got to have all of these characteristics, as well, that means we are going to work hard, we are going to have great fun, but we’re going to work hard and do a fantastic job.

If you think the culture works in a way that if you have that sort of a leader, hopefully that inspires you to work in the same way. Look after each other, look after your colleagues. Be the sort of person that other people want to work for, but also make sure that you’re truly working as hard as you can to make the product as best it can and that your customers are walking in and feeling welcomed, you remember their name. This is what makes the café successful. Those cultural values are the critical parts that we’re constantly looking to develop in ourselves and in each other.

{audio:0:18:15} How do you motivate those relatively low paid staff that are your frontline staff in the coffee shop?

{audio:0:18:24} Through experience, I’ve found that many people come into this business and it will just be that job that they’re looking for to give them some pocket money. Sometimes it’s a part-time job. We fundamentally like to recruit full-timers because they’re the ones who want to progress. We’ve probably already talked about the cultural side of it, which will motivate people.

For us, it’s also the career path. It’s the career path that we are always looking for people who do want to progress. They may not come into the business realizing that they do. We’ve had many people join us as baristas while they’re at university and they had no aspiration at all to progress within the business, they have other ideas of their career. They find that they have a real talent for hospitality. They find that they really love it. They find that they love looking after customers. They love making a cup of coffee. They find that they’re bright, articulate people and they can progress. Almost by default we train them the skills to be a shift leader. They can become a shift leader. Then you start to have a conversation with people to say, have you considered being an assistant manager? What do I need to do to do that? There’s X, Y, Z. These are the characteristics that we’re looking for. Then you can start to develop people toward being an assistant manager in the store.

{audio:0:19:41} Because we’re a growing company and we’ve been opening stores at a pretty fast rate, we do need those people coming through. There are always opportunities for them to progress to the next level. It’s like I go, you’re a barista, there’s nowhere for you to go because we’ve already got shift leaders, we’ve already got an assistant manager. If you think of 700 stores in the UK, our process is to make sure that every single one of those people in every store has a development plan. If I’m a barista, I know that I can become a shift leader within the next three months by doing X, Y, and Z. That’s what helps motivate them.

It's also how we structure the operations team because each of our area managers has on average ten stores within their area. Which is a relatively low-level number of stores to have for area manager. When you think of our competitors in coffee, when you think of the pub business, the average number of pubs or cafes that they would have in those businesses are often 20 plus. Whereas ours is ten. Now, the reason for that is because we want our area managers to be able to walk in a store and to know every single person who’s working and to know at what stage of development they are.

{audio:0:20:55} If I’m an area manager and I’m Russell, who is the area manager for Nottingham, and he walks into one of his stores, he’ll know everybody who’s working. He’ll also know what’s the next stage of their development, what are they currently working on? If I’m a barista in one of those stores and my area manager walks in and starts to ask me, “Hey, how are you getting on with your cappuccino because I know that’s what you’re focusing on for these next two weeks? Or you’re the assistant manager and we’re working on delegation.” The area manager says, “Well, tell me how you’re getting on with the delegation?” That’s really motivating to people because you’re not just a member of the team and an area manager walks in and only talks to the store manager. We don’t work that way. They’ll have a conversation with every single member of the team. Then everybody has that knowledge that we are all in this together. Every member of the team is as important as the others.

{audio:0:21:52} You might have taken the decision to have more area managers in the business, but they know each of their direct reports and like you said, it drives this family feel.

{audio:0:22:02} Absolutely. I’m sure there are academic studies out there that will tell you how many people you can know, how many names you can remember and remember something about them. We know that if you’ve got 20 stores and there’s average of eight/nine/ten people in each of those stores, you can’t do that. Number one, you just can’t know that many people. Also, the level of detail we want our area managers to get into regarding those people plans means that you physically couldn’t get to it if you had 20 stores. 20 stores can work if you have a different culture, but for us, which is that family feel, we’re all in it together. It really doesn’t work unless you’ve got more than ten/eleven stores max.

{audio:0:22:50} Have you got an example of when a front-line staff didn’t represent your brand or you had to really influence someone to represent Caffé Nero on the frontline? It’s one of those businesses, it’s interesting how as a customer, those baristas are effectively your brand. If I’m a customer, that’s what I take away with me. Not only the coffee, but also the experience I have from your actual lowest paid staff. It’s a big challenge in that sense.

{audio:0:23:23} Absolutely. Obviously, as we promote up through the ranks, many of our store managers, area managers, they will be doing that job for their first time. It will be the first time they’ll actually run a business. Now, they are recruiting people. Of course, they all make mistakes. I think one of the biggest mistakes you see them make is when they’re doing knee-jerk reaction recruit because it’s out of necessity. They feel they need to get somebody in quickly because there’s a hole in the team and they will take someone on too early rather than wait and wait to get the right person.
Now, there have been pressures that have caused that over the last few years. Obviously, Brexit has had an impact on that, as well, with the inflow of EU nationals slowing down into the UK. The number of recruits per job that we offer has dropped. That’s put more pressure on store managers to wait and to make sure they get the right person. What tends to happen if you do make an error and recruit the wrong person who doesn’t have the cultural attributes we’re looking for; it can quickly rub off on the rest of the team. That can cause a lot of problems on morale, the standards of the store, because if I’m working in a store and I’m not the right person, I’m doing the closing shift.

{audio:0:24:55} I don’t really focus on doing the cleaning, I don’t do a great job, I don’t put everything away. I don’t clean as well as I should have. The people who then come in in the morning, they see that mess and the next time they are handing over a shift to the people who have left it for them, they may do the same. You have this downward spiral. You have to nip that in the bud quite early. The good thing is that when you resolve those issues, you then can have a very quick upwards spiral. In that, when you are all working together, so quite the opposite, when you do a great close for people and you’re walking in the morning, the store is absolutely spotless, they’ve done a great job. You’re like, “I’ll do the same for that guys, this is fantastic. I’m not going to do a bad handover now to the same people who have just left the store in a great condition for myself.”

{audio:0:25:44} What about compensation and pay for those low paid staff? How do you think about that and really influencing and motivation through direct conversation?

{audio:0:25:53} Again, it is a similar thing as regards career progression. We do know that there will be people who join us who don’t really want to progress, that they’re quite happy joining us as a barista. They stay as a barista, they see it as something they’re going to do for a year, a year and a half, two years, maybe three years while they’re at university. It fulfills that need in them that they want a job. It supplements their life while they’re studying or doing other things. They quite enjoy it because if we’re got the culture right in each store, it will be a very enjoyable job. That fundamentally is what we found over the years is, if I work for a fantastic team, if I have progression if I want it. Those are the fundamental things that I really look for in my job. Yes, I actually know, I can go and potentially earn 50p an hour more and work in an environment that is really unpleasant, but actually we find that the turnover at Caffé Nero has always been pretty stable and where we would expect it to be a hospitality industry. If you get that leadership right, if you get the store manager right, then you will always see the turnover at a manageable level.

{audio:0:27:12} What does leadership mean to you?

{audio:0:27:15} I’m lucky enough I’ve been around long enough now, you read books, you go on courses. There’s so much to digest. If you find something that suits you that you’ve either read or experienced or learned, then you stick with that and you pass that on.

For me, leadership is all about using your personal power as opposed to your authoritative power. Any of us in leadership positions have authoritative power. We can tell people what to do because of our job titles. It just doesn’t stick. For instance, if you have an area manager who thinks for a minute that they can go around and instill great standards by telling people what to do. It’s just not going to happen. They walk out the door and it just doesn’t happen. The way they instill those standards is to have people buy into them as a person. It’s that personal power as opposed to authoritative power, which is the most critical thing.

Then it’s how you use that personal power. And this sounds like a cliché, it sounds like straight out of a textbook. It’s the winning hearts and minds, to get people buying into a common goal. Now, the important thing for that to me, winning hearts and minds, it’s actually a thing that you do. It sounds like it’s just a glib statement. It’s something that you do. You actually do it the other way around. You win someone’s heart, you win someone’s mind first because for me leadership is, you’re a line manager, I’m going to help you understand what the journey ahead looks like whether you’re a barista, an area manager.

{audio:0:28:51} Whatever level you’re working at, I want you to understand the journey ahead. This is what Caffé Nero stands for, this is what we’re like as a brand. This is what I personally can do for you as your line manager to help you and your career and your time at Caffé Nero. That’s winning someone’s mind. It’s about right, I get it, I understand what we’re all about. Then winning their hearts is all about you then walk the walk. You do it yourself. If I’ve told you I will be there for you, I will help your career. I will sit down with you as often as you like, I will talk to you, I will point out the things that you need to be better at. I’ll really help you do that. Then I do it. I’m constantly talking to you. I’m constantly helping you. People then are very quickly like, “Yes, actually Caffé Nero do what they said. This is what they told me in the interview.” Then you continue that for your career. That’s the hearts and minds piece. We do what we said at the initial stage. Then continue to do it for all the right reasons. For me, leadership is absolutely that.

{audio:0:29:54} There’s a big part of it as well which is, and it depends where you work, I think there’s a thing about vulnerability. There’s a willingness, particularly now for people to go, “Do you know what? We’re in a team, I’m only human, I have not got all of the answers. There’s this particular thing that we need to do and, guys, we’ve really got to get around the table and work this out together. I’ve not got it all down.” Now, I think in the particular moment, Coronavirus is the time for real strong leadership and stand up and going, “Guys, we’re going to be okay. We’re going to come through this.”

I think generally to be able to go; do you know what? Yes, I’m not great at that. I’m not great at that, guys, but together we can do this. I think that really helps people buy into you and make you approachable. Makes you the sort of leader that then they are not afraid to show their vulnerabilities because if I want to develop someone. If someone is on our team and they have potential, we also need to be able to have that that open discussion. I want them to be able to say to me, “This is where I need help.” I think if you’re the type of leader that just stands up on a podium and talks about strength and this is the way and I’m this. I don’t think that builds the trust that people can come to you to say, “Look, I’m really struggling with this.” I think you’ve had to have done it yourself. You have to lead by example to say, “It’s not my area of strength.” Once they’ve seen you do it, they will.

{audio:0:31:25} How do you cultivate that vulnerability as a leader?

{audio:0:31:30} For me, personally, I think it’s just come through life experience. As your life goes on, you will have gone through periods which are great, you’ll have gone through periods which aren’t so great, and you learn those life lessons. As you grow older, you just have that confidence to be able to say, I’m okay with sharing this because what’s the worst thing that could happen? I can’t put on an act at work. I’ve been there too long. I’ve been there 14 years and people would have seen through an act by now. True colors always shine through.

I think you have to have that confidence to say, this is a good thing for me to be open. If you can help people understand that there’s any kind of mask that they’re putting on to bring to work will eventually wear through. Just have the confidence to be able to do that from the beginning.

For me, it’s just been forged through personal experience and understanding what fundamentally matters at work is that I turn up. It’s a buzzword these days, it’s about authentic leadership. All it really means is be yourself. Go to work, be yourself, be comfortable. Somethings you will be fantastic, and somethings won’t be. If you’re working at the right place, then it’s fine, if you’re doing the right job then it’s fine.

{audio:0:33:03} The one thing I would share, probably the best book I’ve ever read on leadership was Zenger and Folkman, which was the Extraordinary Leader. It’s a thick book with a huge amount of studies. When you basically boil it down to the message that they found was that great leaders and great leadership is not the absence of weakness, it’s the presence of great strengths. They survey this, over tens of thousands of U.S. companies. They found that people have weaknesses. People who work for them can see those weaknesses. That’s fine. As long as those weaknesses aren’t what they call fatal flaws. As long as they’re not so bad. They categorized it into different areas.

The most important was character. If you’re going to be a great leader and we look for these great strengths. First and foremost, character. Can we trust you? Can we believe you? Do we like to be around you? Then they highlighted it as four subsections. One was being able to drive results. Do you have that desire to drive the business forward? Secondly, it was about building personal relationships. Are you the sort of person that people want to work with, and can they build that rapport with you? Thirdly, it was technical competence. Have you actually got the skills to do the job that you’re employed to do? Fourthly, it was leading strategic change. Now, different sorts of business will rely, and different levels of jobs will rely on those different characteristics at different times.

What I found at Caffé Nero in particular is two of those are if you can build personal relationships and drive results, then you will be successful. The technical competence. Hospitality isn’t an overly complex business to understand. It’s, do you like people? Do you like to give them a great product? It really is as simple as that. Leading strategic change, we are a one brand, it’s coffee, it’s high-quality food. It’s fantastic people. That’s the direction. It has been from the start. Leading strategic change isn’t key at all levels within the organization. It varies depending on the job that you do.

{audio:0:35:27} What has been your biggest challenge in leading a network of cafes, but also café managers?

{audio:0:35:36} I think the one thing that we always keep our focus on, and it was the same question that was being asked. When I joined the company and there were 23/25 areas. There are now 67. I’m talking the UK market. One of the questions back then 14 years ago was, “Can we keep the culture, this wonderful family feel of togetherness now that there are 235 stores?” Now, we’re at 1,100 and people are still saying, can we keep the culture together?

For me, it’s absolutely you can. If you go back right to the beginning and ensure that you’re constantly bringing the right people into the business. As they go through the ranks and become the store managers and become the area managers, it doesn’t matter whether you’ve got five areas or whether you’ve got 505 areas. As long as each of those teams are run within the same cultural values that they always have been. The scale of it doesn’t really matter. It’s about how you bring those people through, fundamentally understanding that if I’m the area manager and I’m running Nottingham or Manchester or if I’m within London, that this piece that I own, this piece that I’m responsible for, I really cultivate that culture. I really work hard on it to ensure that everybody continues to feel those values. Then there’s no reason for it to break. You have to keep a constant eye on that.

Secondary, it’s ensuring that area managers are skilled in situational leadership and that they understand as they’ve come through the ranks that they’re going to have ten store managers who will all be different in their personalities. Difference in their levels of experience, a difference in their personalities. Therefore, they need different types of leadership. The area managers are mainly quite new to it themselves. It’s just understanding that some people, they often just need an arm around and saying well done, great job, keep going. That’s all they need. Other people really need to sit down and go through the numbers and feel that they’re being guided in the right way as regard the P&L and the margin and the sales. It’s understanding that.

{audio:0:37:48} Can we take a step back? You clearly mentioned the growth of Caffé Nero over the last 15 to 20 years now. What has been the growth strategy at the core for the last decade?

{audio:0:38:00} As I say, when I joined, it was only in the UK. We’ve been consistently growing 30 to 35 stores a year. For a while, that was only in the UK. We have a wonderful network of people across the country that are constantly looking for new sites for us. We have a CFO and a property team in the UK who do not open stores unless they’ve actually been to see them themselves. The level of knowledge of the geography within the UK is second to none. We have an incredibly high strike rate of success in picking sites. We do firmly believe that by running the store right, that Caffé Nero is worth walking slightly further for.

We’ve been very good at avoiding the incredibly high rents that some of our competitors have paid to get the prime sites and that’s been really well done within the business. That’s really protected us, particularly in times such as this. There hasn’t been a specific ok, ‘’this year we’re going to expand into North Wales’’. It’s as great sites come along, then we will take that fantastic site, as long as there’s the right level of population. The competition, if it’s overly saturated with coffee shops or there’s already too many. If there’s a Caffé Nero there already, obviously, all of those things we take into consideration. Of course, then there’s been the international expansion which has happened over the last few years, as well. We’re now into 11 countries in total.

{audio:0:39:53} How do you as a company look at an optimal café location?

{audio:0:40:00} Obviously, there’s demographics and there’s the business model. Demographics, we tend to look at places where there’s the minimum level of population. You do need a certain level. If you’re going into market towns that are less than 20,000 people, that may not be good enough to sustain. If you are at the lower end of that and they’re already saturated with coffee shops, then that may not be a good idea to go there. There’s the actual business model itself. Demographics, we have found that over the years that we’ve been successful in a huge range of locations. You will see us in market towns, you will see us in the industrial’s towns, in the north, you will find us in transport hubs in the airports. There isn’t really a sector that we have found that we haven’t been successful in.

{audio:0:41:04} Let’s say you open a café in a large market town, 50,000 people, how do you approach organizing your team around that new opening of a café?

{audio:0:41:15} We have an opening’s team that’s based in the UK, so once the site has been chosen and the deal has been done. Then the opening’s team will organize the period between the signature and the café opening themselves. In conjunction with the operation’s team. During that process, the operations’ team, the area manager who the store is going to go through, they will take control of building a team. Hopefully, what would normally happen is, if you think the philosophy of minimizing risk.

If we’re going to open in a new town that we’ve not been to before, they may not know Caffé Nero too well. Obviously, we’re a reasonably well-known brand, but we may be completely new to that town. It would be very risky to recruit a store manager for that location. We will always look to promote an already existing store manager into the new opening. They’ll move from one store to another. Then within the store they’ll move from, we will promote that person, their number two. The area team will therefore build the store team, the area manager will build the store team. They’ll get the store manager, the assistant manager, they’ll build what we call the four in store, manager, the assistant manager, and two shift leaders. Then baristas. That’s the minimum management structure we want in each team.

The opening’s team will work with the builders, suppliers to get the store ready for opening. The opening’s team will be there ensuring that the building is meeting schedule. We’ll make sure that we get the products delivered in at the right time, so that we can do the in-store training. Often, we will train a team outside of that store so that they’re ready to go from day one of opening. If we were to open a new store, we may well train the team within a ten-mile radius within the nearest stores. It’s easy if you’re in the city center, less easy if you’re expanding into a market town which isn’t too close to anywhere else, which obviously we’ve done over the years. That’s slightly more difficult because you’re often trying to do the training in the week before you open, which is perfectly doable, but what you don’t open with is a team of fully-trained people, which is much easier to do if you’re in a city center.

{audio:0:43:46} How do you set goals or drive competitiveness or that strive to improve at the frontline staff, the baristas for example in the coffee shop?

{audio:0:44:00} Obviously, we have out company budgets, each store will have its financial budget for the year. It will have a weekly sales budget.

{audio:0:44:12} If I’m a barista, clearly I know the culture, I know the brand, I probably naturally like dealing with people and naturally smiley. Are the goals that you set me to improve myself and progress, is it purely the career plan or do you have internal targets that you really look for, for lower paid staff?

{audio:0:44:34} I can answer this from two different angles. One is my experience in the UK and also in the U.S. Yes, in the UK, certainly before I moved to move to the U.S., we were working toward being able to measure and incentivize each barista based on their own levels of selling up, as they work through the queue. We can work out the transaction value of each transaction each barista does because they’re all logged on with their own name on the till.

For instance, if we have one barista whose average transaction value is £4.50, someone else is £5.50 in the same store, obviously one person may be more successful at recommending products to customers as another person. Then we can help them move on. Before I moved to the U.S., there was a lot of work being done in how we measure that and incentivize it on a store-by-store and a person-by-person basis.

Prior to that, we’d always done it on a store-by-store basis. We’ll run internal competitions that will say, for the summer, we’ve got the ice drink range, we’re going to have area prizes. It’s the store that increases its sales on ice drinks more than last year. The highest performer in the area will get X prize to be divvied up amongst the team. Which is pretty much the route that we’re using in the U.S. at the moment because the technology platforms, we tend to put them into the UK first because that’s really the mothership of the company and then it flows out to other international territories afterwards. We can’t do that at the moment in the U.S. We’re really following what we used to do in the UK.

What we find to be perfectly honest with you is when you do those across an area, they have mixed success because some managers 100 percent get behind. They’re often the guys who are more motivated by numbers, they’re more motivated by competition because the manager is, it then flows into the team. There are some managers who are like, “That doesn’t really float my boat. A competition doesn’t. I’m going to do my best. The ice drinks are going to be there. I’m going to merchandise them; I’m going to sell them up. It’s not the competition that’s doing it for me. I just do it because I want my café to look fantastic.” You get this mixed response, mixed buy in.

I think as an operator, if you know that if you work really hard and keep pushing, if you get 80 percent buy in, that’s probably a good result. It’s naïve to think you’ll ever have 700 cafes across the country with every single barista every day going, “I’m really striving for this incentive.”

{audio:0:47:27} Yes, that’s the dream. It doesn’t work that way.

{audio:0:47:32} Paul, I want to fast-forward to today and the chaos with Coronavirus, what has been the impact on Caffé Nero through February/March/and to April?

{audio:0:47:44} Yes, it’s been huge. At the moment, out of 1,100 cafes, we have 10 open and that’s in Sweden because Sweden on the Corona curve is behind everyone else.  We’re closed across the UK. We’re closed in the U.S., so it has been huge. We have virtually zero revenue.

The vast majority of our teams are furloughed. For a company like ours that I’ve just explained the culture of, it’s been a very emotional thing, to close cafes down, or temporarily close them down, to furlough team members. That’s been huge. It’s a huge emotional journey.

Obviously, at the moment, the huge focus has been on, as all hospitality business, is to conserve cash, to ensure that as a brand, we come through this, as we will. They’ll be many brands who will really struggle to be able to do that because they’re not strong brands going into it and they were struggling before. We’ve already seen casualties. Conservation of cash is absolutely key.

Secondly, what’s really key to us now is to keep communicating with our teams whilst they may be on furlough and not working at the moment. We are continuing to communicate with them on a weekly basis. Each of our area managers has setup a zoom call with all of their teams, including their baristas, so that they can keep in touch with us. Ensure that touch point with Caffé Nero continues because the idea of it is obviously to come out as strong as we’re moving into it and for people not to – they may well find another part-time job in retail whilst obviously supermarkets are looking for people. The idea is just to continue to keep in contact.

{audio:0:49:48} How did you navigate those emotional and difficult conversations and furlough employees during this Coronavirus?

{audio:0:49:54} Not only has it been my and the company’s long held stance that you have to be transparent with people. You have to be really honest with people. You also have to truly do what’s right for them and the business and to get that balance.

In the U.S., we had almost two weeks of take-away only sales, which didn’t really happen in the UK. The closure came almost immediately after going take-away. We had more of an elongated process. Then the area managers held conversations with the store managers and the baristas to explain number one, the process and also financially what that meant for each of the baristas and the teams. We setup a helpline so that everybody who was furloughed can use it.

In the U.S., employees have to register for unemployment. Whilst they’re still employees, they technically have to register for unemployment. We setup a helpline for every single barista to be able to contact us if they were having problems with the government website. It wasn’t a matter of, you’re furloughed, see you in a couple of months, you need to go off and do that. We made sure that we were there for them, just to say, look, any questions, please come back to us, we will help you through this because we’ve navigated the site ourselves, so make sure that we can help.

{audio:0:51:26} How did you personally deal with this hugely stressful moment? Unprecedented time, closing all of your stores. I don’t think it’s ever happened before. How did you personally deal with that?

{audio:0:51:38} Particularly, working in the U.S. while my family is here in the UK, I’m over there sacrificing quite a bit of personal family time to help build the business and move the brand forward in the U.S. To find myself boarding a plane to come home with the cafes shut was incredibly emotional. Yes, very difficult.

I think the way I’ve dealt with it is fact that from an emotional point of view and many people will be dealing with this in the same way, for Coronavirus as a whole, is emotionally to take it one day at a time. Since everything was so fluid and everything was moving so quickly, you’re literally dealing with what’s in front of your today. Tomorrow, it might change. The other side of it is, we’re absolutely confident that going into this, we were a strong brand going into it. We’ll be a strong brand coming out of it. It is the first time we’ve had to close any stores in 23 years. We will come through it. We got through the 2008 financial crash. We found that as people cut out lots of luxuries from their life, we found out that many people just said, “If I can’t have a cup of coffee, then what’s the point? I’m going to keep having my coffee.”

{audio:0:53:04} There’s that. My view that hopefully when we come through this, people will have that, well, there’s lots of things we’ve had to sacrifice, the holidays are gone, this is gone. I’m going to get back in Caffé Nero and have a coffee. Or whether it’s Starbucks or wherever they go, I think that coffee is still an important affordable luxury. That’s what I’m hoping for. Humans are a sociable species, we need to be amongst each other, we need to be close to each other. I know this is a temporary thing. We can all second guess how we’re all going to react when things go back to normality. I think it will be a staged approach, obviously. We’ll probably reopen as take-away only. They’ll still be social distancing and then it will slowly, gradually get back to normal.

Caffé Nero: Scaling a Coffee Chain

Differentiated offer versus Starbucks and Costa Coffee

How Caffé Nero have scaled the chain while maintaining the core culture

How to motivate frontline staff in a coffee shop

Learning and development career plans for employees at all levels at Caffé Nero

Challenges meeting rent repayments and deep problems with upward only rent reviews

Caffé Nero: Scaling a Coffee Chain

Current Chief Operating Officer at Caffe Nero

inpractise.com/articles/caffe-nero-coffee-chain

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Executive Bio

Paul Morgan

Current Chief Operating Officer at Caffe Nero

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Caffé Nero: Scaling a Coffee Chain(April 10, 2020)

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