Caffé Nero: Scaling a Coffee Chain | In Practise

Caffé Nero: Scaling a Coffee Chain

Current Chief Operating Officer at Caffe Nero

Learning outcomes

  • 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
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Executive Bio

Paul Morgan

Current Chief Operating Officer at Caffe Nero

Paul has spent 30 years in the hospitality industry running both pubs and restaurants. He spent 13 years running pubs for WD&B, now Marston’s Pubs in the UK, where he worked his way up from area to regional manager. In 2006, Paul joined Caffe Nero, the third largest coffee chain with over 1,000 shops across Europe and the US, as a regional manager. He is now the Chief Operating Officer where is currently responsible for rolling out the chain in the US. Read more

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Paul, can you provide some context to when you joined Caffé Nero in 2006?

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.

How is Caffé Nero really differentiated from the larger players in the market like Starbucks or Costa Coffee?

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.

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.

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?

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.

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.

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.

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.

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.

How do you look for those sunny smiley people, especially for those front-line barista jobs? How do you look for that character?

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.

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?

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.

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Caffé Nero: Scaling a Coffee Chain

April 10, 2020

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