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Coffee Store Franchises
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Industry Research (/ibisworld) > Coffee Store
Franchises
Last Updated: Sep 29, 2020
By: Gavin Ross
Questions about IBISWORLD: Victoria Barankin
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 Covid-19 Update
IBISWorld's analysts constantly monitor the industry impacts of current
events in real-time – here is an update of how this industry is likely to be
impacted as a result of the global COVID-19 pandemic:
· Coffee Store Franchises industry revenue is projected to fall considerably
in 2020 due to declining economic sentiment and the various public
mandates that have attempted to help curb the spread of COVID-19
(coronavirus). These executive orders have limited industry operators' ability
to render certain services. For more detail, see the Regulation and Policy
chapter.
· Since more consumers have been confined to their households due to the
pervasive social and economic restrictions, more coffee drinkers are
expected to purchase home brewing systems or readymade coffee drinks
from grocery stores. This is anticipated to further reduce demand for
industry services.
· Franchises that efficiently and effectively implement mobile ordering and
delivery services are more likely to retain customer demand. Additionally,
establishments outfitted with drive-throughs are expected to fare better
amid the world health crisis.
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Note: The content in this report is currently being updated to reflect the
trends outlined above.
Industry at a Glance
K E Y S TAT I S T I C S
R
8,809 $ million
REVENUE
CAGR:
2005 - 2020
PROJECTED:
2020 - 2026
2.45 %
4.54 %
P
352 $ million
PROFIT
CAGR:
2005 - 2020
-0.50 %
P
4.00 %
PROFIT MARGIN
CAGR:
2005 - 2020
-2.88 %
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I
Coffee Store Franchises
2,974 $ million
INDUSTRY GROSS PRODUCT
CAGR:
2005 - 2020
PROJECTED:
2020 - 2026
2.22 %
4.09 %
N
12,458 Units
NUMBER OF ESTABLISHMENTS
CAGR:
2005 - 2020
PROJECTED:
2020 - 2026
2.28 %
2.51 %
N
9,717 Units
NUMBER OF ENTERPRISES
CAGR:
2005 - 2020
PROJECTED:
2020 - 2026
2.10 %
2.39 %
E
134,080 Units
EMPLOYMENT
CAGR:
2005 - 2020
PROJECTED:
2020 - 2026
2.51 %
3.37 %
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T
Coffee Store Franchises
2,304 $ million
TOTAL WAGES
CAGR:
2005 - 2020
PROJECTED:
2020 - 2026
2.75 %
3.61 %
C
12,305 $ billion
CONSUMER SPENDING
CAGR:
2005 - 2020
PROJECTED:
2020 - 2026
1.34 %
3.61 %
Figures have been adjusted for inflation and are presented in 2020 currency.
EXECUTIVE SUMMARY
For most of the five-year period to 2020, the Coffee Store Franchises industry
has experienced robust growth as the franchise model continued to be a
popular method for large chains to expand its company footprint with
relatively low capital investment. The largest industry player, Dunkin' Brands
Group Inc. (Dunkin'), has added more than 1,500 franchises to its network
during the current period, expanding into underrepresented regions relative
to its traditional stronghold in the Northeast. Although rising consumer
spending and improving economic conditions encouraged industry revenue
growth during most of the period, the COVID-19 (coronavirus) pandemic and
accompanying public mandates limiting public activity are expected stifle
industry revenue in 2020. Over the five years to 2020, IBISWorld expects
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industry revenue to decline an annualized 2.4% to $8.8 billion, including an
estimated fall of 24.1% in 2020 alone. New health and safety protocols and
constrained supply chains are anticipated to hamper near-term profitability.
The industry is highly concentrated; Dunkin' has nearly 10,000 stores in the
United States alone, which are entirely franchised and expected to account
for 84.6% of total industry revenue in 2020. Therefore, the franchise's
performance is highly correlated with that of the overall industry. The total
number of coffee store franchises has been boosted by Canada-based Tim
Hortons Inc.'s movement into the United States, where it now has nearly 800
franchise locations. While there are numerous small coffee store franchises,
they struggle to compete with the brand recognition of Dunkin' or Starbucks
Corporation, which together dominate coffee sales at the retail level. Coffee
store franchises are becoming increasingly concentrated in the hands of
fewer owners, as large, well-capitalized franchisee networks that own
hundreds of stores play an expanding role.
Over the five years to 2025, the Coffee Store Franchises industry is expected
to rebound and exhibit strong growth as economic conditions improve,
public activity resumes and consumers return to frequenting industry
establishments. Additionally, demand for specialty drinks, which are not
easily prepared in one's home or require special equipment to replicate, is
expected to perpetuate. Consequently, industry operators are expected to
continue employing specialized labor and equipment to meet consumer
preferences. Over the five years to 2025, industry revenue is forecast to grow
an annualized 4.8% to $11.1 billion.
CURRENT PERFORMANCE
The Coffee Store Franchises industry has performed well over most of the
five years to 2020 as the franchise model continues to be a proven method
for major chains to expand their footprint in the United States. Industry
revenue has also been supported by rising per capita coffee consumption in
the US. While heightened consumer spending and disposable income have
boosted the industry, many coffee drinkers also perceive the beverage as a
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dietary staple for which they have inelastic demand. As a result, the industry
continues to thrive even during economic uncertainty. Although consumers
may normally continue to frequent industry establishments during adverse
economic conditions, the recent COVID-19 (coronavirus) pandemic,
economic turndown and imposing public mandates restricting industryrelevant activities are expected to materially affect industry revenue in 2020.
Franchises with greater support from their parent company are better
expected to overcome the challenges which lay ahead. Nonetheless,
operators continue to seek new ways to draw in consumers through
promotions and convenience amplifiers.
Purchasing coffee has become more convenient than ever before, with many
operators giving consumers the options to order ahead on mobile apps or
through smart kiosks in the store. Additionally, a growing number of
establishments have developed drive-through and delivery services.
Locations outfitted with drive-through are expected to significantly outpace
those without the extension amid the world health crisis as many stores
prohibit in-store entry. Beyond enhancing efficiencies, operators further seek
to incentivize a loyal customer base by offering reward programs and special
deals for customers using their mobile apps. These trends have been wellreceived by consumers and particularly important in retaining sales amid the
coronavirus pandemic. As a result of the anticipated decline of 24.1% in 2020
alone stemming from recently dismal market conditions, industry revenue is
expected to fall an annualized 2.4% to $8.8 billion over the five years to 2020.
BREAKFAST BOOSTS SALES
The industry has benefited from greater consumer spending on breakfast
goods over the past five years. The breakfast segment has been a bright
spot in an otherwise slow-growing food services sector over the five years
since the recession, as growth in the lunch and dinner segments has
stagnated. However, coffee store operators have been forced to contend
with increased competition from fast food operators, such as McDonald's
Corporation and Burger King Holdings Inc., which recognize that serving
specialty coffee during breakfast is a key way of drawing customers in. For
this reason, coffee franchises have added a greater variety of food items,
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such as breakfast sandwiches, wraps and fruit, to menus to complement
coffee offerings. Major industry operator Dunkin' Brands Group Inc. (Dunkin'
Brands) reported that over 60.0% of total food orders at its various
establishments occurred before 11:00 a.m. In response, the company has
launched a series of value offers aimed to improve systemwide sales in the
mid to late afternoon.
CONSOLIDATION INCREASES
The Coffee Store Franchises industry is dominated by Dunkin' (formerly
Dunkin' Donuts), which belongs to Dunkin' Brands and holds an estimated
84.6% market share in 2020. For this reason, Dunkin's performance correlates
strongly with that of the broader industry. Over the past five years, Dunkin'
has opened hundreds of new stores and is increasingly entering states
where it is underrepresented since it has tapped out growth in the
concentrated northeastern territory. Comparatively, smaller franchises have
experienced slow growth or even decline due to heavy competition from
large, national coffee retailers including Starbucks Corporation and Dunkin'.
Overall, the number of industry establishments is estimated to rise an
annualized 0.5% to 12,458 locations over the five years to 2020.
One of the most noticeable trends over the past five years has been the
increased role of large franchise networks. Franchises have traditionally been
the domain of small family operations that run their stores as family
businesses. However, franchising has become increasingly sophisticated and
there are now several large multiunit franchise networks that own hundreds
of franchises and are buying up smaller networks. Unlike small operators,
these large players can open many new stores quickly, translating to higher
franchise fees. In line with this consolidation trend, the cost of franchises has
increased, with some brands demanding franchise fees over $100,000 and
requiring franchisees to invest in excess of $1.0 million to open a new store.
The number of new franchise openings is expected to slow down
considerably in the short term given the currently uncertain economic and
social environment.
WAGES AND PROFIT
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Wages and revenue grew at a similar rate for most of the current period.
However, as the industry encounters significant challenges related to the
coronavirus in 2020, revenue is expected to decline more rapidly than wages
as the industry's labor force is still integral to fulfilling orders. As wages are
expected to absorb a larger share of revenue in 2020, average industry profit
is expected to fall. IBISWorld estimated industry profit, measured as earnings
before interest and taxes, to account for 4.0% of revenue in 2020, down from
6.7% in 2015. Over the five years to 2020, wages are expected to decline an
annualized 0.7% to $2.3 billion. This is playing out amid the rapid automation
transformation currently occurring. Many industry establishments are
equipped with smart kiosks and permit customers to order and pay for
drinks without speaking to an employee. Additionally, the number of mobile
orders has risen drastically as operators are creating loyalty incentive
programs through their mobile apps. Mobile ordering trends are expected to
heighten in 2020 to promote efficiency. Nonetheless, the number of industry
employees is expected to decrease an annualized 0.7% to 134,080 workers
over the five years to 2020. Many of these employees reside in states that
have recently passed higher minimum wage laws, further increasing wage
costs.
Several factors influence profit growth. The world price of coffee is
anticipated to decline an annualized 3.5% during the period, lowering
purchase costs for operators. Moreover, demand for specialty drinks from
consumers continues to heighten. From cold brew to matcha lattes,
consumers have come to prefer specialty drinks that are not as easy to make
in one's own home. Industry operators with the workforce and equipment
suited to match such consumer trends are able to expand their profit.
FUTURE OUTLOOK
The Coffee Store Franchises industry is expected to return to growth over
the five years to 2025. Consumer spending is expected to grow as people
increase their expenditure on convenient but affordable food products, one
of the industry's specializations. The two largest coffee store franchises in
the United States, Dunkin' Brands Group Inc. (Dunkin' Brands) and Tim
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Hortons Inc. (Tim Hortons), have aggressive growth plans set for the next five
years and a long list of parties applying to open new franchises in
underrepresented states such as California. As a result, industry revenue is
projected to rise at an annualized rate of 4.8% to reach $11.1 billion during the
outlook period.
DEMAND TRENDS
For many coffee drinkers, the beverage represents a dietary staple. These
consumers exhibit inelastic demand for industry goods and are likely to
continue to spend at industry establishments during times of economic
uncertainty. However, even for the devout coffee consumer, several broad
macroeconomic trends may moderate demand. Evident from the recent
shock experienced by industry operators in 2020. The Consumer Confidence
Index is expected to rise at an annualized rate of 4.0% over the next five
years. This index measures individuals' perceptions of the general economy
and their financial outlook. As consumer confidence rises, individuals are
more likely to spend on nonessential expenditures, including store-bought
coffee. Additionally, growing consumer confidence is expected to be
accompanied by a declining unemployment rate, granting many individuals
with greater purchasing power. These trends are likely to lift consumer
demand and support overall industry growth.
Another trend that poses a risk to operators is the business practice of
providing coffee to employees for free. A growing number of individuals are
anticipated to work in shared office space facilities that are often equipped
with their own coffee bars. The number of businesses able to provide coffee
shop services to their employees increases in line with corporate profit,
which is expected to grow an annualized 10.4% over the next five years.
Individuals are less likely to pay for specialty drinks at industry
establishments if they are able to receive them for free at their place of work.
Whether workforces return to offices remains to be seen and hinges on the
defeat of the COVID-19 (coronavirus) pandemic.
D U N K I N ' B R A N D S A N D T I M H O RTO N S EXPA N D
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The industry's primary source of establishment growth over the next five
years will come from the major coffee store chains expanding into
underrepresented states. For the Dunkin' segment of Dunkin' Brands, major
growth markets include Texas, Colorado and California, which currently have
very few per capita stores. Dunkin's first stand-alone restaurants opened in
California in 2014 and the company already has franchise agreements to
open nearly 200 stores in the state by 2023. Dunkin' shuttered its dozen
California locations in the early 2000s as it pursued international expansion.
However, domestic expansion is now a major priority for the company and it
plans to partner with trusted existing franchisers. In 2015, the company
announced plans to open 1,000 stores in California alone, indicating the
possibilities for growth outside its traditional Northeast stronghold. In 2016,
the company opened nearly 400 restaurants in the United States. While
service has slowed as a result of the expansion, the company plans to
continue amid increasing competition from Starbucks Corporation and other
well-established brands.
Meanwhile, Tim Hortons is focused on building brand awareness in the
United States, where it is relatively unknown. The US fast food market is
crowded and the most competitive in the world; however, Tim Hortons
expects to add a significant number of stores throughout the country over
the five years to 2025. The company's growth in Canada, where it dominates
the Coffee and Snack Shops industry (IBISWorld Report 72221bCA), has
begun to slow, so the US market is a major priority for the chain. Overall, the
number of industry establishments is projected to rise at an annualized rate
of 2.6% to 14,166 locations over the next five years.
PROFITABILITY
Industry profitability is expected to improve over the next five years as sales
volumes increase and consumers resume indulging on high-priced premium
items. Larger operators are implementing several initiatives to boost profit,
such as using technology to reduce wage costs. However, as industry activity
is anticipated to rise given a reopening of the domestic economy, industry
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operators are expected to rehire workers to meet heightened demand. Over
the five years to 2025, IBISWorld projects industry wages to increase an
annualized 3.8% to reach $2.8 billion.
Rising wage costs are anticipated to result in certain operators raising prices,
thus losing some ground to quick-service competitors in the area of value
offerings. As many urban areas are increasing the minimum wage, operators
are projected to develop means to relieve the pressure that increased wages
will potentially impose on overall earnings. Many operators will simply
choose to employ less full-time staff to reduce labor costs. Operators will
also attempt to boost profit by enticing customers to spend on highermargin products when visiting industry establishments. The world price of
coffee is unpredictable, but unlikely to decline below its current level due to
voracious global demand for coffee. The intense internal competition from
other coffee establishments may constrain the ability of franchises to raise
beverage prices, weighing on industry profitability over the next five years.
Nevertheless, IBISWorld expects industry profit to rebound from its current
lows amid restored demand for industry products and services.
INDUSTRY DEFINITION
This industry is composed of franchise establishments that prepare and
serve coffee. Reports in our Business Franchise collection focus solely on the
operation of franchised outlets and exclude nonfranchise data. They show
the total number of franchise outlets, total franchise revenue and the
average profit margin earned by franchisees. Our reports also highlight the
largest franchisors by market share.
I N D U S T R Y I M PA C T

POSITIVE IMPACT
Globalization Level
low - steady
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Coffee Store Franchises
MIXED IMPACT
Life Cycle Stage
mature
Revenue Volatility Level
medium
Capital Intensity Level
medium
Regulation Level
medium - increasing
Technology Change Level
medium

NEGATIVE IMPACT
Industry Assistance Level
low - steady
Concentration Level
high
Barriers To Entry Level
low - steady
Competition Level
high - increasing
S W O T A N A LY S I S
S
STRENGTHS
Low Imports
Low Customer Class Concentration
W
WEAKNESSES
Low & Steady Barriers to Entry
Low & Steady Level of Assistance
High Competition
Low Profit vs. Sector Average
High Product/Service Concentration
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High Capital Requirements
O
OPPORTUNITIES
High Revenue Growth (2020-2025)
Healthy eating index
T
THREATS
Low Revenue Growth (2005-2020)
Low Revenue Growth (2015-2020)
Low Outlier Growth
Low Performance Drivers
World price of coffee
I N D U S T R Y L I F E C YC L E
Industry value added growth exceeds the overall economy
Industry operators are increasing their range of products
There is wholehearted market acceptance of industry products
The Coffee Store Franchises industry is in the mature stage of its economic
life cycle. The industry is characterized by steady long-run growth,
wholehearted market acceptance and rising market saturation. Industry
products and services are established; however, beverages and food items
are subject to change based on consumer preferences and seasonal trends.
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Over the five years to 2020, the industry has outpaced the overall food sector
as coffee items remain a popular choice among various population
demographics.
Industry value added (IVA), which is used to measure an industry's
contribution to the overall economy, is projected to grow at an annualized
rate of 0.8% over the 10 years to 2025. This slightly lags the expansion of the
overall economy, which is forecast to grow an annualized 1.9% during the 10year period. IVA growth has resembled that of the overall economy, which is
typical of a mature industry. However, industry establishments are
anticipated to be particularly affected by the COVID-19 (coronavirus)
pandemic which emerged midway through the 10-year period. Nevertheless,
IBISWorld expects IVA growth to slightly exceed that of GDP over the five
years to 2025.
Over the five years to 2020, new establishments have continued to enter the
market, largely under the Dunkin' brand. The brand, owned by Dunkin'
Brands Group Inc. (Dunkin' Brands), franchises all of its store locations. This
has enabled the company to open more than 1,500 stores over the past five
years and further intensify its brand recognition. Furthermore, Dunkin' Brands
continues to expand the products that it offers. This includes offering a
variety of coffee types, seasonal items and food products.
KEY TRENDS
As wages are expected to absorb a larger share of revenue in 2020,
average industry profit is expected to fall
Franchising has become increasingly sophisticated
The industry has benefited from greater consumer spending on
breakfast goods over the past five years
For many coffee drinkers, the beverage represents a dietary staple
The industry's primary source of establishment growth will come
from the major chains
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Industry profitability is expected to improve slightly as sales
volumes increase
Coffee store franchises are becoming increasingly concentrated in
the hands of fewer owners
Supply Chain
EXTERNAL DRIVERS
C
C
P
CONSUMER SPENDING
Factors that influence consumer spending affect the Coffee Store Franchises
industry. During a recession, the spike in unemployment generally leads to
declines in consumption. Conversely, when the economy is strong, consumers
are more likely to spend money on discretionary purchases such as drinks and
snacks at coffee shops. Consumer spending is expected to decline in 2020,
posing a potential threat to the industry.
CONSUMER CONFIDENCE INDEX
The Consumer Confidence Index measures consumers' perceptions of their
current and future financial prospects. Changes in consumer sentiment have a
significant effect on spending on discretionary items, including food and
beverages from quick-service restaurants such as coffee stores. When
consumer confidence is low, consumers are less likely to purchase highermargin items and tend to opt for lower-priced value products. The Consumer
Confidence Index is expected to decline in 2020.
PER CAPITA COFFEE CONSUMPTION
The industry benefits from growing coffee consumption. Specialization of
production has given American consumers ready access to a wide variety of
different coffee products, encouraging greater consumption. Per capita coffee
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consumption is expected to increase in 2020, providing a potential opportunity
for the industry.
W
H
WORLD PRICE OF COFFEE
Coffee beans are a major input for coffee stores and rising prices can harm
franchise operators' profit by making them unable to raise prices in the shortterm. The world price of coffee has risen sharply during much of the past
decade as growing global demand for coffee from countries, such as Russia,
Germany and China, has led to supply shortages. The world price of coffee is
expected to decline in 2020.
H E A LT H Y E AT I N G I N D E X
Consumers are becoming increasingly aware of issues associated with weight
and obesity, fatty food intake and food safety. The healthy eating index is
expected to increase in 2020. This can particularly hurt coffee stores with
menus dominated by items high in sugar, fat, salt or calories.
S U P P LY C H A I N
TIER 2 SUPPLIERS

Egg & Poultry
Wholesaling in the
US

(/ibisworld/reportkey/1/974)
(/ibisworld/reportkey/1/976)
Fish & Seafood
Wholesaling in the
US
Soft Drink, Baked
Goods & Other
Grocery
Wholesaling in the
US

(/ibisworld/reportkey/1/979)

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TIER 1 SUPPLIERS

Coffee Production
in the US

(/ibisworld/reportkey/1/272)
Frozen Food
Wholesaling in the
US

(/ibisworld/reportkey/1/972)
Dairy Wholesaling
in the US
(/ibisworld/reportkey/1/973)

COFFEE STORE FRANCHISES

TIER 1 BUYERS
Consumers in the
US
SIMILAR INDUSTRIES

Chain Restaurants
in the US

(/ibisworld/reportkey/1/1677)
Caterers in the US

(/ibisworld/reportkey/1/1682)
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Street Vendors in
the US
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
(/ibisworld/reportkey/1/1683)
Coffee & Snack
Shops in the US

(/ibisworld/reportkey/1/1973)
Fast Food
Restaurants in the
US
(/ibisworld/reportkey/1/1980)
R E L AT E D I N T E R N AT I O N A L I N D U S T R I E S

Cafes and Coffee
Shops in Australia

(/ibisworld/reportkey/61/2015)
Cafes, Bars & Other
Drinking
Establishments in
China

(/ibisworld/reportkey/86/941)
Juice & Smoothie
Bars in the UK

(/ibisworld/reportkey/44/6026)
Cafes & Coffee
Shops in the UK

(/ibisworld/reportkey/44/6242)
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Coffee & Snack
Shops in Canada
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
(/ibisworld/reportkey/124/1973)
Cafes and
Restaurants in New
Zealand
(/ibisworld/reportkey/64/720)
PRODUCTS & SERVICES
57.8 %
BEVERAGES
33.8 %
FOOD ITEMS
8.4 %
MERCHANDISE
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Operators in the Coffee Store Franchises industry retail a range of beverages,
food items and other merchandise. The product mix between different
franchises may differ considerably; however, the industry average is
weighted toward large coffee shop operators, such as Dunkin' Brands Group
Inc., due to the high level of market share concentration these operators
possess. The total value of each segment expanded considerably for most of
the five-year period to 2020; however, economic and business sentiment fell
markedly at the end of the period as the COVID-19 (coronavirus) outbreak
weighed tremendously on economic activity. Although the total value of
each segment is expected to decline substantially in 2020 due to falling
consumer spending and the implementation of various public wellness
policies, such as the closure of in-store dining, IBISWorld does not anticipate
the industry's product segmentation to deviate significantly from historic
levels.
BEVERAGES
In 2020, IBISWorld anticipated beverages to account for 57.8% of industry
revenue. Coffee is the primary product served in coffee stores and
comprises the greatest share of this segment. Industry operators provide a
breadth of coffee products to accommodate wide-ranging consumer
preferences. Coffee products are typically differentiated by style, taste,
strength, aroma and bean origin. Traditionally, industry players have mainly
served brewed coffee at a low price point and this product continues to
generate the majority of sales. However, over the past five years, specialty
coffee such as espresso-based drinks, siphoned coffee and pour over
filtered coffee have become increasingly popular. Operators that serve these
products can typically charge more for these requests, helping to achieve
wider profitability. Industry operators can also differentiate their business by
offering coffee that is brewed using various techniques and by employing
knowledgeable baristas to service customers. Additionally, coffee franchise
stores have attempted to enter niche markets by providing a wider range of
rarer blends, fair trade coffee and organic beans. As a result, premium
pricing has helped drive industry revenue; however, competition among
boutique coffee shops remains strong.
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Other beverages retailed at industry establishments include cold beverages,
such as iced and frozen coffee drinks and iced teas, and other hot
beverages, such as hot chocolate, lattes, cappuccinos, teas and chai-based
drinks. Franchises typically offer various types of products to appeal to a
range of consumer demographics and provide patrons with ample
alternatives to caffeinated drinks. Hot and cold drinks tend to be seasonal,
with warmer seasons creating stronger demand for chilled products and
constraining demand for hot beverages. Over the five years to 2020,
beverage sales have been pressured by rising food sales; however,
IBISWorld anticipates this segment to maintain its dominant share of
revenue.
FOOD ITEMS
IBISWorld estimates the Coffee Store Franchises industry to derive 33.8% of
its revenue from food sales in 2020. This segment consists of items such as
donuts, cookies, pastries, cookies, cakes, bagels and muffins. Additionally,
coffee shops may also sell yogurt, ice cream and meals, such as
sandwiches, wraps, salads and fruit. Franchise coffee stores typically
compete on the basis of speed of service and, therefore, items that require
significant preparation time are not generally served. Consumers that
frequent industry establishments may typically be constrained on time,
therefore, the speed at which these services are rendered can have a large
effect on consumer purchase decisions. Food items have grown as a
proportion of revenue over the past five years as businesses have increased
their range of food items to attract more customers and generate profit
through high-margin food products.
MERCHANDISE SALES
Other industry products include items such as packaged coffee beans or
grounds, coffee pods, drinkware, cups, utensils and even clothing. Over the
past five years, merchandise sales have risen as a proportion of revenue as
more companies have promoted brand-name items. While some consumers
may elect to purchase coffee pods to brew beverages at home, others have
opted to purchase reusable cups to cut on personal waste production.
Additionally, some industry establishments may render a drink in a reusable
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cup for less than the price of purchasing the beverage in a disposable cup.
These items are typically advertised as environmentally friendly and less
expensive over the long term, while serving as a promotional tool as well. In
2020, merchandise sales are expected to account for 8.4% of industry
revenue.
DEMAND DETERMINANTS
Demand for the Coffee Store Franchises industry is mainly driven by
overarching economic conditions, consumer sentiment and changes in
dietary preferences. Expectations regarding current and future financial and
economic conditions can have a substantial influence over industry revenue.
During periods of economic prosperity, consumers with more confidence
and greater disposable income are typically more inclined to purchase
products at coffee franchises, as they are better able to afford these
expenditures.
CONSUMER INCOME AND SPENDING
The primary driver of consumption of coffee products from franchise stores
is the level of per capita disposable income that consumers earn. Consumers
adjust purchase decisions depending on their current and expected financial
situation. Therefore, spending on discretionary purchases, such as dining out
and consuming store brewed coffee, has a positive relationship with per
capita disposable income. Furthermore, consumer spending is dictated by
general sentiment toward the presiding economic climate. As consumer
sentiment surrounding general economic conditions climb, they are more
likely to spend rather than allocating a greater proportion toward savings.
DEMOGRAPHICS
Changes in population demographics also influence industry demand.
Industry demand has been boosted by the baby-boomer generation, which
has had greater access to higher disposable income than ever before.
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Therefore, these consumers continue to eat at restaurants and purchase
coffee and other items from stores. Additionally, relative to other generations,
young adults between the ages of 18 and 30 are delaying marriage and
having children later. As a result, these consumers have higher incomes to
spend on discretionary products.
H E A LT H C O N S C I O U S N E S S
Rising concerns regarding healthy eating have affected coffee franchise
stores, which typically serve fast beverages and food products that are
relatively high in calories. Consumers are becoming increasingly conscious
of the amount of fat, oil and salt they are consuming and, therefore, industry
operators have attempted to respond through offering healthier items such
as salads, fruits and low-fat options. This is typically at odds with
convenience, which also drives demand for industry products. Notably, some
coffee store franchises have increased their offerings of plant-based food
items to attract a growing number of consumers with certain dietary
restrictions. For example, Dunkin' Brands Group Inc. (Dunkin' Brands) has
paired with Beyond Meat Inc. (Beyond Meat) to introduce plant-based
breakfast sandwiches.
EXOGENOUS SHOCKS
Exogenous shocks, such as the COVID-19 (coronavirus) pandemic and
imposing government regulations, can also have a substantial effect on
industry revenue growth. For instance, public regulations which curbed
indoor ordering and dining amid the coronavirus pandemic can severely
inhibit demand for industry products and services. Establishments that can
effectively service customers through drive-throughs or make other
reasonable accommodations are more likely to persevere through adverse
business conditions.
M A R K E T S E G M E N TAT I O N
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Consumers
​C
onsumers over the age of 55 34.9%
Consumers
​C
onsumers aged 3
Consumers
​C
onsumers aged under 25 8.5%
Consumers
​C
onsumers aged 25 to 34 14.6%
Consumers
​C
onsumers aged 45 to 54 20.6%
Since operators in the Coffee Store Franchises industry service a diverse
customer base, the industry's market segmentation has been broken down
based on the age of the consumer. According to 2018 data from the US
Census Bureau's Consumer Expenditure Survey (latest data available), the
average consumer spends 5.6% of their income on food and beverages away
from home. However, due to the contrasting financial situations experienced
by consumers in different age groups, certain populations are more likely to
spend at industry establishment.
Although industry revenue is anticipated to decline markedly in 2020 due to
the COVID-19 (coronavirus) pandemic and ensuing economic turndown,
consumers across all major markets are expected to limit discretionary
spending. Therefore, IBISWorld expects the major markets breakdown to not
deviate substantially from historical levels.
CONSUMERS AGED UNDER 25
Consumers under the age of 25 represent a limited market and are
estimated to account for only 8.5% of revenue for coffee store franchise
operators. As more seasonal and sweet products are released, these
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consumers increase their consumption of industry products. Over the five
years to 2020, this segment has declined as a share of industry revenue as
more individuals in this cohort enroll in colleges and universities. Although
this is a prime operating area for industry establishments, young adults have
increasingly purchased inexpensive personal coffee brewing systems to limit
cash outflows as they begin to accrue or start to pay off student loans.
Consumers in this age group typically have relatively low disposable income;
however, they have fewer expenses and more free time. Therefore, these
consumers are more likely to frequent coffee stores and purchase small
items, particularly as coffee becomes a study aid for many students.
Although this segment has declined marginally as a share of revenue, trends
exhibited by individuals in this age bracket will likely come to dominate
industry demand in the coming years as these consumers earn more income
and become more strapped for time. Therefore, insights into the preferences
and decisions of this major market will likely play a major role into the future
objectives of industry operators.
CONSUMERS AGED 25 TO 54
Consumers between the ages of 25 to 54 are expected to account for the
majority of industry revenue. In 2020, IBISWorld estimates consumers aged
25 to 34 to represent 14.6% of industry revenue, while consumers 35 to 54
represent an estimated 42.0% in 2020. Consumers in these age brackets
typically have the greatest disposable incomes and value convenience.
Therefore, these consumers are most likely to frequent franchise coffee
shops to pick up coffee beverages and quick food items due to their
comparatively lower amount of leisure time. Over the past five years,
consumers aged 25 to 54 have increased their coffee consumption and have
grown as a proportion of the US population, causing sales in this segment to
grow.
CONSUMERS AGED 55 AND ABOVE
Consumers over 55 are estimated to account for 34.9% of sales in 2020.
These consumers typically purchase less expensive items such as brewed
coffee and visit franchise stores to take advantage of relatively low prices for
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food items. Over the past five years, this segment has grown marginally as a
proportion of revenue. Although coffee consumption from this segment has
remained relatively flat, an aging US population has led the number of
consumers in this segment to grow, lifting revenue derived from this market
segment.
I N T E R N AT I O N A L T R A D E

IMPORTS
low and steady

EXPORTS
low and steady
As a retail industry, the Coffee Store Franchises industry does not involve in
any international trade. Several industry players have overseas operations
that generate revenue; however, this is not considered an import or export.
B U S I N E S S L O C AT I O N S
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​249
249
​37
37
​50
50
​25
25
​149
149
​187
187
​62
62
​25
25
​12
12
​125
125
​212
212
​1,595
1,595
​237
237
​473
473
​100
100
​511
511
​112
112
​224
224
​149
149
​75
75
​885
885
​361
361
​62
62
​125
125
​25
25
​187
187
​62
62
​162
162
​100
100
​187
187
​199
199
​262
262
​37
37
​336
336
​399
399
​262
262
​112
112
​1,084
1,084
​473
​249 473
249
​50
50
​137
137
​349
349
​37
37
​436
436
​262
262
​174
174
​685
685
​25
25
​50
50
​62
62
0
500
1000
1500
2000
The geographic distribution of the Coffee Store Franchises industry largely
reflects the overall distribution of the US population. Industry operators
typically start up in urban areas, where there is a relatively large population
to serve. In addition to population density, franchises also target areas with
greater disposable income. The geographic location of an industry
establishment plays a major role in its overall success.
SOUTHEAST
IBISWorld expects 25.0% of all industry establishments to be located in the
Southeast region in 2020. This concentration of coffee store franchises
reflects the region's 25.8% share of the US population. Florida is estimated to
contain 5.5% of industry locations, while 6.5% of the US population resides in
the state. Furthermore, North Carolina and Virginia are expected to comprise
3.2% and 2.7% of industry establishments, respectively. The Southeast has
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grown marginally as a proportion of revenue over the five years to 2020 due
to an expanding population and continued recognition of major brand name
franchise stores.
WEST
The West is estimated to account for 17.8% of coffee franchise stores, which
is in line with its 17.2% share of the US population in the area. The region is
dominated by California, which is estimated to comprise 12.8% of
establishments alone due to the large population and relatively high
incomes in the area. However, this region has experienced stronger
competition from boutique coffee stores and other chains that do not
franchise establishments.
MID-ATLANTIC
The Mid-Atlantic is estimated to account for 16.5% of establishments,
outpacing the 15.0% of the US population in the region. New York is the most
populous and concentrated state and is forecast to account for 7.1% of coffee
franchise stores alone. Additionally, Pennsylvania and New Jersey account
for an estimated 3.8% and 2.8% of establishments, respectively. This densely
populated region has a large professional work force that values
convenience and high disposable incomes. Therefore, this region contains a
notably higher share of industry establishments compared with its
population.
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Distribution of Establishments vs Population
40
Percentage
30
20
10
0
Southeast
West
Mid-Atlantic
Great Lakes
Southwest
Establishments
Plains
New England Rocky M
Population
Competitive Landscape
BASIS OF COMPETITION

HIGH competition

INCREASING competition
INTERNAL COMPETITION
Operators in the Coffee Store Franchises industry primarily compete on the
basis of location, price, assortment, consistency, convenience and quality of
rendered products and services. The majority of industry revenue is
generated through brewed coffee and consumers are generally pricesensitive for this product due to its availability in a variety of other coffee
stores, snack shops and restaurants. However, stores can win more business
through offering other products, such as donuts, sandwiches and pastries.
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Additionally, as consumer preferences change, coffee shops can respond by
offering new coffee flavors or food items. These include seasonal items, fair
trade coffee and organic coffee, among others.
Coffee store franchises also win business through marketing efforts. Dunkin'
Brands Group Inc. has been extremely successful in attracting customers
due to its widespread brand recognition that many consumers find nearly
synonymous with coffee. Many companies may also tailor marketing
campaigns to certain states or regions, using local sports teams, seasonal
trends and other recognizable brand names to further brand recognition.
Since the industry is highly competitive, operators must constantly introduce
new products or market more aggressively to attract new clientele.
EXTERNAL COMPETITION
External competition for coffee store franchise is very high, with the
industry's primary product available at a range of other establishments.
Consumers are able to purchase coffee from nonfranchise coffee stores,
restaurants, snack shops and grocery stores. Additionally, the industry
competes with stores that serve other beverages such as energy drinks and
sodas. Furthermore, franchise stores also need to compete with consumers
that are willing to make their own coffee at home, which acts as a substitute
when consumer incomes fall and conditions become more difficult. The low
entry price of home single cup brewing systems has made them widely
popular among households in recent years. These machines are expected to
continue making inroads into US households, particularly as consumers are
confined to their homes and seek to cut nonessential purchases amid the
COVID-19 (coronavirus) pandemic.
BARRIERS TO ENTRY

LOW barriers

STEADY barriers
FACTORS FOR INCREASED BARRIERS
FACTORS FOR DECREASED BARRIERS
Life Cycle Stage
mature
Globalization Level
low - steady
Industry Assistance Level
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low - steady
Concentration Level
high
Competition Level
high - increasing
Barriers to entry for the Coffee Store Franchises industry are low, though,
operators enter a highly competitive market place. Franchisors encourage
market entry by minimizing start-up costs related to establishing a franchise
and also by providing support in the form of marketing, technology, advisory
councils and training. Industry operators can also lease equipment, furniture
and fittings, which lowers initial capital expenses and borrowings for
potential players.
The most notable attraction of franchise operations rather than opening a
single-location store are the benefits that come with franchise ownership
which reduce barriers to entry and operating expenses. For example, Dunkin'
Brands Group Inc. claims to have a 94.0% brand awareness in the United
States as a result of continuous regional and national advertising and
marketing campaigns. Additionally, industry operators immediately benefit
from new technologies, such as mobile applications, gift cards and the ability
to find locations and recognize them as a known brand instantly. Many
franchise companies also provide advisory councils and forums to receive
feedback from franchisees. These councils and forums provide a framework
for improving common brand issues and targeting new promotions
collectively. Industry operators typically also receive training before opening
their store so they are fully aware of the potential pitfalls and how to
effectively run a coffee store.
LOCATION
However, despite assistance from franchisers, location provides a barrier for
many prospective entrants. Highly concentrated and popular markets, such
as the Mid-Atlantic region, are often reserved for existing franchisees, while
companies promote other areas where the brand would prefer to expand
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operations. Prospective entrants may also compete for top locations such as
those in high-profile areas such as malls and shopping centers, where
guaranteed foot traffic will ensure business.
M A R K E T S H A R E C O N C E N T R AT I O N

HIGH concentration
The Coffee Store Franchises industry is characterized as having a high level
of market share concentration. IBISWorld estimates the top four players in
the industry to account for 92.2% of revenue in 2020. The industry is
dominated by Dunkin' Brands Group Inc. (Dunkin'), which is the most
franchised coffee store in the United States. The company has expanded
aggressively over the five years to 2020 and is expected to continue doing so
over the five years to 2025, as it moves into underrepresented states.
The industry's concentration has increased over the past five years due to
rapid expansion of major chains, including Tim Hortons Inc., which has
expanded aggressively into the United States from its native Canada.
Additionally, the role of large franchise networks, which open hundreds of
locations under the same franchise, has grown over the past five years,
contributing to the industry's level of concentration. Franchises have
traditionally been the domain of small family operations that run their stores
as a family business. However, unlike small operators, larger franchise
networks can open lots of new stores quickly, which translates into higher
franchise fees for the franchise.
I N D U S T R Y G L O B A L I Z AT I O N

LOW globalization

STEADY globalization
Globalization is low in the Coffee Store Franchises industry. Although several
players have international operations and global brand recognition, industry
products and services are limited to the United States. Additionally, there are
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no major international brands operating in the domestic industry. The
industry is expected to remain predominantly domestic over the five years to
2025 as US brands continue to dominate the local market.
M A J O R P L AY E R S
Market Share for 2020
Dunkin’
​D
unkin’ Brands 84.6
OTHERS
​O
THERS 10.1%
Tim
​T
im Hortons 5.3%
2015 2016 2017 2018 2019 2020
D U N K I N’ B R A N D S G R O U P I N C .
MARKET SHARE: 84.6 %
REVENUE: 7,450 $ million
Headquartered in Canton, MA, Dunkin' Brands Group Inc. (Dunkin' Brands) is
an international donut, coffee and ice cream retailer that sells these products
under its Dunkin' (formerly Dunkin' Donuts) and Baskin-Robbins brands. The
company has been widely successful in its franchise business model. Since
opening the first Dunkin' location in 1950, the company has grown to operate
more than 21,000 points of distribution in more than 60 countries. Nearly
10,000 of these distribution points were Dunkin' franchises in the US in 2020.
Contrary to the company's name, the majority of store sales come from
beverages, with donuts accounting for less than 15.0% of a typical store's
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sales and coffee comprising just under two-thirds of sales. Dunkin's growth
has been fueled mainly by coffee; according to the company website, it sells
more than two billion cups of coffee each year. Baskin-Robbins was founded
in 1945 in Glendale, CA, and is one of the world's largest hard-serve ice
cream franchises, with an estimated 8,000 locations worldwide. In the United
States, Baskin-Robbins operates an estimated 2,600 outlets and develops
and sells a full range of frozen ice cream products. Dunkin' Brands is now a
publicly listed company, having been previously owned by a consortium of
private equity firms. In 2019 (latest data available), Dunkin' Brands reported
$1.4 billion in revenue and system-wide sales of $9.2 billion. The COVID-19
(coronavirus) pandemic and accompanying public policies aimed to curb the
spread of the virus have hampered company-wide performance throughout
2020.
Dunkin' Brands pursues an asset-light business model, with all of its retail
locations operating under franchise agreements. This has enabled the
company to open more than 3,000 Dunkin' locations over the 10 years to
2020. An estimated 85.0% of Dunkin's points of distribution are traditional
restaurants, comprising both standalone locations and those contained in
gas stations and convenience stores. In addition, the company has full- and
self-service kiosks in grocery stores, hospitals, airports, offices and other
locations with small retail footprints. The company reports more than 50.0%
of its restaurants to have drive-throughs. These locations have fared better
during the coronavirus pandemic as establishments with drive-throughs
have been better able to serve consumers while minimizing human contact.
FINANCIAL PERFORMANCE
Over the five years to 2020, Dunkin' Brands' US-specific sales are expected
to decline at an annualized rate of 0.4% to $7.5 billion. Aside from in 2020,
system-wide sales attributable to Dunkin' establishments grew each year
during the current period. However, the monumental disruption stemming
from the coronavirus in 2020 is expected to override all growth experienced
during the current period. Nevertheless, the addition of thousands of new
locations has contributed to the brand's recognition and sales growth. This
growth has been further bolstered by an increase in the average spending
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per customer at Dunkin' location, mainly due to premium-priced cold
beverages and differentiated sandwiches. Dunkin' has also heavily marketed
its afternoon offerings, resulting in higher sales of beverages and donuts
during this time slot. Coffee Store Franchises industry operators are
expected to bounce back from the initial shock of the coronavirus pandemic
by implementing new policies aimed at maximizing consumer and employee
safety. Additionally, Dunkin' Brands has waived up to one month of rental
payments and has permitted franchisees to defer two months of rental
payments to help store owners during this unprecedented period. The cash
outlays associated with establishing these policies and loss of business
related to store closures is expected to affect franchises' average profit. In
2020, operating margin, measured as earnings before interest and taxes, is
expected to account for 4.0% of company revenue.
YEAR
REVENUE
$ MILLION
GROWTH
% CHANGE
OPERATING INCOME
$ MILLION
GROWTH
% CHANGE
2015
7,595
2016
8,214
8
608
20
2017
8,459
3
651
7
2018
8,787
4
404
-48
2019
9,229
5
435
8
2020
7,450
-19
300
-31
509
*Estimates
REVENUE
10k
9k
8k
7k
2015
2016
2017
2018
2019
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REVENUE OPERATING INCOME
TIM HORTONS INC.
MARKET SHARE: 5.3 %
REVENUE: 467 $ million
Tim Hortons Inc. (Tim Hortons) is a Canada-based, fast-casual restaurant that
focuses on retailing coffee and donuts. The company was founded in 1964 in
Hamilton, Ontario, and is the largest player of its kind in Canada. Tim Hortons
caters to a broad range of consumer tastes, with a menu that includes
premium-blend coffee, hot and cold specialty drinks, including lattes,
cappuccinos and espresso-based drinks, teas and fruit smoothies. The
company has also rolled out an increasing number of food options, including
soups, sandwiches, wraps, yogurt and baked goods.
Tim Hortons opened its first US store in 1985 in Buffalo, NY, and expanded
rapidly through the 1990s by acquiring former locations of fast-food chains.
The company has made significant inroads into the US market over the past
five years and currently has just under 800 locations in the United States. Tim
Hortons owns and operates only a small number of company restaurants,
preferring to franchise the majority of its locations. The chain operates both
full-service restaurants and self-serve kiosks that offer a limited product
offering and may operate in offices, hospitals, colleges, airports and
convenience stores. The company's strategy is to use self-service kiosks
where existing full-service locations are at full capacity. The company has
also focused on developing its mobile ordering app to help streamline
processes to help avoid store congestion. A vertically integrated supply
chain supplies paper, dry goods, frozen baked goods and refrigerated
products to a majority of the franchise locations.
In December 2014, Tim Hortons and Burger King Holdings Inc. merged to
form Restaurant Brands International Inc. (RBI). The company is based in
Toronto, Ontario and a significant stake of the business is owned by 3G
Capital Partners Ltd. The combination of companies under RBI is expected to
significantly boost the company's market share in the coming years, as RBI is
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expected to continue to aggressively expand Tim Hortons worldwide.
According to RBI, the combined companies comprise over 27,000
restaurants in more than 100 countries. Nearly 5,000 of these locations are
specific to the Tim Hortons brand. Moving forward, the company aims to
expand internationally while defending its dominant position in Canada and
aggressively competing in the saturated US market. It plans on achieving this
strategy through significant menu overhauls, introducing premium products
and extending its brand reach in urban areas through nontraditional formats.
In 2019 (latest data available), RBI generated $5.4 billion in total revenue.
FINANCIAL PERFORMANCE
Over the five years to 2020, Tim Hortons' US franchise system-wide sales are
estimated to decline an annualized 5.8% to $465.6 million. Tim Hortons has
added over 300 franchises in the United States over the past five years and
the average check per customer visit has also increased. Tim Hortons is
focused on building brand awareness in the United States, since the coffee
market is saturated by industry giants, such as Starbucks Corporation and
Dunkin'. The US fast food market is crowded and the most competitive in the
world; however, Tim Hortons expects to expand its base in the United States
over the next five years. The company's growth has begun to slow in Canada,
where it dominates the coffee stores industry, so the United States is a major
priority for the chain. Industry-relevant operating income, measured as
earnings before interest and taxes, is expected to contract substantially in
2020 as industry operations are inhibited by the coronavirus pandemic.
YEAR
SALES
$ MILLION
GROWTH
% CHANGE
OPERATING INCOME
$ MILLION
GROWTH
% CHANGE
2015
629
2016
635
1
47
12
2017
724
14
56
19
2018
710
-2
33
-41
2019
694
-2
33
0
2020
466
-33
19
-43
42
*Estimates
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SALES
800
700
600
500
400
2015
2016
2017
2018
2019
2020
SALES OPERATING INCOME
Costs & Operations
COST STRUCTURE
Benchmarks for 2020
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dustry
sector
0
10
20
30
40
50
60
70
80
90
percentage of revenue
Profit
Wages
Purchases
Depreciation
Marketing
Rent
Utilities
Othe
2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020
Operators in the Coffee Store Franchises industry are subject to a range of
expenses that can vary greatly depending on the size, scale, location and
terms of the franchise agreement. Additionally, costs can vary markedly
depending on the type of service rendered by industry establishments.
Nonetheless, all industry establishments operate under franchise
agreements and benefit from the economies of scale passed down by the
parent company. Franchises that are part of a more expansive network may
gain from lower purchase and advertising costs; however, it may lead to
greater expenses in the form of franchise fees. The figures which follow are
averages for the entire Coffee Store Franchises industry in 2020.
PROFIT
Industry profit, measured as earnings before interest and taxes, is estimated
to account for 4.0% of industry revenue in 2020, down from 6.7% in 2015.
Operating profit varies between players depending on location, as stores in
high-profile locations typically attract more customers and, thus, maintain
stronger profitability. Despite high margin specialty drinks becoming
increasingly popular and the world price of coffee declining over the five
years to 2020, greater industry competition has tempered average industry
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profit. In 2020, profitability is expected to fall as operators are required to
purchase new equipment and establish new protocols to accommodate
patrons amid the COVID-19 (coronavirus) pandemic.
WAGES
Wages are estimated to account for 26.2% of industry revenue in 2020.
Wages comprise one of the industry's largest expenses since labor is
required throughout every industry process, including food preparation,
customer servicing and cleaning up. These costs include wages and
benefits, such as health insurance, workers' compensation and
unemployment insurance. As the number of industry establishments grew
over the five years to 2020, a larger labor force is necessary to conduct
industry operations. Stronger revenue growth and greater production
efficiencies have somewhat reduced labor dependency; however, wages'
share of revenue is expected to jump in 2020 as revenue declines at a faster
rate compared with wages. Nonetheless, as more states pass legislation
requiring higher minimum wages, this segment's share of revenue can be
expected to increase.
PURCHASES
Purchases represent the single largest expense with an estimated 44.1% of
industry revenue dedicated to the purchase of food and beverage items that
are sold in stores in 2020. Food and beverages are typically purchased
through wholesalers that have negotiated long-term contracts with regional
franchisees and, therefore, guarantee prompt delivery and high quality.
Fluctuations in the cost of food and coffee are also typically minimal for this
industry as contracts are negotiated on a long-term basis to ensure that
there are no disruptions to supply. This is essential as industry operators are
not able to quickly pass on costs to consumers as prices are set by
franchisers and the industry is highly price-competitive. As a result,
purchases have remained a steady share of revenue over the past five years.
DEPRECIATION
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Other industry costs include depreciation. Coffee stores require basic
commercial kitchen equipment, store fixtures and fittings, crockery and
cutlery as well as a variety of machinery for producing coffee. These items
are replaced frequently; however, over the past five years, industry operators
are increasingly renting equipment rather than owning it. As a result,
depreciation has remained a marginal share of revenue. In 2020, depreciation
is expected to account for 3.6% of industry revenue.
MARKETING
Often industry marketing costs are subsidized by franchisors. Franchisees
benefit from the national brand awareness of the franchisors' brand and
typically do not pay for wide-scale national media campaigns. Rather, they
rely on the franchisor to bolster brand awareness. However, on the regional
level operators do incur some marketing related expenses. In 2020, these
expenditures are expected to comprise 2.0% of industry revenue.
RENT
Rent expenses are estimated to account for 5.9% of industry revenue. Rent
costs are high for industry operators that choose to locate in high-density or
high-traffic areas with greater visibility. Operators serving urban populations
tend to have greater rent costs compare with rural counterparts.
UTILITIES
Utilities are expected to comprise 1.9% of revenue in 2020. These are the
costs associated with heating, cooling and powering industry
establishments. Utility costs may also vary by region and size of an
establishment. However, operators typically consume similar amounts of
electricity and water.
OTHER COSTS
Other costs include general administrative costs and insurance fees.
Additionally, franchisees incur royalty, licensing and franchise fees, which
they must pay to the franchisor. These fees vary depending on the franchisor
but are a requirement for all industry operators. In 2020, these costs are
expected to represent 12.3% of industry revenue.
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C A P I TA L I N T E N S I T Y

MEDIUM capital intensity
The Coffee Store Franchises industry is estimated to have a low-to-moderate
level of capital intensity. IBISWorld estimates that for every $1.00 spent on
wages, the average industry operator will spend $0.14 on capital outlays in
2020. The industry primarily depends on labor because of the need for
personal, face-to-face service and labor input in all areas of operation,
including order taking, serving, food and beverage preparation, acceptance
of deliveries, cleaning and management. The industry's overall spending on
labor is relatively low as most positions within coffee stores require little
training or skills and can be undertaken by students or other low-skilled
workers.
Start-up costs can be relatively high for a new industry entrant, with
commercial kitchen equipment, furniture and decor required to set up a
store. According to Entrepreneur.com, the total investment required to open
a coffee franchise typically ranges between $150,000 to over $1.0 million,
depending on the brand and type of store. However, little ongoing capital
investment is required for a coffee store franchise once it is up and running.
Franchises may opt to lease the store premises and any necessary
equipment or furniture to minimize the upfront capital investment. Although
technology may help staff scheduling, customer ordering and sales
analytics, labor is currently unable to be reduced beyond a certain level. For
these reasons, the industry's level of capital intensity has remained relatively
unchanged over time.
T EC H N O LO GY & SYS T E M S
FACTOR
LEVEL
EFFECT
DESCRIPTION
Rate of
Innovation

Unknown
A ranked measure for the number of patents assigned to an industry. A
faster rate of new patent additions to the industry increases the likelihood
of a disruptive innovation occurring.
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FACTOR
LEVEL
EFFECT
DESCRIPTION
Innovation
Concentration

Unknown
A measure for the mix of patent classes assigned to the industry. A greater
concentration of patents in one area increases the likelihood of
technological disruption of incumbent operators.
Ease of Entry

Unknown
A qualitative measure of barriers to entry. Fewer barriers to entry increases
the likelihood that new entrants can disrupt incumbents by putting new
technologies to use.
Rate of Entry

Unknown
Annualized growth in the number of enterprises in the industry, ranked
against all other industries. A greater intensity of companies entering an
industry increases the pool of potential disruptors.
Market
Concentration

Very
Likely
A ranked measure of the largest core market for the industry. Concentrated
core markets present a low-end market or new market entry point for
disruptive technologies to capture market share.
TECHNOLOGICAL DISRUPTION
The Coffee Stores Franchises industry is not expected to experience a
significant level of technological disruption in the near future. Coffee is a very
popular consumer good, with relatively established production processes
that are not expected to fundamentally change in the foreseeable future.
While there is some technological change in this industry, these
technological developments are primarily focused on customer service and
payment systems. These technological changes are expected to increase
the efficiency of industry operations, while not significantly altering the core
services of this industry. Overall, this industry is relatively inoculated from the
threat of potential technological disruption.

MEDIUM technology change
Operators in the Coffee Store Franchises industry use technology to optimize
operational efficiency, reduce labor dependency, minimize food costs and to
increase their sales by improving overall convenience and customer
experience.
QUALITY OF SERVICE AND EFFICIENCY
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A large portion of the new technology adopted by the industry aims to
improve the quality of rendered services and to minimize customer wait
time. Wireless electronic ordering systems that link front-of-the house orders
to kitchen meal preparation lines are an example of such innovation.
Equipment such as advanced bean grinders and coffee machines are used
to minimize coffee-brewing times and maximize brewing consistency. The
growing sophistication of the internet and mobile technology has also
enabled industry players to reach wholesalers and suppliers online. This has
enabled for increased efficiencies in coordinating supply chains. Additionally,
mobile ordering initiatives, such as those undertaken by major player Dunkin'
Brands Group Inc. (Dunkin') in late 2014, are expected to become even more
common in the coming years. Mobile ordering enables customers to place
orders and pay ahead of time on their smartphones, which is an order
method that will be increasingly available as coffee store franchises continue
streamlining operations and incorporating mobile technology. In addition,
operators have linked these mobile apps with traditional modes of payment.
For instance, Dunkin' launched DD Perks, a loyalty program that tracks a
customer's spending and delivers them targeted offers based on their
consumption patterns, which benefits both consumer and the franchise
itself, for bringing about benefits for consumers and greater sales for the
franchisee. These efforts have been quite successful; the mobile platform
remains the centerpiece of consumer engagement for Dunkin', with more
than 10.0 million downloads of the mobile app as of 2014 (latest data
available). Efforts to engage consumers through mobile platforms will grow
more popular in the coming years as smartphone use continues to mount
and it becomes increasingly convenient for consumers. Mobile ordering
platforms have been particularly important in 2020 as the COVID-19
(coronavirus) pandemic disrupts normal business operations, pushing them
further toward digitization. As many consumers remain apprehensive about
congregating inside a public store and many public policies limit in-store
services, franchises with these systems are expected to capture a greater
share of industry demand.
P O I N T O F S A L E SYST E M S A N D PAYM E N TS
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The small-business nature of the industry means many operators do not
have the capacity to invest heavily in advanced technology. However, there
are various low-cost options that assist store efficiency. Most operators now
have point-of-sale systems in stores to speed up service, which leads to
larger purchases on average and cuts down on labor costs. Retailers are
increasingly accepting credit card payments through devices such as
Square, which connect directly to the store's iPad or iPhone and facilitates
ease of transaction. Customers can sign with their finger on a touchscreen
rather than with a pen and have the receipt emailed to them. On the back
end, franchise stores may use various computer systems to pay
miscellaneous invoices. For instance, Dunkin' uses its proprietary FAST
System, through which franchisees report their weekly sales and pay their
corresponding royalties and contributions to the corporation's advertising
fund. For all noncorporate-related invoices, the company uses EFTPay, which
makes the payment of nonfee invoices easy to track and enact.
SOCIAL MEDIA
Technology has also aided coffee and snack shop owners with marketing
and promoting store locations. Social media platforms. Including Facebook,
Twitter and Instagram, enable tech savvy operators to connect directly with
customers and tailor their brand's message to target fragmented consumer
segments. These initiatives can help drive brand recognition and consumer
adoption, especially with the young adults that are likely to grow as a
proportion of coffee drinkers over the five years to 2025.
R E V E N U E V O L AT I L I T Y

MEDIUM revenue volatility
IBISWorld estimates that Coffee Store Franchises industry to have a
moderate level of revenue volatility. Moderate revenue volatility has
propagated primarily due to the significant growth in the number of
franchises that has occurred over the past decade. The cultural affinity
Americans have with coffee means it is one of the most widely consumed
beverages in the United States and consumed at all hours of the day for a
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range of occasions and events. The relatively inexpensive nature of industry
products and strong demand have driven the perception of coffee as an
affordable luxury. This has enabled the industry to survive during tough
economic times as consumers sought larger savings elsewhere, unwilling to
sacrifice their daily coffee.
The industry also offers an increasing range of food types, quality, menu
prices and locations to suit changing consumers preferences. The fact that
certain product segments, such as coffee, have experienced strong growth,
while other products, such as donuts, have become less popular over the
past 10 years has acted to mitigate a portion of industry revenue volatility.
Despite this strong performance, spending at coffee stores is largely
discretionary. Therefore, consumers may elect to purchase at-home brewing
systems during instances of economic uncertainty as they limit discretionary
purchases. Although consumer spending largely expanded over the five
years to 2020 as economic conditions improved, lifting industry revenue, the
COVID-19 (coronavirus) pandemic is expected to significantly affect industry
revenue in 2020. Over the five years to 2020, IBISWorld estimates revenue to
increase as much as 7.6% in 2015 and decline as much as 24.1% in 2020. As
the economic environment improves over the five years to 2025, revenue
volatility is anticipated to decline.
R E G U L AT I O N & P O L I C Y

MEDIUM regulation

INCREASING regulation
The Coffee Store Franchises industry is subject to a medium level of
regulation. A variety of federal, state and local regulations are imposed upon
the industry with respect to the health, sanitation, fire and safety standards at
each franchise. Additionally, laws governing the treatment of staff and their
compensation, such as the Fair Labor Standards Act, are relevant to industry
operators. In addition, regulations and policies are imposed upon the
individual franchisees from franchise agreements that are regulated by the
Federal Trade Commission (FTC).
FOOD SAFETY AND STANDARDS
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There are more than 3,000 state, local and tribal agencies that have a
responsibility to regulate the retail food and food service industries in the
United States. The main agency responsible for providing guidance and
regulation is the US Food and Drug Administration (FDA). The FDA's Model
Food Code, which is a best-practice guide to food handling and
presentation, applies to this industry and is updated on an annual basis. The
FDA Nutritional Value guidelines apply as well. Since 1996, the FDA
regulations have set standards for nutritional values of individual foods and
meals. If claims such as “low fat” or “heart healthy” are on a menu, a
franchisee must be able to demonstrate to officials that there is a reasonable
basis for the claim. For instance, the meal may be based on a recipe from a
health association or a recognized dietary group. Complete nutritional
information, however, is not required to be on menus.
LABOR RELATIONS
This industry employs a high number of young and low-skilled workers at
hourly rates and, therefore, is subject to minimum wage and employee
benefits regulations. Workers in the United States are entitled to be paid no
less than the statutory minimum wage, which as of 2014 is $7.25 per hour.
Each state also formulates and regulates its own minimum wage, with some
states implementing rates higher than the federal rate.
The implementation of the Affordable Care Act (ACA) over the five years to
2025 will have a minor effect on the industry. Employers with 50 or more
employees that work 30 hours a week will be required to provide healthcare
coverage or pay a fine. Major player Dunkin' Brands Group Inc. (Dunkin'
Brands) lobbied to have the definition of full-time work increased from 30
hours to 40 hours per week in 2013, which would afford the corporation
considerable cost savings. The employer mandate has not been updated to
benefit operators such as Dunkin' Brands; however, its implementation has
been postponed until 2015, at which time operators will either provide health
insurance for eligible employees or contend with a fine of up to $3,000 per
employee for noncompliance.
FRANCHISING LAWS
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All industry establishments operate under franchise agreements. There are
both federal and state laws governing franchising, which vary from state to
state. Franchising is regulated at the federal level by the US Federal Trade
Commission and applied in any region within the United States. At the state
level, various state agencies regulate franchises and laws vary between
states. A state's franchise laws usually only apply if the sale of a franchise is
made in the state and the business is located in the state. Laws generally fall
under three categories: disclosure laws, registration laws and relationship
laws.
Under the FTC Franchise Rule there are three elements of a franchise: the
franchise has a trademark under which the franchisee is given the right to
distribute goods and services; the franchisor has significant control of or
provides significance to the franchisee's method of operation; and the
franchisee is required to pay the franchisor at least $500.00 before opening
for business.
In addition to laws governing how a franchise is set up, run and structured
generally, each operator may have elements to its franchise agreements that
are unique to them that franchisees must comply with. For instance, under
Dunkin' Brands' franchise agreements, the corporation and the franchisee
determine whether the franchisee will open a single-branded distribution
point or a multibranded distribution point (i.e. a standalone Dunkin' facility or
one that is attached to other establishments). In addition, the franchisee will
decide whether they will open one or multiple locations. The franchisee then
sets out to determine a location that will then be subject to the approval of
the corporation depending on the accessibility, proximity to other restaurants
and visibility of the coffee store, as well as targeted demographic factors.
COVID-19 REGULATIONS
In response to the COVID-19 (coronavirus) outbreak, which emerged in early
2020, various local, state and federal regulations have been implemented to
curb transmission of the virus. Declarations of state of emergencies and
executive orders issued by governors adversely affected industry
performance by restricting in-store services. Other recent mandates include
the Families First Coronavirus Response Act (FFCRA), which requires
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specified employers to provide its employees with paid sick leave or
expanded family and medical leave for reasons related to coronavirus. This
regulation may affect operators that fall under the designated categories
outlined by the act. These disruptions may adversely affect franchise
performance and results of operations; however, industry establishments are
required to comply with such orders.
I N D U S T R Y A S S I S TA N C E

LOW assistance

STEADY assistance
Although the Coffee Store Franchises industry receives no formal assistance,
such as government aid or monetary compensation, there are industry
associations that help the industry as a whole. For instance, the National
Coffee Association provides industry news and research to members, and
sponsors industry-related events that engage operators across the spectrum
of the coffee market in the United States. In addition to industry associations,
the structure of franchises is such that the overarching brand or parent
corporation provides immense assistance and support in the form of training,
established company culture and, most importantly, brand recognition.
Before a franchisee opens a coffee store, the owner may undergo a
compulsory minimum period of classroom training in which they learn how
the business functions, what to expect during operations and information
regarding company culture. After opening, the corporation monitors the
location's level of quality and compliance to the company's set standards
through periodic visits to the coffee stores and offers assessments of each
location once per year. In addition to these efforts, guest surveys are often
available to maintain another layer of quality control.
Another form of assistance comes in the form of brand building. Franchises
pay a royalty fee to their parent corporation that may vary from corporation
to corporation. In addition to a royalty fee, Dunkin' Brands Group Inc. also
requires each franchisee to contribute a portion of sales to an advertising
fund that the corporation then uses to fund marketing initiatives across all
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forms of media. This advertising fund strengthens the brand and builds
loyalty around the products the company serves, which drives sales and
builds a customer base, benefiting franchisees in all locations.
Questions for Owners
How does your company market deals on e-commerce
sites, such as Groupon, to generate new customers?
Sales & Marketing
Promotional offerings and exposure to consumers can increase brand loyalty
and frequency of patronization.
H o w d o r e v i e w s i t e s , s u c h a s Ye l p a n d G o o g l e R e v i e w s ,
impact sales?
Sales & Marketing
Generating positive reviews through superior customer service can help
increase foot traffic and pique the interest of first-time consumers.
Has your company explored acquisition opportunities to
ex pa n d yo u r m a r ke t s h a re?
Strategy & Operations
Acquisitions can help increase scale and enhance segment portfolios in
order to diversify revenue streams.
Is your company located in high traff ic areas to increase
visibility?
Strategy & Operations
Locating in high density areas ensures a steady stream of demand for
industry operators.
Does your company leverage mobile booking
applications to streamline the booking process?
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Te c h n o l o g y
Developing an online ordering experience could lure a larger amount of
customers and help lower overall lead times.
What point-of-sale systems (i.e. Square) does your
company use to reduce labor costs?
Te c h n o l o g y
Automating point-of-sale systems either entirely or for a fraction of
transactions minimizes reliance on labor.
What measures does your company take to ensure all
employees are compliant with food handling and safety
laws?
Compliance
Regulations regarding product safety, nutritional content and menu labeling
vary between municipalities.
Is your company compliant with the varying labor
regulations across states?
Compliance
The industry employs a high number of workers at hourly rates and,
therefore, is subject to minimum wage and employee benefits regulations.
How does your company's inventory turnover rate
compare to your major competitors'?
Finance
Supply-chain efficiency is crucial to maintaining a competitive edge over
others.
How does your company's prof it margins compare to
your main competitors?
Finance
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Achieving lower profit margins amid heightened competition suggests that
inefficiencies may exist in a company's supply chain in relation to its major
competitors.
How do you maintain a clear position in the market?
Having a clear market positions
Owning a clear position in the market against competitors enable franchise
stores to win business based on brand reputation.
What measures do you have in place to reduce
operational costs?
Effective cost controls
Cost controls with minimal waste are important to low-margin service
industries.
How do you attract and retain skilled employees?
Access to multiskilled and flexible workforce
Industry operators require a supply of seasonal workers that can complete a
range of tasks in industry stores.
How does your company respond to fluctuating input
prices?
Wo r l d p r i c e o f c o f f e e
Coffee beans are a major input for coffee stores and rising prices can harm
franchise operators' profit margins as they are unable to raise prices in the
short term.
How signif icantly does consumer conf idence affect
product demand?
Consumer Confidence Index
The Consumer Confidence Index measures consumers' perceptions about
their current and future financial prospects.
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How do you measure trends in consumer spending?
Consumer spending
Factors that influence consumer spending affect the industry.
Datatables & Glossary
I N D U S T R Y D ATA
YEAR
INDUSTRY
TURNOVER
$ MILLION
INDUSTRY
GROSS
PRODUCT
$
MILLION
NUMBER OF
ESTABLISHMENTS
UNITS
NUMBER OF
ENTERPRISES
UNITS
2005
6,126
2,141
8,884
2006
7,020
2,547
2007
8,045
2008
EMPLOYMENT
UNITS
EXPORTS
$
MILLION
IMPORTS
$
MILLION
TOTAL
WAGES
$
MILLION
DOM
DEMA
$ MIL
7,115
92,420
N/A
N/A
1,534
N/A
10,005
7,876
107,410
N/A
N/A
1,761
N/A
2,761
11,492
8,755
124,359
N/A
N/A
2,021
N/A
8,522
2,486
11,585
8,631
133,638
N/A
N/A
2,111
N/A
2009
8,039
2,775
11,127
8,321
124,458
N/A
N/A
1,963
N/A
2010
8,024
2,654
10,884
8,248
114,065
N/A
N/A
1,932
N/A
2011
8,129
2,775
10,806
8,237
113,742
N/A
N/A
1,930
N/A
2012
8,010
2,820
10,694
8,145
113,254
N/A
N/A
1,875
N/A
2013
8,718
3,182
11,221
8,545
121,581
N/A
N/A
2,057
N/A
2014
9,262
3,018
11,731
8,940
131,067
N/A
N/A
2,203
N/A
2015
9,965
3,386
12,138
9,252
139,219
N/A
N/A
2,390
N/A
2016
10,674
3,669
12,735
9,789
149,047
N/A
N/A
2,580
N/A
2017
10,692
3,909
13,205
10,137
158,090
N/A
N/A
2,679
N/A
2018
11,395
3,720
13,159
10,136
153,890
N/A
N/A
2,706
N/A
2019
11,605
3,730
13,484
10,392
157,732
N/A
N/A
2,770
N/A
2020
8,809
2,974
12,458
9,717
134,080
N/A
N/A
2,304
N/A
2021
9,053
3,055
12,715
9,916
137,317
N/A
N/A
2,362
N/A
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YEAR
INDUSTRY
TURNOVER
$ MILLION
INDUSTRY
GROSS
PRODUCT
$
MILLION
NUMBER OF
ESTABLISHMENTS
UNITS
NUMBER OF
ENTERPRISES
UNITS
2022
9,549
3,204
13,088
2023
10,221
3,408
2024
10,751
2025
2026
EMPLOYMENT
UNITS
EXPORTS
$
MILLION
IMPORTS
$
MILLION
TOTAL
WAGES
$
MILLION
DOM
DEMA
$ MIL
10,193
142,898
N/A
N/A
2,464
N/A
13,548
10,530
150,118
N/A
N/A
2,599
N/A
3,575
13,906
10,793
155,687
N/A
N/A
2,703
N/A
11,123
3,681
14,166
10,985
159,504
N/A
N/A
2,775
N/A
11,499
3,782
14,454
11,199
163,624
N/A
N/A
2,851
N/A
Future values are projections made by IBISWORLD.
Figures have been adjusted for inflation and are presented in 2020 currency.
ANNUAL CHANGE
YEAR
INDUSTRY
TURNOVER
%
INDUSTRY
GROSS
PRODUCT
%
NUMBER OF
ESTABLISHMENTS
%
NUMBER OF
ENTERPRISES
%
EMPLOYMENT
%
EXPORTS
%
IMPORTS
%
TOTAL
WAGES
%
DOMES
DEMAN
%
2005
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
N/A
2006
14.59
18.99
12.61
10.69
16.21
N/A
N/A
14.76
N/A
2007
14.6
8.4
14.86
11.16
15.77
N/A
N/A
14.78
N/A
2008
5.93
-9.97
0.8
-1.42
7.46
N/A
N/A
4.44
N/A
2009
-5.67
11.63
-3.96
-3.6
-6.87
N/A
N/A
-7.01
N/A
2010
-0.19
-4.36
-2.19
-0.88
-8.36
N/A
N/A
-1.59
N/A
2011
1.3
4.55
-0.72
-0.14
-0.29
N/A
N/A
-0.12
N/A
2012
-1.46
1.62
-1.04
-1.12
-0.43
N/A
N/A
-2.84
N/A
2013
8.83
12.81
4.92
4.91
7.35
N/A
N/A
9.71
N/A
2014
6.24
-5.14
4.54
4.62
7.8
N/A
N/A
7.1
N/A
2015
7.58
12.17
3.46
3.48
6.21
N/A
N/A
8.45
N/A
2016
7.11
8.35
4.91
5.8
7.05
N/A
N/A
7.98
N/A
2017
0.17
6.53
3.69
3.55
6.06
N/A
N/A
3.82
N/A
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YEAR
INDUSTRY
TURNOVER
%
INDUSTRY
GROSS
PRODUCT
%
NUMBER OF
ESTABLISHMENTS
%
NUMBER OF
ENTERPRISES
%
EMPLOYMENT
%
EXPORTS
%
IMPORTS
%
TOTAL
WAGES
%
DOMES
DEMAN
%
2018
6.57
-4.83
-0.35
-0.01
-2.66
N/A
N/A
1.01
N/A
2019
1.84
0.26
2.46
2.52
2.49
N/A
N/A
2.36
N/A
2020
-24.1
-20.28
-7.61
-6.5
-15
N/A
N/A
-16.82
N/A
2021
2.76
2.73
2.06
2.04
2.41
N/A
N/A
2.48
N/A
2022
5.48
4.86
2.93
2.79
4.06
N/A
N/A
4.34
N/A
2023
7.03
6.36
3.51
3.3
5.05
N/A
N/A
5.44
N/A
2024
5.18
4.91
2.64
2.49
3.7
N/A
N/A
4
N/A
2025
3.46
2.95
1.86
1.77
2.45
N/A
N/A
2.65
N/A
2026
3.38
2.74
2.03
1.94
2.58
N/A
N/A
2.73
N/A
Future values are projections made by IBISWORLD.
K E Y R AT I O S
IMPORTS/
DEMAND
%
EXPORTS/
REVENUE
%
REVENUE/
EMPLOYEE
$'000
WAGES/
REVENUE
%
EMPLOYEES/
ESTABLISHMENT
YEAR
IVA/
REVENUE
%
WAGES/
EMPLOYEE
$
2005
35
N/A
N/A
66
25
10
16,600
2006
36
N/A
N/A
65
25
11
16,393
2007
34
N/A
N/A
65
25
11
16,252
2008
29
N/A
N/A
64
25
12
15,796
2009
35
N/A
N/A
65
24
11
15,774
2010
33
N/A
N/A
70
24
10
16,939
2011
34
N/A
N/A
71
24
11
16,966
2012
35
N/A
N/A
71
23
11
16,556
2013
36
N/A
N/A
72
24
11
16,920
2014
33
N/A
N/A
71
24
11
16,810
2015
34
N/A
N/A
72
24
11
17,164
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IMPORTS/
DEMAND
%
EXPORTS/
REVENUE
%
REVENUE/
EMPLOYEE
$'000
WAGES/
REVENUE
%
EMPLOYEES/
ESTABLISHMENT
YEAR
IVA/
REVENUE
%
WAGES/
EMPLOYEE
$
2016
34
N/A
N/A
72
24
12
17,312
2017
37
N/A
N/A
68
25
12
16,946
2018
33
N/A
N/A
74
24
12
17,585
2019
32
N/A
N/A
74
24
12
17,563
2020
34
N/A
N/A
66
26
11
17,187
2021
34
N/A
N/A
66
26
11
17,199
2022
34
N/A
N/A
67
26
11
17,246
2023
33
N/A
N/A
68
25
11
17,311
2024
33
N/A
N/A
69
25
11
17,360
2025
33
N/A
N/A
70
25
11
17,395
2026
33
N/A
N/A
70
25
11
17,421
Future values are projections made by IBISWORLD.
GLOSSARY
BARISTA
A person who prepares and serves espresso-based coffee drinks.
ESPRESSO
Coffee brewed by forcing a small amount of nearly boiling water under
pressure through finely ground coffee beans.
FOOD SERVICE
The practice or business of making, transporting, and serving or dispensing
prepared foods outside the home.
FRANCHISE
A store that uses a well-known firm's business model, including their
trademark and goods, for a fee. This is an alternative to chain stores, which
share a brand and a central management.
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POINT OF SALE (POS)
A system used at checkout in retail stores using computers and cash
registers to capture transaction data at the time and place of sale.
BARRIERS TO ENTRY
High barriers to entry mean that new companies struggle to enter an
industry, while low barriers mean it is easy for new companies to enter an
industry.
CAPITAL INTENSITY
Compares the amount of money spent on capital (plant, machinery and
equipment) with that spent on labor. IBISWorld uses the ratio of depreciation
to wages as a proxy for capital intensity. High capital intensity is more than
$0.333 of capital to $1 of labor; medium is $0.125 to $0.333 of capital to $1 of
labor; low is less than $0.125 of capital for every $1 of labor.
CONSTANT PRICES
The dollar figures in the Key Statistics table, including forecasts, are adjusted
for inflation using the current year (i.e. year published) as the base year. This
removes the impact of changes in the purchasing power of the dollar,
leaving only the "real" growth or decline in industry metrics. The inflation
adjustments in IBISWorld’s reports are made using the US Bureau of
Economic Analysis’ implicit GDP price deflator.
DOMESTIC DEMAND
Spending on industry goods and services within the United States,
regardless of their country of origin. It is derived by adding imports to
industry revenue, and then subtracting exports.
EMPLOYMENT
The number of permanent, part-time, temporary and seasonal employees,
working proprietors, partners, managers and executives within the industry.
ENTERPRISE
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A division that is separately managed and keeps management accounts.
Each enterprise consists of one or more establishments that are under
common ownership or control.
ESTABLISHMENT
The smallest type of accounting unit within an enterprise, an establishment
is a single physical location where business is conducted or where services
or industrial operations are performed. Multiple establishments under
common control make up an enterprise.
EXPORTS
Total value of industry goods and services sold by US companies to
customers abroad.
IMPORTS
Total value of industry goods and services brought in from foreign countries
to be sold in the United States.
INDUSTRY CONCENTRATION
An indicator of the dominance of the top four players in an industry.
Concentration is considered high if the top players account for more than
70% of industry revenue. Medium is 40% to 70% of industry revenue. Low is
less than 40%.
INDUSTRY REVENUE
The total sales of industry goods and services (exclusive of excise and sales
tax); subsidies on production; all other operating income from outside the
firm (such as commission income, repair and service income, and rent,
leasing and hiring income); and capital work done by rental or lease. Receipts
from interest royalties, dividends and the sale of fixed tangible assets are
excluded.
INDUSTRY VALUE ADDED (IVA)
The market value of goods and services produced by the industry minus the
cost of goods and services used in production. IVA is also described as the
industry's contribution to GDP, or profit plus wages and depreciation.
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INTERNATIONAL TRADE
The level of international trade is determined by ratios of exports to revenue
and imports to domestic demand. For exports/revenue: low is less than 5%,
medium is 5% to 20%, and high is more than 20%. Imports/domestic demand:
low is less than 5%, medium is 5% to 35%, and high is more than 35%.
LIFE CYCLE
All industries go through periods of growth, maturity and decline. IBISWorld
determines an industry's life cycle by considering its growth rate (measured
by IVA) compared with GDP; the growth rate of the number of
establishments; the amount of change the industry's products are
undergoing; the rate of technological change; and the level of customer
acceptance of industry products and services.
NONEMPLOYING ESTABLISHMENT
Businesses with no paid employment or payroll, also known as
nonemployers. These are mostly set up by self-employed individuals.
PROFIT
IBISWorld uses earnings before interest and tax (EBIT) as an indicator of a
company’s profitability. It is calculated as revenue minus expenses, excluding
interest and tax.
REGIONS
West | CA, NV, OR, WA, HI, AK
Great Lakes | OH, IN, IL, WI, MI
Mid-Atlantic | NY, NJ, PA, DE, MD
New England | ME, NH, VT, MA, CT, RI
Plains | MN, IA, MO, KS, NE, SD, ND
Rocky Mountains | CO, UT, WY, ID, MT
Southeast | VA, WV, KY, TN, AR, LA, MS, AL, GA, FL, SC, NC
Southwest | OK, TX, NM, AZ
VOL ATILITY
The level of volatility is determined by averaging the absolute change in
revenue in each of the past five years. Volatility levels: very high is more than
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±20%; high volatility is ±10% to ±20%; moderate volatility is ±3% to ±10%; and
low volatility is less than ±3%.
WAGES
The gross total wages and salaries of all employees in the industry.
R E L AT E D R E P O R T S

Egg & Poultry
Wholesaling in the
US

(/ibisworld/reportkey/1/974)
(/ibisworld/reportkey/1/976)
Soft Drink, Baked
Goods & Other
Grocery
Wholesaling in the
US
Fish & Seafood
Wholesaling in the
US


(/ibisworld/reportkey/1/979)
Coffee Production
in the US

(/ibisworld/reportkey/1/272)
Frozen Food
Wholesaling in the
US

(/ibisworld/reportkey/1/972)
Dairy Wholesaling
in the US

(/ibisworld/reportkey/1/973)
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Chain Restaurants
in the US
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Coffee Store Franchises

(/ibisworld/reportkey/1/1677)
Caterers in the US

(/ibisworld/reportkey/1/1682)
Street Vendors in
the US

(/ibisworld/reportkey/1/1683)
Coffee & Snack
Shops in the US

(/ibisworld/reportkey/1/1973)
Fast Food
Restaurants in the
US

(/ibisworld/reportkey/1/1980)
Cafes and Coffee
Shops in Australia

(/ibisworld/reportkey/61/2015)
Cafes, Bars & Other
Drinking
Establishments in
China

(/ibisworld/reportkey/86/941)
Juice & Smoothie
Bars in the UK

(/ibisworld/reportkey/44/6026)
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Cafes & Coffee
Shops in the UK
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
(/ibisworld/reportkey/44/6242)
Coffee & Snack
Shops in Canada

(/ibisworld/reportkey/124/1973)
Cafes and
Restaurants in New
Zealand
(/ibisworld/reportkey/64/720)
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