Danny Meyer’s Union Square Hospitality Group has turned to coffee for its latest area of opportunity, announcing on Jan. 23 that it made an undisclosed investment and strategic alliance with Joe Coffee. The New York City-based company grew from a small shop in Greenwich Village in 2003 to a coffee company with 13 locations in Manhattan and Philadelphia, a catering division and a wholesale business that has worked with USHG in the past. Here’s a closer look at Joe Coffee and how the chain plans to tap into USHG’s resources to further grow its business.
Road to investment
Since launching in 2003 in Greenwich Village, Joe Coffee president Jonathan Rubinstein and his family have been growing the concept by about one shop per year in different Manhattan neighborhoods, with Rubinstein’s goal to establish Joe as the high-end coffee shop for the area before third-wave competitors like Stumptown, La Colombe and Intelligentsia moved in.
“I think the difference [between Joe and third-wave competitors] is…we really push warm hospitality and a neighborhood feel,” Rubinstein says. “Our stores are a bit more quaint, less austere aesthetics and our focus is to greet customers with a ‘Hi, welcome back to Joe.’”
Joe’s neighborhood presence and hospitality focus attracted attention from Danny Meyer and USHG. The company, which has served Joe Coffee at some of its concepts and events in the past, calls Joe “the ultimate neighborhood coffee bar.”
“USHG has had a meaningful relationship with Joe Coffee and founder Jonathan Rubinstein for many years, both as avid fans of their coffee bars and also having served their coffee at Union Square Events for years,” Meyer said in a statement announcing the investment. “We chose to make this investment with Joe Coffee because they are dedicated to the pursuit of making flawless coffee, are led by passionate and exceptional management, and share the same hospitality values as USHG.”
Rubinstein says a main reason he chose to partner with USHG is the shared commitment to sustainable sourcing. Last year, Joe sourced coffee from 16 farms around the world, and the chain has a dedicated team—with each person responsible for a region—that visits farms and meets with growers. Nearly all of Joe’s coffee is made from direct trade beans, and the goal is for all beans to rainforest alliance-certified (Rubinstein says that as of recently, all of its blends are certified rainforest alliance). Like other third-wave coffee brands, Joe’s menu is made up of rotating single-origin and blended coffees, along with simple espresso drinks.
On tap with USHG’s help: WiFi and savory food
In keeping with its hospitality focus, Joe reached out to customers about six months ago with a survey that asked open-ended questions on several topics, including menu and service amenities such as WiFi. Surprisingly, the strongest responses were “hands down” requests for different food options, Rubinstein says, with customers clamoring for more healthful, savory and protein-rich items in place of the pastry-heavy menu Joe currently offers. Rubinstein plans to work with USHG chefs to revamp Joe’s food menu to incorporate customers’ suggestions.
Less of a surprise was the demand for more WiFi. Because of high-priced New York real estate, many of Joe’s units are small—about 450 square feet with limited seating—and therefore never offered free WiFi. Larger units, including the two Philadelphia locations, do offer WiFi and Rubinstein hopes USHG’s investment will allow the brand to launch larger locations with additional seating to accommodate the laptop crowd. They’ll also explore adding WiFi at the smaller units.
Tips: to include or not to include?
Prior to USHG’s investment, Joe began exploring a well-publicized USHG policy—including tips in the price. The survey also asked customers their feedback Joe’s potentially implementing a gratuity-included policy on its coffee, possibly through raising the prices by about quarter, Rubinstein says. The responses were mixed: Some customers loved the idea, citing support for providing livable wages; others were against it, wanting a more personalized option to reward baristas with a tip; and some said it depended on just how much prices would increase. Rubinstein aims to explore the policy further, possibly through testing it at an existing shop or when it opens a new unit.
One differentiator for Joe is its full-service catering program, in which Joe baristas prepare anything from pour-over coffee to espresso drinks on-site. Rubinstein says the service, which comprises about 5% to 7% of Joe’s sales, came about on accident in 2005 when his sister got a call from a New York City museum asking if Joe could provide coffee for an event. “She grabbed another barista…and just ad hoc threw it together” on the fly. The program grew by word of mouth, and Joe has since provided catering for a variety of events, from weddings and bar mitzvahs to corporate meetings and even New York City fashion shows. Joe now has a dedicated team running the catering program, which last year served coffee at 175 events. Rubinstein hopes to expand Joe’s catering arm with the help of USHG, whose catering division has worked with Joe in the past.
Joe is gearing up for expansion. Rubinstein says he, his father and sister still own part of the company (he declined to disclose how much) and remain involved. With USHG’s resources, the family aims to launch five units this year in New York City before expanding in Philadelphia next year. Rubinstein also aims to enter a new city next year—he hasn’t decided where (“the world is our oyster,” he says) but he named Chicago, California and Boston as markets of interest.
Rubinstein also aims to expand Joe’s wholesale division, which now mostly includes New York restaurants. That division already has a new client—Daily Provisions, USHG’s soon-to-open fast-casual concept adjacent to the revamped Union Square Cafe. Joe will be providing the restaurant’s coffee, and Rubinstein says the door is open for Joe to provide coffee for USHG’s other concepts (although he said Meyer isn’t requiring his brands to only serve Joe Coffee).