Joe Coffee’s Jonathan Rubinstein: Investment, Expansion, And Staying Joe

News broke this morning via PR waiver wire that Union Square Hospitality Group, noted Manhattan restaurateur Danny Meyer’s global project hub, hath invested bigly in Joe Coffee, those landmark purveyors of progressive coffee based in New York City. In the wake of this buzzing news break, Joe Coffee co-founder and president Jonathan Rubinstein spoke with Sprudge co-founder Jordan Michelman on this exciting (and really pretty logical if you think about it) news. Reach beyond the reblogs with our interview below to discover what this investment means for Joe, and where the brand goes next.

Hello Jonathan, thank you for speaking first with Sprudge Media Network on this exciting news event. My first question is, as an independent business owner with 15 cafes, why take investment now? And why go with these guys? Surely you’ve been approached before. 

There are so many reasons why now, and why we went with Danny. Joe went through an entire evaluation process with an investment bank around three years ago, but those partners just weren’t right. There were a lot of, you know, questions like: “Can you get the cost of green coffee down? Why do you have to steam drinks individually? Do you want to be in every Costco?”

We felt crappy about it; it just wasn’t the right fit. And at the same time, we were seeing our contemporaries come into money and do good things and being celebrated, and we felt this pressure to keep up. All these years we’ve grown, people have assumed that we must be “in the money”, but as you well know, people on the outside never know what’s happening on the inside, and the truth is that my 77-year-old father was raising most of our money for us, going to friends, nickel and diming cash to get the next store open—and it meant we weren’t able to make these gorgeous shops like our contemporaries were. So we knew it was unsustainable.

Cut to nine months ago, and someone mentioned to me that Union Square Hospitality Group was looking to invest in like-minded companies; and the truth is, I have studied them, idolized them, tried to emulate them forever, followed all their openings—Danny is a personal and professional hero of mine. We teach hospitality classes to our staff, and much of that curriculum is lifted from his famous book Setting The Table. So when there was a chance to take a meeting, I pretty much said, “Tell me where to be, I’ll be there in 5 seconds.” It was amazing, and we started hatching ideas and seeing how we could work for each other and make sense together.

I think the key to why it fits is because they are a restaurant group, which is a very different proposition from a money group or a private equity group. There is a different understanding of quality, commitment to sourcing, putting out a beautiful product beyond simply getting a return on investment.  And I left the meeting saying, “This could be the dream come true.” We worked on it for 9 months, and it happened. Both in terms of finding the perfect partner, and the timing and us being able to propel ourselves to where we want to be—it was kismet.

Let me ask you about something from that press release, which states your intent to, and I quote, “Grow the Joe Coffee brand in New York, Philadelphia, and beyond.” What is the “beyond” they’re referring to? Where will you open next? 

I don’t know exactly—it will develop. In 2017 we’re hoping to open five new stores this year, which is a lot for us; the brand needs to work, our aesthetics, our wholesale—it all needs to work. Then in 2018 we’ll choose another city. We don’t know where yet, but on our list we have DC, Boston, Chicago, Los Angeles, and we’re open if something else comes about that makes sense. I think we’ll find out.

 

One of the things we haven’t been able to do in a scientific way is to study where we’ll be and have it make sense. When we expanded to Philly, we really just jumped on an opportunity without studying pros and cons and the market around us. But now we have a sister company in Shake Shack, which does site selection nationally and internationally so brilliantly, so we have access to that information now. It’s a whole other thing now. There are a lot of strategic meetings coming up and we’ll decide where to take the plunge. The hope is to become more of a national brand, along the lines of Intelligentsia, La Colombe, Stumptown, and Blue Bottle.

Does your new partnership with Danny Meyer’s group mean that Joe will become the house coffee served at all of his affiliated projects and restaurants? 

This topic got brought up very early on in our meetings with Union Square. One of his philosophies Danny has is to give autonomy to chef partners. And these partners have longstanding previous relationships with their purveyors, including coffee purveyors. Danny and his team would never dictate to one of their restaurants, “Now you serve Joe.” But we’re hopeful that chefs will want to work with us, will fall in love with us, and we’ll have a shot at new restaurants in the group as they open. Our first dipping of toes in the water will be with Daily Provisions, which will be a monstrous, high volume Union Square Hospitality Group project that will open in a few weeks, connected to Union Square Cafe. It’s a coffee bar/pastry/bread store, that will turn into a bar and rotisserie chicken place later in the day. We’ve put a lot of work in, especially [through] our trainer Katie Duris, to present our coffee really well and to exhibit what we do.

What percentage of ownership did you maintain following this investment?

I’m sorry, I can’t answer that question. In fact, I’ve been coached: “Rubinstein declines to mention.” But I’m still myself—myself and my family, we’ve retained part of the company, and I am 1000% with it to drive the growth and be the face of it, so nothing like that is changing. We haven’t “sold”—we’ve been invested in, and we share ownership now.

Typically that kind of language—”We haven’t sold, we’ve been invested in”—would imply that the original owners have maintained a controlling stake of ownership. Is that the case? 

I can’t speak to that, I’m sorry.

Can you share with me the dollar amount of investment?

I can’t, I’m sorry.

How will day to day operations at Joe change now that you’ve taken on investment? Are things different today at your offices? 

We don’t expect day to day to change much at all. Danny told our staff, “Think of us as an uncle, not a father”—he and his team are here to support and guide, not run our business. I will be checking in with them and a board I’m now a part of for big decisions and strategic thinking, but nothing really changes at the Joe level. If we bring new people in to work in our headquarters, which we will be, it’ll be 100% us—if we move into a new city or a location we’re not sure of, they may help with some of that strategy, but in terms of day to day there will be zero micromanaging from them. But  I think that customers may know soon that something has changed because the stores will be prettier, you’ll see a bigger footprint, but you’ll never know the companies are tied by walking into a Joe—there won’t be a huge USHG banner over our logo.

There is a lot of buzz now around the Daily Provisions project. Is this a Joe cafe, or a wholesale collaboration, or some kind of hybrid? 

Well before Wednesday I would have said, “It’s a wholesale account”—but now we’re all in the same family. We are providing coffee, training services, like for any other wholesale account, but we’re putting a ton of work into it because all eyes will be on it, and there are high expectations. But this is not our store—this is their store. Coffee-program-wise it is an ambitious program, with a standard coffee bar menu plus single origin espresso, all baked in house bread and pastries, featuring Joe Coffee. But this is not our 16th store.

Five more stores in 2017, plus a mandate to grow and expand the brand—that’s a lot. Where do you open next? Where will the rest of your 2017 cafes open?

Our next to open is Westfield World Trade Center in March, which has been in the works for some time. From there, we’d love for some of our upcoming stores to be in Brooklyn, and I’m fascinated by Queens. But we can’t make a misstep and we don’t want to rush.

The amount of time I’ve spent pounding the pavement the last few weeks, looking at locations, it’s just amazing, because there is this competition for real estate now in New York coffee. It’s a competition for not just neighborhoods, but for blocks, and a rush to find these spaces. You lose availability to make a mark, and it’s tricky. This little island is not that big. and our strategy has always been to pioneer the neighborhoods, to be the first in. And from there other people will see you can do well and make a move. But there aren’t that many neighborhoods left for us to conquer first, so it’s tricky. Now you can throw a rock and hit a quality coffee shop in Manhattan. That’s why our partnership with Union Square is so important—it means we can keep up and continue to be ourselves, to maintain quality while growing, to still be Joe.

Thank you. 

Jordan Michelman is the co-founder at Sprudge Media Network. Read more Jordan Michelman on Sprudge.