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Coffee Chains in Grand Battle to Take No. 2 Spot

L.A.-Based Coffee Bean & Tea Leaf plans aggressive expansion in hopes of setting itself apart and getting closer to industry leader Starbucks.

March 16, 2006|Jerry Hirsch | Times Staff Writer

Adding the Ralphs cafes and 37 company-owned Coffee Beans in the Southland this year will help narrow the gap and make his chain more convenient, he said.

"We want to go where people live and work, and we want to cluster our stores," Sassoon said. "Success in this industry is how well you have a concentration of units in a given area so that it is convenient for customers to find you."

That's different from other forms of retailing, Sassoon said.

"You could never open 12 Gap stores on Ventura Boulevard, but if you are in coffee, you can do that," Sassoon said.

Coffee Bean profitably operates three stores on about a one-mile stretch of Beverly Drive in the Beverly Hills area.

The first store opened 10 years ago, growing into a cafe with $1 million in annual sales. Combined sales continued to climb with each new outlet, and now all three add up to $3.5 million in revenue, Sassoon said.

"And during that time we have had two Starbucks, a Peet's and three mom-and-pops open," Sassoon said.

Sassoon is the descendant of Iraqi Jews who fled the Arab country in the late 19th century, eventually settling in East Java, Indonesia, where they entered the spice business.

The family got into the coffee business in 1996, when it signed a franchise agreement to open outlets in Asia with Coffee Bean, then a small chain of Los Angeles coffee stores.

But in 1998, the family's franchised store business had outgrown the parent company in the United States. Sassoon grew nervous with the lack of control the family had over the brand.

"As we outgrew them we knew we had to do something," said Sassoon. "So we made them an offer they couldn't refuse and bought the company."

The family's Asian ties are still apparent in its business. Coffee Bean owns 77 cafes in Malaysia and Singapore. It has licensed or franchised an additional 113 stores internationally. There are Coffee Bean restaurants in Australia, China, Israel, Kuwait, Saudi Arabia and the United Arab Emirates. Sassoon's brother Victor runs the international operations out of Singapore.

Operating in so many diverse nations has trained the company to take an ecumenical approach to its business.

Its Southern California stores, for example, sell only kosher products, both as a stamp of quality and to appeal to the area's large population of Jews, Sassoon said. But in places such as Malaysia, Saudi Arabia and Kuwait where the customer base is Muslim, Coffee Bean's offerings are prepared according to Islamic halal rules.

"We are working toward a worldwide brand," said Melvin Elias, Coffee Bean's chief operating officer. "We are on the cusp of breaking out in this industry."

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