Dive Brief:

• Caribou Coffee on Monday introduced a domestic franchise program for the first time in the U.S. The 718-unit brand has previously franchised internationally, and includes 314 company-owned locations, primarily in the Midwest.
• The program includes the chain's "Caribou Cabin" prototype, which launched in 2019 with a drive-thru focus and smaller footprint, as well as Caribou's traditional coffeehouse store model. 
• In August, Caribou formed fast casual restaurant platform Panera Brands with Panera Bread and Einstein Bros. This collaboration gives Caribou access to Panera's technology suite and its franchise owners, which could help it deploy its U.S. franchise program. 

Dive Insight:

Franchising could drive a more rapid expansion for Caribou, especially since the chain will be pursuing smaller (and likely less expensive) retail space for its Cabin store model. The prototype yields strong sales and traffic, the company said in a press release, which could help attract operators. 

Dozens of these locations are currently open, and more are in development. The domestic franchising program's launch also comes amid strong franchisee interest in restaurant franchisors with drive-thrus — a trend that could rake in a solid contingent of potential partners. According to the International Franchise Association, more than 26,000 franchised locations are expected to be added this year, with employment in the franchise industry to grow by more than 10%.

"Recognizing Caribou Cabins' immense expansion potential, we've optimized this business model through our corporate-owned locations and are focused on replicating the success we've experience in new markets in partnership with the franchise owners," Caribou CEO John Butcher said in the press release.

Caribou is seeking multi-unit operators who have "extensive franchising experience" in the food and beverage space. This may reflect Panera's franchising strategy, since the fast casual giant doesn't sell single-unit franchises. Caribou is targeting markets throughout the U.S., including Michigan, Ohio, Illinois, Colorado and the Southeast.

The U.S. coffee market looks poised for a strong recovery, even though the pandemic wiped out nearly a quarter of the segment's market value in 2020. Revenue in the coffee market is expected to grow annually by over 6% through 2025, according to Statista, while Allegra forecasts the growth to reach a 7% annual growth rate. The anticipated recovery may be why Caribou rival Dutch Bros Coffee's IPO exceeded expectations in September.

There are still risks in the coffee category, however. Although some workers are returning to offices, many companies are shifting entirely to remote work or maintaining a hybrid workplace, which could constrain the coffee segment's sales by taking morning commuters off the road.