Dive Brief:

• Philz Coffee, a San Francisco-based coffee brand with about 50 units, opened a mobile-order-only pilot location on Wednesday in the city’s Salesforce Transit Center.  
• According to a company release emailed to Restaurant Dive, the store includes three large counter spaces where orders are prepared, and a board where customers can identify where to pick up their order. There is no indoor seating, but an outdoor patio can accommodate up to 15 guests. The store will also have a limited pastry and baked goods menu. 
• The purpose for this test is to analyze a smaller footprint while also providing convenience for on-the-go guests, the company said.  The coffee chain plans to open other mobile-only locations if all goes well with the test store, a company spokesperson told Restaurant Dive.

Dive Insight:

Philz Coffee's test store is a little over 1,000 square feet, which is the smallest unit in the system. That alone should save on occupancy costs. A smaller store also makes sense for Philz Coffee's metropolitan footprint. The company has 57 units in San Francisco, Los Angeles, San Diego, Washington, D.C. and Chicago. While the company could very well open more of these mobile-only stores, it's not abandoning its larger community stores and also opened a 2,090 square foot store on Thursday three minutes away from the smaller location. 

This pilot model's location in the Salesforce Transit Center should also bode well. The center opened in the fall of 2018 and was designed to be a centralized hub for local transportation that can accommodate about 45 million people each year, according to Business Insider. That is both a large and fluid group of consumers an ideal target audience for any concept selling coffee on-the-go. 

Offering convenience, particularly during the busy, habitual morning hours, can be a significant advantage in the coffee segment as it continues to intensify. The American coffee market is expected to grow at a CAGR of 8.1% through 2024, and plenty of players are stepping up their games to capture that growing demand, including Panera, which recently added a new subscription service.  

Philz is not alone here. Starbucks is also piloting a pickup-only store in New York City that aims at its mobile-savvy customer base, which boasts 16.8 million mobile app rewards program users. The new stateside pilot follows Starbucks' launch of a scaled-down express footprint in China designed to compete with rising coffee competitor Luckin.

Although Luckin doesn't have a presence in the U.S., it has turned up the heat on Starbucks in China and is a case study on competitive convenience. The company's model consists of a large number of pickup and delivery-only formats and also introduced self-serve vending machines in January.   

Peet's is also chasing more convenience-seeking customers, launching order ahead options on its app in April 2019, while The Coffee Bean & Tea Leaf and Caribou Coffee also have order ahead services.

These type of services and locations will likely increase as consumers continue to demand convenience and speed, and coffee is uniquely positioned as a product of convenience and speed. That's not to say consumers will turn their back on coffee as a social occasion, however, as evidenced by Starbucks Roastery's success. As Starbucks COO Roz Brewer said during the company’s earnings call in January, "we're seeing increased traffic when we create new formats."