Coffee Shops, Once a Mainstay of America, Are Struggling

When Fred Harvey stepped off the train in Topeka, Kan., darned if he could find a nearby spot with a decent cup of coffee.

He walked into one restaurant and took a gulp of some muddy coffee. And that gulp, back in 1876, eventually changed the way many American travelers dine.

Harvey shortly built a coffee shop right there at the Topeka train depot--and went on to develop a chain of 44 more clean and efficient restaurants in other locations. Long before the automobile, the railroad was the catalyst to the all-American eatery--the coffee shop as a chain in America.

More then a century later, restaurant industry observers refer to coffee shops as the “meat and potatoes” of the restaurant industry. Yet coffee shops are feeling competitive heat like never before.

Although sales at the nation’s estimated 85,000 coffee shops exceeded $28 billion last year, the fast-food spots such as McDonald’s and Burger King now post higher annual sales than coffee shops. While some chains like Denny’s have valiantly strived to change with the times by upgrading their images, others like Sambo’s ignored the fast-food competitors and disappeared completely.

“It’s turbulent times in a saturated marketplace,” said Peter Berlinski, editor of Restaurant Business, a trade magazine based in New York. “But coffee shops are still the bread and butter of the industry. People just like to go to them.”

What makes coffee shops special? For years, many of those who built the chains assumed it was such things as cleanliness, quality food and relatively fast service. But at least one well-known psychologist has her own ideas about what puts the perk into coffee shops.

“People go to coffee shops for the ambiance,” said Dr. Joyce Brothers, the author and radio talk show host. “The waitresses all have their names on badges, and it gives a feeling of friendliness to know that ‘Dottie’ is waiting on you. At Spago, you never know who is serving you dinner.”

Brothers says that when she is in town, she sometimes stays at the Beverly Hills Hotel--but seldom goes near the inn’s famous Polo Lounge. Instead, she heads for the hotel coffee shop. “You don’t have to put on the Ritz to walk in there,” she said. “It sort of gives me a sense of home away from home.”

Indeed, that feeling of homeyness was so important to Fred Harvey that he personally tutored his waitresses--later known as “Harvey’s Girls”--in how to treat customers with care.

By the turn of the century, however, automats began to replace coffee shops in big cities like New York and Philadelphia. But after a short-lived fascination, the public didn’t much care for the newfangled restaurants without waitresses. A few years later, however, customers showed great interest in the soda fountains that began to open in Chicago-area drugstores. And by 1920, luncheonettes--with long counters and bright lights--became the craze.

It was Howard Johnson, however, who in 1929 placed a full-service restaurant by a highly travelled road. And so was born the first coffee shop chain driven by the automobile.

After that, it didn’t take long for the coffee shop craze to explode in California. The 1,000-plus unit Big Boy chain, for example, began in 1936 when Robert C. (Bob) Wian sold his car for $300 to buy a 10-seat diner in his hometown of Glendale.

From Danny’s to Denny’s

The nation’s largest and perhaps best-known coffee shop chain, Denny’s, got its start as a doughnut shop in Lakewood. But when founder Harold Butler thought the name was getting confused with a rival, Coffee Dan’s, he simply changed one letter and converted “Danny’s” into “Denny’s.”

Growth came quickly for Denny’s. “After we opened our fifth restaurant,” said Butler, who sold his interest in Denny’s in 1971, “I looked at all the traveling going on in California and said to myself, ‘My God, this is the future.’ ”

Indeed, it was. And not just for Denny’s. Coffee shop chains--of all sizes and designs--began to appear nationwide, with names like Norm’s, Ships, Sambo’s and Shoney’s. Coffee shops reached their peak in the mid-1970s. It was then that the fast-food restaurants began to cut into their business.

And now, some industry consultants see big headaches ahead for the coffee shop industry.

The double whammy of clever marketing by the fast-food restaurants along with the recent popularity of upscale diners with yuppie-oriented blue plate specials has whittled away at the coffee shops market share.

“Even with the graying of America,” said Janet Lowder, manager of the restaurant consulting group at Laventhol & Horwath’s Los Angeles office, “in order to survive, coffee shops must do more to get the yuppie customers.” Denny’s, for instance, has begun offering its own private-label wine and training its employees to sell and serve it.

But others say that coffee shops are trying too hard to appeal to everyone. “The problem with many coffee shops is that they simply aren’t sure what they are,” said Philip Langdon, author of “Orange Roofs, Golden Arches,” a book about the restaurant industry. “Most don’t even refer to themselves as coffee shops anymore. Instead, they call themselves ‘family restaurants’ in attempts to bring in the dinner crowd.”

Barbara Dawson, West Coast editor of the trade magazine Restaurants & Institutions, concurs: “Denny’s can put in a bar and serve a five-course meal, but as far as I’m concerned, they can’t afford to forget that above all else, they’re still a coffee shop.”