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Despite Planned Expansion, Philz Coffee Hopes to Retain Mom-and-Pop Culture

The CEO hopes $45 million in funding won't change perceptions of the brand

Philz Coffee Facebook

The infusion of venture capital into coffee continues. Philz Coffee, the San Francisco- based chain with a self-professed mission to “challenge the status quo,” raised $45 million in a recent round of funding. But, its chief executive officer doesn’t want that money changing the way its customers, or employees, view the brand.

Philz currently has 36 locations, one of which sits at Facebook headquarters in Silicon Valley. With the new funding, the company hopes to expand to around 50 stores. Recode notes the coffee chain now faces a challenge: expanding while retaining its mom-and-pop vibe and emphasis on company culture.

From Recode: “The big question is whether Philz can continue to create the welcoming culture and homey in-store environment it stresses as it chases national growth. Starbucks, which is a multibillion-dollar corporation, started as a venture-backed startup.”

Since its founding, Starbucks has grown into a food and beverage behemoth with more than 24,000 locations worldwide. Many of the company’s employees say something’s been lost along the way. One barista recently petitioned Starbucks for more hours, arguing that labor cuts had led to poor customer service and a loss of the chain’s welcoming “third place” experience.

So far, Philz hasn’t faced issues of understaffing or worker benefit cuts. In fact, CEO Jacob Jaber told Code Enterprise conference-goers on Tuesday that Philz maintains an almost 50 percent retention rate (according to QSR Magazine, Starbucks is at 65 percent). But can that continue with rapid expansion?

At the conference, Jaber acknowledged the chain isn’t going to be able to pay its baristas $25 an hour any time soon, but he said it can “create an education platform that is free and democratized, that’s available to every team member so that they’re improving themselves and learning skills so that there’s an opportunity for them to grow.”

There’s a lot of tech interest in coffee these days. Bulletproof, purveyor of the trendy butter coffee popularized by the eponymous diet, raised $9 million in funding in 2015 to open a Los Angeles café. Oakland-based Blue Bottle has raised more than $120 million in funding from Silicon Valley investors.

In a September interview with Forbes, Jaber said the $45 million funding round for Philz was led by private equity firm TPG, and that the money will be used to push his family’s business outside of the Bay Area. Next stop: Boston, where the company plans to expand in 2017.

Philz Coffee Can’t Pay Baristas $25 an Hour, but They Can Help Make Their Lives Better [Recode]
Burgeoning Cafe Chain Philz Coffee Plans Boston Expansion [E]
All Coffee Coverage [E]

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