Like nearly every business on the Gulf Coast, PJ's Coffee, a famed New Orleans institution, suffered serious losses following Hurricane Katrina. Founded nearly 30 years ago in the heart of the Big Easy, pre-Katrina PJ's was a chain of 42 coffeehouses located across Alabama, Florida, Louisiana, and Mississippi. As a result of the disaster, all 25 of PJ's New Orleans stores suffered damage.
Two years ago, BusinessWeek's Stacy Perman spoke to Chris Morocco, president of PJ's Coffee, in Atlanta, and Randy Hollingsworth, then PJ's vice-president of operations about the impact of Katrina on their business (see BusinessWeek.com, 9/29/05, "Grounds for Hope in New Orleans"). On the second anniversary of the disaster, Hollingsworth, now PJ's brand leader, discussed the company's road to recovery. Here's what he had to say:
An Indelible Mark
Roughly two years after the Katrina disaster, I can say without hesitation that life is less of a daily grind. In the parishes, towns, and cities that define the Gulf States, it now takes less effort to appreciate things that seem fundamental to most people in America like fresh water, consecutive days of power, or a police presence. Running a business like PJ's Coffee of New Orleans now takes fewer makeshift resources than the months immediately following the disaster.
Less is a relative term in a post-Katrina era, though, as we approach two years since it left an indelible mark on a city with the third-largest coffee port in the U.S.; one of the most recognized streets in the world, Bourbon Street; a city whose architecture is not of this country, but of this world; a city that borders the most famous or infamous river in the U.S. Even fewer families are choosing the forever disaster-related Katrina identity—I noticed it was recently reported that Katrina dropped more than 100 slots in the popularity list for newborn names.
A third of our PJ's Coffee stores (we added "of New Orleans" to the brand in 2006 to feature our proud heritage and commitment) were dramatically affected by Katrina. Damage at our franchisees' locations ranged anywhere from several thousand dollars to in excess of $200,000, just in property and store damage. That does not include loss of operating income—or individual owners whose homes were damaged or lost. Felton Jones, our longtime roaster, lost his entire home as did his roasting associate Brian Beck.
Listening to Mark Twain
In those initial days and weeks following the storm, we were persistent in trying to determine the whereabouts of our franchisees and our corporate employees, and the scope of damage at our stores and our roasting facility that rests just a stone's throw from the mighty Mississippi. Mark Twain wrote, "The Mississippi River will always have its own way; no engineering skill can persuade it to do otherwise." How perceptive he was.
Realizing there was much at stake for us as a company, much at risk for the livelihood of our franchisees both inside and outside the Gulf, and much more in jeopardy close to home, it quickly became apparent to us that the only way to get our arms around the situation was to go against traffic, against the word on the street, against trucks and tanks and armored personnel carriers, and make our way to New Orleans.
We would fly to Jackson, Miss., and make the drive to New Orleans, stopping at every exit to fill gas containers, gaining familiarity with McComb, Miss., the last-chance fueling destination before entering Louisiana. Cash was important, but gas was king back then. Water was king. Without either liquid, you didn't go very far or last very long.
Sanctuaries for Locals
While armored personnel vehicles kept us at bay initially, we found friends in the state patrol—frequenters of PJ's Coffee, who eventually helped us navigate around the despair to get us to our roasting facility located in the Faubourg Marigny, which is the next neighborhood down river from New Orleans' French Quarter. It is the backbone of our coffee business and our franchises.
Some stores in outlying areas like Hammond, Covington, and River Ridge recovered in a few days. These stores would soon become sanctuaries for locals. As we were unable to get our roasting facility back up and producing until Nov. 12, 2005, we relied heavily on an Atlanta roaster to supply our franchisees with the coffee—roasted to our PJ's Coffee profiles—that they required to survive.
While we worked to ramp up our roasting facility, we faced the challenge of physically getting coffee to the stores. We could no longer take transportation for granted. Suppliers were reluctant to truck product into the Gulf States or to export it from our roasting facility to our markets in Georgia, Florida, and New Jersey, for example. The supply chain of American invention was breaking down in both directions. We persevered like many companies, giving up efficiencies to simply get the job done. Our people slept in cars, trailers, and on air mattresses in warehouses to fill in the gaps of a supply chain that was broken for several months across the Gulf.
Last spring was the first time I was able to fly into New Orleans International Airport instead of making the three-hour, 220-mile commute from Jackson by car. I remember seeing our PJ's Coffee shop on Concourse D dark. It's one of two locations that never bounced back. Concourse D remains today much like the neighborhoods in which local businesses can't sustain themselves. Our franchisee in the Lakeview area continues to hope for the return of their neighborhood. For now, though, they can't justify reopening their store. And as a franchiser with a conscience, we can't insist they open. That's not our way. That's not the New Orleans way.
As it relates to Katrina and the related bureaucracy, what we have learned doesn't help us much. Our franchisees may have learned that business interruption insurance is important, if not vital. Yet such insurance has become either cost-prohibitive for a small business or simply unavailable. As a franchiser, we have come to learn you can't have enough liability insurance along the Gulf. We have also come to learn that liability insurance costs three times what it used to. There's not much we can do about that. It's simply the cost of doing business along the Gulf.
The Home of Good Coffee
As we approach 30 years since Phyllis Jordan founded our great coffee brand, years before specialty coffee found its way to every street corner, we are reminded that New Orleans defined the idea of specialty coffee, leveraging its New Orleans port to bring the best beans in the world to our roasting facility, then to our coffee shops, and to neighbors who wanted to enjoy a great cup of coffee.
We expect to hit 60 stores before the end of 2007, with plans to franchise more stores in 2008 than ever previously. And so for Phyllis, our franchisees, and our customers, we are back, more robust than ever, more full of hope knowing our true place is to be the neighborhood coffeehouse, that sanctuary for friends, family, public servants, students, travelers, neighbors—in the best of times and the worst of times.