7 Leaves Cafe will happily follow in Starbucks Corp.’s footsteps.
But it brings its own recipe for success.
You can find an example in a strip mall at Trask Avenue and Euclid Street in Garden Grove, not far from the company’s headquarters. Seattle-based Starbucks Corp. gave up a store in the strip mall at the intersection in 2011.
7 Leaves snapped up the spot, and it’s now the top performer for the chain, which has grown to eight stores and 300 employees spread over North OC and southern Los Angeles County.
The average 7 Leaves sells about 2,000 drinks per day—all Asian-style concoctions—and the average drink is 16 ounces and goes for $3.
That comes to an estimated $12 million in revenue for the four brothers who started the business about five years ago.
Profit margins range from 20% at smaller stores of about 900-square-feet to 35% at the Garden Grove location, which is about 2,200-square-feet, said company President Sonny Nguyen.
Most of the stores are kiosks or drive-thrus. Locations with lots of sit-down space, such as the store at Trask and Euclid, tend to bring the higher margins. Nguyen said he and his brothers, Vinh, Quang and Ha, are thinking bigger in more ways than one, with plans to open eight more stores next year, including a 4,000-square-foot site in Cerritos.
They’re also considering franchising the company.
The brothers started out in Asian-American neighborhoods, and most of 7 Leaves’ clientele is Asian-American and Latino-American, though the Nguyens plan to expand the chain into more diverse areas. Its Huntington Beach location, for instance, serves a primarily white clientele.
Simple Yet Complex
7 Leaves, which is named after a drink made with seven leaves, has grown in OC because it doesn’t try to compete with nearby cafes or restaurants, Nguyen said. In fact, it sought out spots abandoned by Starbucks.
National beverage chains compete with area restaurants by selling sandwiches, desserts and other food items that take customers from local businesses, Nguyen pointed out. 7 Leaves cafes, by comparison, keep their selection of food limited to a few macarons or sweet croissants. In some areas it sells drinks to other restaurants.
Nguyen said he and his brothers prefer to partner with local businesses to grow revenues in the communities.
“We don’t want to be everything to everyone.” he said. “We want to be the place you enjoy before and after breakfast, before and after lunch, and before and after dinner.”
The national and regional chains primarily offer coffee-based products “that appeal to a mature audience,” Nguyen said.
7 Leaves doesn’t take on the bigger competitors directly on coffee, instead offering beverages based on Asian recipes and ingredients.
Only 20% of the drinks served at 7 Leaves contain coffee. Most contain tea, fruit or vegetable roots.
“We appeal to young adults who have a sense of adventure,” Nguyen said. “Each one of our drinks has a different base of ingredients.”
Most new customers start out their 7 Leaves experimentation by tasting Vietnamese coffee, a slow-brewed drink mixed with sweetened condensed milk.
“It appeals to all ethnicities and communities in OC,” Nguyen said, “It usually has a (caffeine) kick and sweetness to motivate people for about five hours.”
Customers eventually begin to “explore the world of beverages” that includes Japanese Matcha Tea and Filipino Taro Milk drinks, he said. The drinks are cooked for hours in soup pots on 12-burner stoves according to traditional recipes.
Mung Bean Milk Tea, for example, is a combination of mung beans, tropical Pandan leaves, tea and coconut that undergoes a five-step daily cooking process before straining and refrigeration prior to serving. The recipe makes about 15 drinks.
7 Leaves’ drinks are poured and sealed into splash-proof cups for customers.
“We want speedy customer service, but don’t want to make the drinks quickly,” Nguyen said. “Quickly-made drinks are lower quality in taste.”
The drinks have also been slightly altered for American palettes. For instance, the normally ultra-strong “Vietnamese coffee in its original recipe is a little too harsh for Western preferences,” Nguyen explained.
Growing Pains
He said he and his brothers started the company in 2012 with their own funds after they began to “burn out” at their own jobs.
Nguyen was a regional vice president for Bank of America, managing 300 people. Ha practiced law, Quang was a software engineer, and Vinh worked as a network engineer.
They immigrated to Orange County from Vietnam as children in 1983 via a refugee camp in the Phillipines.
Nguyen and his brothers started the company after Vinh enjoyed a variety of drinks on a trip to Asia and discussed his adventures with them for months. They eventually decided to open their first store in Garden Grove.
“It didn’t have any seats, and it took a lot of work,” Nguyen said.
The Nguyens spent months thinking about whether to replicate the traditional cooking processes of Asia or work with flavor companies that could provide a shortcut.
“After a while, you learn that only an apple tastes exactly like an apple,” he said.
They also deliberated about business operations, shipping and storage.
“We drove supplies to the stores for a while,” Nguyen said, “then we realized that we were more successful if we simplified everything.” So they hired specialists to provide ingredients and handle logistics.
“It took about three years before we opened store number two,” Nguyen said.
It was 2015, and the brothers opened five locations before the year was out, followed by two more this year.
Nguyen said he and his brothers prefer a low-profile lifestyle that allows them to enjoy time with their families and travel effortlessly around OC, but that they adapted after they met Tam Nguyen, president of Advance Beauty College in Garden Grove and former chairman of the Vietnamese American Chamber of Commerce, and no relations to the brothers.
Tam advised that they become visible leaders in the community to set an example for the next generation of business owners.
The brothers are liked by the community, Tam Nguyen said, are respectful toward employees and customers, and have created an enjoyable customer atmosphere.
Scale Time
They’ve started to debate about whether the business should become a franchiser. 7 Leaves hasn’t grown according to an established plan, and its made-from-scratch approach can be challenging to codify.
“We opened the second store because we needed seating,” Sonny Nguyen said.
The cafes don’t even have a uniform color palette. “We look to the stores’ communities for inspiration,” Nguyen said. “We want to know what the stores represent to the community and how people feel in them.”
Then the Nguyens modify a store’s interior according to local tastes.
It’s been a challenge for Nguyen to draft a manual that lays out 7 Leaves’ culture and operations.
He said he and his brothers prefer to open stores in multicultural communities where people are more likely to enjoy the international flavors. New stores should also be no more than about 45 minutes from an existing location so that employees can access nearby help if needed.
The brothers have decided to ask other successful OC companies for advice. They’ve talked with chefs, logistics operators, and retail and public relations specialists at Irvine-based burger chain In-N-Out and representatives from Disneyland Resort in Anaheim.
“We can’t use all of their advice, because some of their tips don’t fit with our processes, but the discussions shorten the learning process of operating and scaling a business,” Nguyen said. “The business seems to be easier to operate as it grows—there are more people who understand how it operates and who can provide help to all the stores.”
