The Starbucks Solution

Mike Sheldrake figured he was dead when Starbucks opened two stores near his indie coffeehouse. Now his business is up 40 percent.

Lately, a glossy polo-green 1998 Cadillac El Dorado has been showing up in the small parking lot at the far western end of Second Street, the one that Polly's Gourmet Coffee shares with Fingerprints Records, Z Pizza, Now Playing video and Kentucky Fried Chicken. The car does not belong to Mike Sheldrake; he still drives a 1969 VW Bus. The Caddy belongs to Bob Phibbs. "My license plates say 'Retail Doctor,'" says Phibbs, in case you didn't notice. His business cards say that, too. "When I first started showing up here, though, the employees called me 'El Diablo.'" Most of those employees aren't around anymore. Phibbs shrugs. "When I got here, things were going so badly they were talking about looking for other jobs, anyway."

Phibbs is sitting next to Sheldrake and the slowly expanding collection of fractured coffee beans, alternately glowing with the quiet pride of an exalted guru and clucking with the affectionate exasperation of a meddling mother. "I had been watching Mike's business for quite a while," he says. "I live nearby. I was just a customer. But I'm also the Retail Doctor, you know? I could see this guy needed help, but it took me six weeks to convince him."

Phibbs is a former district manager with the Howard & Phil's western-wear chain. When he was managing the company's store in South Coast Plaza, he won an award for the biggest sales increase in the shopping center. Since Phibbs set out as an independent sales and marketing consultant, his biggest success has been the rejuvenation of the Bayshores Inn in Newport Beach. "The Bayshores was a 21-room hotel that treated itself like a Best Western," Phibbs sniffs. "Now it realizes it is a premium destination in a prime resort town."

Similarly, Sheldrake gratefully credits Phibbs as the man whose revitalization plan saved Polly's Gourmet Coffee. "I was so caught up in the operation that I couldn't step back to see the big picture," Sheldrake says. "I was so busy looking for solutions that I couldn't see the one staring me right in the face."

Observing Sheldrake and Phibbs sitting next to each other, it's easy to understand why it took a while for their relationship to warm up. Their association still seems unlikely. Phibbs is a slender fellow with an edge to his features and a bit of a sting in his speech. He has a meticulous presence even in casual clothes—on this afternoon, a pressed plaid shirt atop a dark mock-turtleneck pullover with black-rinsed jeans—and he keeps his thinning hair closely snipped. When he's not being a retail doctor, he's being the artistic director of the South Coast Chorale. Sheldrake, on the other hand, resembles a shopkeeper out of a storybook. He has a full head of hair and a thick mustache, though both are turning gray, and he exudes the comfort of someone who relies on his working-man's muscles and his conventional wisdom. He likes to golf and roast coffee.

"I told Mike, 'I don't want to teach you to make a latte, just how to do your business,'" Phibbs says. "But he kept dodging me. Mike has a real passion for coffee. Things began to get better for Polly's Gourmet Coffee when he was finally able to make the leap that someone else might have a better perspective on the coffee business. I told him, 'You've got a brand name here, and you don't even know it.'"

Sheldrake relented—"I decided to invest in Bob," he says—and almost immediately began to regret it. "Next thing I knew, Bob came up with a 20-page report filled with a checklist of 85 things that Polly's needed to change," Sheldrake recalls.

"Later, the list was expanded to 100," Phibbs interjects.

"It made me mad," Sheldrake continues. "Half the things I didn't agree with, and the other half I already knew needed to be done and was embarrassed because I just hadn't done them."

The process became very personal for Sheldrake. "Basically, Bob would challenge everything I was doing, and I had to defend it," he explains. "Oftentimes my only defense was, 'Because that's the way we always do it.'"

Every time Sheldrake offered that explanation, Phibbs seized upon it in a way that sometimes seemed like an invalidation of everything Sheldrake had been doing for more than two decades. "Like lots of small-business people, Mike cruised through the 1980s doing well and not really knowing why," Phibbs says. "But the problem with that is when things got more competitive in the 1990s and those businesspeople started doing badly, they still didn't know why."

When the review was completed, the revitalization began. Again, Phibbs was pushpin direct. "The list was thorough, but everything fit into one of three categories: the facility, the employees and the advertising," he says. "It definitely wasn't brain surgery."

Polly's Gourmet Coffee's interior got an overhaul. "We had to reinvent the store, but we did it without changing the basic character of the store," says Sheldrake. "It was funny. People who hadn't been in for a year would show up and say, 'Yep, the same old Polly's.' But people who came in every day would say, 'Hey, you've changed something again.'"

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