Citizens on Republic
One of the fastest growing specialty cafe & lifestyle brands
Starbucks has held a a near monopoly on to-go coffee in the US for years. But when a big name gets comfortable, disruption is often not far behind. And a cafe competitor is approaching.
Citizens is an Australian-inspired cafe and coffee shop begun in New York City. The brand already has a strong social media following, and its four stores have weathered the pandemic skillfully. We reached out to co-founder and CEO Justin Giuffrida to learn about the company’s goals for national expansion.
Note: This interview was conducted over phone and email. It has been lightly edited for clarity and length.
Can you give us a brief elevator pitch for your company?
Citizens Coffee is a Forbes and Vogue featured company disrupting the monopolized Starbucks coffee market. With average revenues increasing 87% YoY and EBITDA increasing 84% YoY, the company is rolling out a national expansion and is poised for further international growth to become a global industry leader in coffee & healthy food.
What inspired you to take the leap and build this company?
Andrew Geisel and I moved to New York from Australia in 2016. Upon a chance meeting in a café, we bonded over how much we missed the unique Australian café experience. In late 2016, the vision sprung to life. Citizens of Chelsea, the Australian inspired, 75 seat full-service café opened at 401 West 25th Street in the urban Manhattan neighborhood of Chelsea. It wasn’t long before there were regular lines out the door and PR pieces from Forbes, New York Times, and Vogue on the “Duo taking over NY’s brunch scene.” Four years later, three more cafes and 36,000 loyal brand followers, Citizens is just getting started in becoming the next generation of what cafes can be across the USA.
What past experiences prepared you to start, build, and lead your company?
Andrew and I are both skilled operators with deep domain experience in the coffee industry, having led some of Australia’s premier brands. We have been featured in top publications such as Forbes as up and coming entrepreneurs in the wellness & lifestyle hospitality category.
After graduating in finance & economics, I spent a decade building top-tier brands within the specialty coffee, food and wellness industry. Andrew spent years working with one of Australia’s premier coffee companies, Merlo Coffee. Then, he expanded his professional skill set by graduating from Australia’s top architecture & design school.
What is your vision for the future of the industry you are operating in?
The coffee and food industry will exponentially continue its mass shift away from unhealthy and dated concepts, as seen with the National Coffee Association 2020 consumer report that shows specialty coffee capturing more than 60% market share in 2020, up from 9% in 1991. This marks the mass shift away from Starbucks, and we believe Citizens is at the front of that wave.
Who is on your team and how did you come together?
Our team has been assembled with A-players as the company has scaled. We have top industry experts from high growth companies advising & invested in the executive team.
CEO: Justin Giuffrida, corporate development, finance, growth and strategy
COO: Andrew Geisel, head of development, real estate, operational technology
Director of People and Culture: Benjamin Darmanin, people development, pipeline development, culture, training infrastructure
Executive Advisory: James Rogers
Do you have any competition, if so, how do you differentiate?
We face competition in Starbucks, Blue Bottle, Inteligencia and La Colombe.
Citizens has two major revenue streams under one roof — robust coffee togo revenue stream & high volume brunch and lunch products. In comparison to Starbucks or Blue Bottle which only sell coffee and pastry, Citizens revenue attribute over 70% to food which lifts the per head spend of customers over 300%. Because of this, the store level volume & EBITDA exceeds that of publicly listed companies in the coffee and food space.
Citizens also has an unfair advantage in social media & PR. In under four years Citizens has amassed more than 36,000 instagram followers world wide. This is a product of our visually beautiful food, coffee and store design. Citizens’ Instagram following outperforms brands like Le Pain Quotidien (which has more than 250 stores compared to Citizens’ four). Put simply, Citizens’ brand is stronger than companies that have more than 62x the store count. Imagine where the brand can be in five years.
What does your business model look like?
Citizens’ business model is one of compounding economics. The stores are extremely profitable (up to 21% profitability per location) and have a very low build cost of $250,000. The result is a repeatable, scalable execution model that generates best-in-class store ROI with high-volume stores with attractive operating margins, efficiently built and at a very low cost.
- Best in class economics:
- Sales-to-Investment Ratio
- Citizens 9.7x
- WING 3.1x
- Shake Shack 1.9x
- Store Return on Investment
- Citizens 226%
- WING 83%
- Shake Shack 51%
- Sales-to-Investment Ratio
- High Unit Volume $2 million or more (This represent average revenue from every cafe opened)
- Store Payback Period of 12 months
- Best in Class Food Product Gross Margin 75%
What brought you to equity crowdfunding and how do you intend to use the money you raise this round to scale the business?
Equity crowdfunding forms part of our brand strategy to build a deeper relationship with our customers and locals. Citizens has 36,000 brand followers and plans to deepen the relationship and loyalty by including them on the journey of growth.
What do you want potential investors to know about you and/or your company?
The machine is already built and proven with success. Citizens Coffee has achieved best in class margins, sales, and build cost exceeding public listed companies with the four locations in NYC. The machine is built, now is the time to scale.
This is the perfect time to grow for a company like Citizens. Real estate costs are down, development costs are down, good talent is available and volumes are up. The company is profitable, and there is a golden opportunity to expand in the down market. Look at Panera Bread in 2008 — it opened more than 100 stores in an economic downturn and went on to IPO in 2009 with an incredibly successful company. Citizens has proven not only to be resilient, but profitable in this environment. Now is the time to grow.
As you think about the business 5-10 years down the road, what do you see exit opportunities looking like? Have you set any future goals for the company?
Completion of the five year expansion plan will see Citizens expand globally and achieve revenues of more than $100 million. The business will be in a strong position to merge with a strategic partner, accelerating a path to IPO or exit through private equity or industry acquisition.
Recent M&A transactions in the specialty cafe space have seen comparable high growth companies achieve 2.5X revenue valuations. Citizens Coffee is targeting a 2.5X revenue valuation on a $100 million run rate. This could potentially result in more than 20x return for investors who participate in this round on Republic.
How was your performance in 2020 despite the pandemic?
Monthly net profitability increased up to 6% in 2020 due to cost reduction and revenue stream expansion. Per seat sales increased at all locations — signaling that our business pivots into online, app and dinner were all successful in achieving resilient financials. Unit level revenue reached 86% of prior year sales with only 25% of the capacity of seating. Citizens recorded revenues of more than $2,000,000. This is a tremendous outcome for the business which confirms that our concept is absolutely strong and resilient in Covid times.
The business was able to achieve over 50% of prior year revenues whilst operating with the following constraints:
- Closed for 30% of the year
- Operated with no indoor seating for majority of the year (7 months)
- Seating capacity was dropped by 75%, limiting the capacity to bring in revenue
We at KingsCrowd are excited to see where Justin and his team take the company. Citizens is currently raising on Republic.
About: Inez Sanjaya
Inez's background is in the startup ecosystem, which she is very passionate about. Inez has experience working in a startup, a Google-backed accelerator, and lastly in Plug and Play Tech Center. Prior to this, she was a part of VU Venture Partners doing deal sourcing and conducting due diligence. Inez graduated from the University of California Berkeley with an Economics degree.