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Posted on Mon, Jun 3, 2013 : 5:59 a.m.

Ann Arbor's Espresso Royale eyes careful expansion as coffee competition grows

By Lizzy Alfs


Espresso Royale CEO Marcus Goller stands near the company's coffee roaster at its plant in Whitmore Lake.

Melanie Maxwell |

Editor's note: This is part of a series of articles about local companies surviving the economic downturn.

Related coverage: Emerging from the Great Recession: How Ann Arbor area companies bounced back

Espresso Royale president and founder Marcus Goller is confident when he says the Ann Arbor area-based coffee shop is the tortoise, not the hare, in the race toward expansion.

Founded in 1987, the 500-employee coffee shop chain now operates 21 stores in five states, a roasting plant just north of Ann Arbor, and an online store. The plan is to grow its store count by two or three locations per year, Goller said.

“I feel more confident now than I ever have about the company,” he said. “It’s been such a tough, challenging, scary couple years and I see opportunities now. We’ve been around since 1987 and we’ve weathered anything anyone can throw at us.”

Despite the economic downturn, market revenue in the $18 billion U.S. coffee industry increased at an average annual rate of 5.6 percent from 2008 to 2013, according to an IBISWorld report. But competition in the market is fierce, with more than 25,000 coffee shops in the country and 70 percent of coffee sales coming from the top 50 coffee shop operators.


Espresso Royale coffee roaster Jeff Dout prepares bags of coffee at the Whitmore Lake roasting plant.

Melanie Maxwell |

Goller said Espresso Royale managed to grow its sales year-over-year since 2008, but that didn’t come without sacrifices. The company relocated its corporate offices from South Main Street in downtown Ann Arbor to a warehouse in Whitmore Lake; it halted expansion plans and closed a store on Carpenter Road in 2009; and Goller took a four-year pay cut and slashed corporate positions, like chief financial officer and marketing director.

“We really liked our office on Main Street, but it was more money than we needed to spend,” he said. “You do what you have to do to make the business work.”

The key, he said, is not passing the effects of the economy on to the customer. He called pricing coffee “an art” and said increases can easily backfire on small coffee roasters and retailers. Espresso Royale raised prices by an average of 3.2 percent in 2010, and again in late 2011 by 1.25 percent. To minimize the effect of price increases on customers, Goller said offering coupons, loyalty club programs and daily deals is crucial.

“Pricing is an art and I think we do a good job. To raise prices much more would be dangerous,” he said. “We can’t act like a gas station and put up a new price every day. We can either get more customers to increase volume; raise prices; or cut quality or portions. Those are the things you can play with.”

The average American spends more than $20 a week, or $1,040 per year, on coffee, according to Accounting Principals’ 2012 Workonomix survey. Although Goller called coffee an “affordable luxury,” he said some people cut their coffee purchases when money is tight. He attributed a marked decline in Espresso Royale’s sales during the first few months of 2013 to the higher payroll taxes.


Coffee beans at Espresso Royale, shown before they are roasted.

Melanie Maxwell |

At Espresso Royale's 12,000-square-foot Whitmore Lake roasting plant, 160-pound bags of coffee beans from places such as Haiti, Burundi, Mexico, Colombia and Guatemala line the walls. A worker oversees the coffee roasting operation — where 100,000 pounds of coffee is roasted per year — and someone prepares Espresso Royale’s baked goods, which are delivered by truck to nearby stores each day.

Goller takes pride in his company’s coffee and baked goods and said he’s not willing to cut corners to boost profits. Espresso Royale works with Chicago-based Crop to Cup to get family farmed coffee, and Goller pointed to Espresso’s made-in-house chai tea as an example of a quality product.

Although the first Espresso Royale opened in Oklahoma in 1987, Goller said the Ann Arbor State Street store, which opened in 1988, was shockingly successful. It made sense to headquarter the company near that store as Espresso Royale expanded to various college campuses.

“Ann Arbor is wonderful, because (people) get it. If they don’t take a stand and defend local businesses, they’ll disappear,” he said. “We always look for charming, busy, touristy, college places where people gravitate to. We can’t expect people are just going to find us.”

Over the years, Goller said, Ann Arbor has become saturated with coffee shops, but he sees opportunity near Eastern Michigan University’s campus. Espresso doesn't operate a store in Ypsilanti, but Ann Arbor-based Sweetwaters Coffee & Tea recently opened a store on Cross Street.

Goller also wants to grow the company’s retail presence in grocery stores.

“We’re just going to keep slowly growing,” he said. “We’re definitely the turtle, but at this point, we can’t afford to keep hunkering down. If you don’t grow, you die.”

Watch the video below to see how Espresso Royale's coffee is roasted.

Lizzy Alfs is a business reporter for Reach her at 734-623-2584 or email her at Follow her on Twitter at



Tue, Jun 4, 2013 : 2:41 a.m.

I love stopping at the location on Plymouth Road for an iced green tea and delicious (vegan) zucchini bread. Also like using a Flock Tag to get points for a free drink.


Mon, Jun 3, 2013 : 5:21 p.m.

They also have great non coffee drink. Their "Green Dragon" which is ginger and honey is amazing


Mon, Jun 3, 2013 : 3:57 p.m.

Since my office moved downtown, I've taken the opportunity to visit most of the coffee shops. I still go back to Espresso Royale as my first choice. I wouldn't miss Starbucks if they left town (although I might if they disappeared from various highway service plazas). I'm also pretty fond of Mighty Good Coffee, but ERC is still #1 in my book. Just call me a Customer Loyale. :)


Mon, Jun 3, 2013 : 3:03 p.m.

Nice article Lizzy. I work with Crop to Cup Coffee Importers, mentioned in the article. While we didn't supply them with the Haitian coffee they are serving now I will say that this is one cup you should go in to check out before posting up a review. It is an example of what Espresso Royale is doing today, not last year. This coffee tied to supporting a water nonprofit, but more, I've tried sourcing coffee from Haiti - it is difficult to get coffee as good as they got - and it is a place that really needs customers like Espresso Royale. Again I work with Espresso Royale, but the Haitian coffee they are currently serving isn't ours. I just really respect the company all the more for doing things like this. Espresso Royale may be a turtle, but it is turtle-stepping it up a step in ways which are on par with (or simply different from) places like Zingermans or Roos, both of which are awesome in their own right. Coffee is big, and in coffee-forward towns like Ann Arbor, there is a lot of ways to do the right thing. My $.02 I love the discussion here, thanks to all who posted!

Dirty Mouth

Mon, Jun 3, 2013 : 1:43 p.m.

These guys are day late and dollar short. Back in the 80s, they controlled the market, but then, for whatever reason, they stopped expanding and their quality started to suffer. Now, in the midst of the mature coffee market they aim to expand? How? Zingerman's dominates the high-end (and rightly so) and Starbucks has nailed the rest. Good luck.


Mon, Jun 3, 2013 : 7:04 p.m.

Zingerman's does many things well but coffee is not one of them.


Mon, Jun 3, 2013 : 3:39 p.m.

"Zingerman's dominates the high-end" Dominates the high-end, or the high-priced? Hey, like most of AA, I love and respect Zingerman's for so many reasons. Their coffee, unfortunately, is not one of them. If you want to extend the market to Ypsi, Ugly Mug and Comet are the only two true high-end coffee shops in the area. Zingerman's has high-end sandwiches, not high-end coffee.


Mon, Jun 3, 2013 : 1:37 p.m.

Ann Arbor coffee from best to worst: 1. Comet 2. Morgan & York 3. Roos Roast ... 83. Starbucks 84. Caribou 85. Espresso Royale To be fair I only drink Espresso drinks, so I can't comment on the basic coffee choices.


Mon, Jun 3, 2013 : 4 p.m.

"Especially attached to an article highlighting how a local business is working to keep their head above water." This is the PERFECT place for my personal review. Smart business owners don't look for the folks "blowing sunshine". They look for the reasons they're suffering. Also note, those top three I picked are also local, so I don't see your point at all.


Mon, Jun 3, 2013 : 3:48 p.m.

You're certainly welcome to rate your coffee preferences, but the big shift down to 83-85 is a little snarky. Especially attached to an article highlighting how a local business is working to keep their head above water.


Mon, Jun 3, 2013 : 3:16 p.m.

I think you can definitely rate a coffee house just by it's espresso, it is the base of most drinks and it is called "Espresso Royale"!

Tex Treeder

Mon, Jun 3, 2013 : 1:49 p.m.

You only drink espresso, but you rate everyone's coffee? That doesn't even make sense. As a regular coffee drinker, I would rate ERC's coffee substantially higher. I don't care for Starbucks: overly roasted, in my opinion, making it taste burnt.

Dirty Mouth

Mon, Jun 3, 2013 : 1:44 p.m.

Comet, is a speciality shop and their market share is less than 2%.

Sam McDermott

Mon, Jun 3, 2013 : 1:31 p.m.

I imagine the coffee is actually coming from Colombia, not Columbia...

Lizzy Alfs

Mon, Jun 3, 2013 : 1:48 p.m.

Haha, you're probably right about that one. Fixed it - thanks!

Robert D. Mosley

Mon, Jun 3, 2013 : 12:56 p.m.

I really enjoyed the coffee and the people who work there when I was last in AA for business.


Mon, Jun 3, 2013 : 12:49 p.m.

Since I am a coffee lover who has never heard of this company or noticed any of its stores, I have to think that maybe eliminating the marketing function was not the best idea.

Nick Treeville

Tue, Jun 4, 2013 : 3:56 a.m.

The Ypsi right next to A2, where these stores are, or the one in Greece?

Lizzy Alfs

Mon, Jun 3, 2013 : 1:24 p.m.

@PattyinYpsi: Marcus recently hired a marketing director who will be revamping the company's website and its social media brands. He sees this as a very important growth strategy for the company moving forward.


Mon, Jun 3, 2013 : 11:05 a.m.

I wish they would make better coffee.


Mon, Jun 3, 2013 : 1:31 p.m.

Nice folks, bad coffee.


Mon, Jun 3, 2013 : 10:17 a.m.

I have neglected to go there or purchase their coffee in awhile. This article is a reminder of how good it is and I need to grab a bag. I love their Verone.

J. A. Pieper

Mon, Jun 3, 2013 : 10:11 a.m.

I love this coffee shop, especially the people who work there!