Ann Arbor's Espresso Royale to close Carpenter Road store on Nov. 3

An Ann Arbor-based coffee house chain will close one of its local stores next month as it plans to open another store in East Lansing.

Espresso Royale, based on South Main Street in Ann Arbor, is closing its Carpenter Road location due to low sales volumes.

"Unfortunately, that store is surrounded by a lot of aggressive competition," said Sarah Douglas, regional manager of Michigan stores for the chain. "It's a small location and it just didn’t attract enough customers."

The store's five employees have been offered transfers, and four accepted, Douglas said.

The potential closing was discussed over the past year, Douglas said, and the company decided to move forward this fall.

The chain - founded in Ann Arbor and still home to five other stores in the area - now operates 21 corporate stores in five states.

Douglas said it's still looking for expansion opportunities. Among them is the new store in East Lansing, which will open by mid-November.

"We're a real small company and trying to keep growing and moving," she said.

The company roasts its own coffee and makes its own baked goods, Douglas said.

It's also holding up well despite the economy, she added, thanks in part to a new pricing structures that emphasize deals like specials on lattes.

The competition is fueled by companies seeking market share from the large number of coffee drinkers in the U.S. According to data from the National Coffee Association, 17% of the adult population consumed a gourmet beverage on a daily basis in 2008 and 14% in 2007. And 54 percent of adults drink coffee beverages daily, according to early 2009 data, a level consistent with last year.

At the same time, more people are preparing their coffee at home, according to the NCA. Recent industry data also shows fewer people are drinking coffee in restaurants.

In the case of Espresso Royale, the Carpenter Road store started out strong when it opened about six years ago, Douglas said.

But then competition heated up. Now, within about a two-minute drive, there are three Starbucks - two with drive-throughs, Biggby Coffee, Dunkin' Donuts, Tim Horton's and three McDonald's, which has been pushing an expanded coffee menu at budget prices.

"Sometimes it’s hard for the little stores without a drive-through," Douglas said. "Our other stores are doing great."

Paula Gardner is Business Director at AnnArbor.com. She can be reached by email, (734) 623-2586 or on Twitter.