Small Business

Grounds for Hope in New Orleans


Signs of business life are slowly starting to emerge in New Orleans and the other areas rocked by Hurricanes Katrina and Rita. Despite the challenges that come with a lack of utilities and changing directives from government officials, some business owners are doing what they can to pick up the pieces and help spark economic recovery on Main Street.

One such business is New Orleans' famed PJ's Coffee, now a 42-store chain of coffeehouses that was founded 27 years ago in the heart of the Big Easy. With 516 employees and locations across Louisiana, Mississippi, Alabama, and Florida, some 30% of PJ's stores were initially inoperable after Katrina blew through. The hurricane also shut PJ's roasting facility, located on North Peters Street between the Mississippi and landmark watering hole Pat O'Brien's. After being bought by Atlanta-based Raving Brands in 2002, PJ's quickly began a franchise expansion and added wine bars to its portfolio. Now it is in the rebuilding business.

BusinessWeek Online reporter Stacy Perman recently spoke with Chris Morocco, president of PJs Coffee, in Atlanta, and Randy Hollingsworth, PJ's vice-president of operations, in Jefferson Parish, La., about their efforts to help rebuild both the community devastated by Katrina and the coffee company so closely associated with it. Edited excerpts of their conversation follow.

What has been the extent of the damage to PJ's?

Morocco: We have roughly 30 stores in New Orleans and they were all hit -- 10 stores have pretty serious damage. Ninety percent of our business has been affected. There's been minimal damage to the stores on the outskirts of the city and they are up and running.

What, if anything, did you do in order prepare in advance of Katrina?

Morocco: Our roasting-facility operation is in New Orleans and supports all of our stores. As the hurricane got closer, we lined up an alternative roaster in Atlanta, Coffee AM, and partnered with them. So we are able to supply our stores that survived.

How are the stores functioning?

Morocco: Our New Orleans-area stores are running. We have two stores in the airport that we could open as soon as the airport allows us to open for business. The rest of the stores can be opened anywhere from one month to six months or a year. There are some that we haven't been able to get to yet and even see them.

What are you doing to assist your franchise owners and employees, and to get the remaining stores online?

Hollingsworth: We are assisting them in assessing their insurance claims. First, they have to see the damage. We have some franchisees who haven't been able to get a handle on their stores. We have also organized a program with all of our vendors to help rebuild the stores -- all equipment, signage, etc., our vendors will offer at cost.

Morocco: We don't have the numbers yet on how many people have done so, but the surviving stores have offered jobs to any PJ employee displaced by the hurricane. And we moved four members of the New Orleans plant to Atlanta, we've found them places to live, and gotten them clothing.

Even for the operational stores, it must be anything but business as usual.

Hollingsworth: The biggest challenge is finding employees -- most residents have evacuated. Many haven't even decided if they will come back. One of the slowest things to recover here is the living situation.

One of things I've suggested [to franchise owners] is to go to a nearby store that is open -- like a Target (TGT), where there are motivated people -- and give them their business card and say, "Are you happy here? If not you might be happier serving coffee." Always have a business card in your pocket.

What does the local business community look like in the area?

Hollingsworth: I'm standing in Jefferson Parish, 15 minutes from downtown New Orleans, and it looks like a regular city. There is power and water. In New Orleans, there is water and electricity in parts of the central business district, the French Quarter, and Uptown. Our stores that are open are busy -- one [owner] is trying to...open a second store.

What comes next?

Morocco: Those stores that are open, business is up. People go there for a sense of normalcy. Everything's gone, but they can still get a cup of PJ's coffee. And when the Wi-Fi is up, the place is filled with laptops and people are using PJ's as their offices. Here in Atlanta, evacuees are coming into PJ's as a connection to home.

We've found it's also opened up other opportunities. When our roasting facility is back up, we are looking to roast private label for other coffee companies who lost their own sites, and we are trying new distribution channels. In addition to selling coffee in our stores, we are opening up to other retailers and selling online.

Now that you will able to go into New Orleans, what will be the first order of business?

Hollingsworth: Our roasting facility is still in a restricted area. We just got in to see it and there was no damage. We retrieved our coffee supply. We can be up and roasting as soon as the city restores power. And we don't know when that will be. I've heard predictions of anywhere from this weekend to three weeks.

Our stores are expecting us to maintain our coffee supply until we can roast it ourselves. We're producing 12 of 22 coffees, but because we have to go to a third-party roaster, there is an extra layer of stress and complication. We are at their mercy. We don't want to run out of coffee. Once electricity, water, and gas are up, we expect we will move forward quickly.

You're also taking part in community-relief efforts.

Morocco: We've created a limited edition Preservation Blend coffee and will donate $1 from the sale of each bag to relief. We've also set up "kid-drop spots" in our operating stores for clothing, toys, and nonperishable items for children. We've also created Preserve T-shirts and Preserve Flags to help rally support, with proceeds going to relief efforts.

How do you strategize and make plans when the government agencies have been at odds about letting residents and business owners return to the city?

Morocco: There are many interruptions -- the mayor [Ray Nagin] says, "Yes, come in" -- and then "No." We're anxious about the uncertainty of our plant. It is difficult, but we recognize that there are lives lost and there are bigger issues and needs than just the repair of our plant.


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