Blank Street Coffee shops have taken over New York City as they attract customers with cheap lattes and cold brews.
Now, the new chain aims to attract even more consumers who want to cut their coffee budgets through a subscription program.
The Blank Street Regulars program, which opened to the public this summer, has attracted about 5,000 paying members, and another 4,000 are on a waiting list to join.
For more than a decade, startups have turned to subscription models to generate guaranteed revenue, which can make their businesses more attractive to investors and improve their valuations. More established businesses have also turned to monthly subscriptions in a bid to attract repeat customers looking for a deal. For example, members of Panera Bread’s Unlimited Sip Club pay $11.99 per month for “free” coffee, tea, caffeinated lemonades, and sodas every two hours.
Since launching three and a half years ago as a coffee cart in Williamsburg, Brooklyn, Blank Street has grown to 74 locations in New York City, London, Boston and Washington. The typical Blank Street location is small, with limited seating and a semi-automatic Eversys espresso machine for making drinks.
The startup has raised approximately $100 million, with backing from companies including General Catalyst, Tiger Global and a Warby Parker co-founder, according to PitchBook.
In March, the company was valued at $177 million, down from its previous valuation of $218 million about a year earlier, according to PitchBook. Many startups have seen their valuations fall as the Federal Reserve raised interest rates and economists worried about a recession.
The chain has its critics. Blank Street’s rapid growth (and venture funding) has sparked complaints and skepticism among some coffee drinkers. However, its prices have helped attract customers, especially as the cost of coffee beans skyrocketed in 2021 and $8 lattes became more common.
In New York City, ordering an oat milk latte today will cost a Blank Street customer $5, less than the $5.45 charged by Dunkin’ or the $6.15 at starbucks for comparable sizes. The chain’s lower overall costs, such as less square footage and fewer employees needed to make cappuccinos, help it charge cheaper prices for its coffee.
But Blank Street Regulars, as the chain calls its subscribed members, can save even more money on their coffee. Members pay $8.99 or $17.99 per week.
The cheapest plan covers basic drinks, such as teas, hot coffee, Americanos and double espressos, while the most expensive option allows members to purchase a wider range of drinks, including cold brew. To stem losses and avoid the fate of MoviePass, a movie theater subscription service that offered unlimited admission before filing for bankruptcy, Blank Street limits the total number of drinks per week to 14 and customers have to wait at least two hours to buy another drink.
Blank Street CEO and co-founder Vinay Menda estimates that between 30% and 40% of its customer base will eventually become members.
“I never think they’re going to be the majority of customers,” he told CNBC.
For now, Blank Street has limited the number of regular customers to ensure its cafes and baristas are not overwhelmed by demand.
“The more we can build capacity and expand our stores, the more we want to continue to unlock access for more people,” said Blank Street Chief Product Officer Dan Hill.
The chain is working to improve capacity at its locations to eventually accommodate those on the wait list. Those improvements include installing a second or third espresso machine so baristas can make more drinks quickly.
Blank Street also recently launched Regulars across the pond at its London locations. For £12, or about $15, customers can purchase any drink on their menu, with similar limitations as their US program.
The program already has a few hundred members, according to Hill. In the UK, Blank Street faces tougher competition from Pret A Manger, the ubiquitous sandwich shop with its own coffee subscription programme. But Menda said he believes Blank Street’s version will win over more coffee-conscious customers.
Blank Street opted for a subscription program instead of a traditional loyalty program because its customers wanted a quick and easy way to benefit from visiting its coffee shops regularly, according to Hill. The relative youth of the network gave it flexibility when designing the program.
Hill said Blank Street is already thinking about ways to expand the program, such as adding family and group plans.
“We don’t have to deal with the way a loyalty program was designed 10 years ago and now has millions of members who are used to the way things were,” Hill said.
Don’t miss these CNBC PRO stories:
