Martine Powers of the Boston Globe reports that Starbucks was adding about $1.50 to the price of bags of coffee beans weighing less than a pound, never posting the addition to the price.

The Massachusetts Office of Consumer Affairs and Business Regulation discovered the practice in late August and fined five Starbucks locations with $1,575 for overcharge violations two weeks ago.

Last week, Starbucks nixed the $1.50 fee – and not just in Massachusetts. Pressure from the state’s consumer agency spurred the company to eliminate the extra charge nationwide.

“It’s a message to the whole marketplace,’’ Barbara Anthony, undersecretary of the Office of Consumer Affairs, said in a phone interview yesterday. “We have to be able to trust that the price we’re paying is the price we should be paying for a particular commodity.’’

When a customer ordered a bag of coffee beans weighing less than 1 pound, Starbucks tacked on about $1.50 to the price without putting up signs about the fee in the store or itemizing the extra charge on receipts.

For example, beans listed at $11.95 per pound ended up costing $7.45 for a half-pound – not $5.98, or 50 percent of the price.

Read More: The Boston Globe

Photo Illustration by Liz Sullivan

A bitter court battle is spilling intimate secrets about Tim Hortons’ hefty profits.

Michael Friscolanti at MACLEANS.CA reports that last year, customers spent more than $5 billion at Tim Hortons. Five billion dollars. That’s $13.7 million worth of coffee and doughnuts per day. Which, in theory, should leave everyone—head office, shareholders and individual franchisees—with plenty of profit to go around. (Don Schroeder, recently fired as Tim’s CEO, pocketed $5.7 million just for walking away and keeping quiet.)

But not everyone agrees with how the pot is divvied up. Arch and Anne Jollymore, both long-time Hortons franchisees, were in a Toronto courtroom last week hoping to certify a hefty class-action lawsuit against the iconic company, arguing that Tim’s historic shift to frozen doughnuts nearly a decade ago has taken a huge bite out of their cash registers—while providing head office with “spectacular” returns. Their legal briefs are complex (the court file is tens of thousands of pages) but the couple’s claim boils down to this: Hortons “forced” franchisees to scrap their deep fryers, then sold them frozen fritters and crullers for triple the cost of the scratch-baked versions.

Three years after the lawsuit was filed, a judge will soon decide whether the action should be sent to trial or tossed out of court. But whatever the outcome, the high-profile case has already served up one revelation that some loyal double-double drinkers will have a hard time swallowing: the Jollymores aren’t the only Hortons operators who think they should be making more money.

Among the evidence disclosed so far are a number of internal emails that discuss “fear” and “discontent” among franchisees, some of whom “are just keeping their mouths shut for fear of retribution” from management. “Every owner that I have talked to has expressed dissatisfaction with the bottom line,” reads one note sent to Roland Walton, head of Tim’s Canadian operations, weeks after the lawsuit was launched. “[T]he feeling is that [the company’s] attitude is ‘We’re still the best game in town, if you don’t like it or aren’t happy, there is a waiting list to get stores.’ ”

The email concludes: “I have yet to be in the company of Tim Franchisee’s [sic] whether at meetings or social situations that there isn’t lots of bitching and complaining.”

Read more at: MACLEANS.CA

Expanding its coffee competition with Dunkin' Donuts, Starbucks is set to begin selling single-serving K-Cups in November for the Keurig coffee maker.

Starbucks Corp.  .. (Nasdaq: SBUX) said Tuesday that it will be selling single-serving K-Cups for the Keurig coffee machine in grocery stores in November, signaling a challenge to Dunkin’ Brands Inc.  .. (Nasdaq: DNKN), which this month began selling K-Cups in Dunkin’ Donuts franchises only.

Made by Vermont-based Green Mountain Coffee Roasters Inc.  .. (Nasdaq: GMCR), Keurig coffee makers are common in workplaces, and are also found in relatively high concentration in homes in Dunkin’s core markets of New York and New England, Dunkin’ Brands said previously.

Starbucks had previously launched its own single-cup system, Starbucks VIA Ready Brew, and said in its news release the first-year sales for the products surpassed $200 million. The Seattle-based coffee giant said it is seeking to build its K-Cup venture into a $1 billion business.

Dunkin’ began selling K-Cups in its franchise stores in early August, supported by ads in television, radio, print, outdoor and digital media, the company said.

Boston Business Journal

Even company co-founder Ron Joyce, who sold the majority of his stake in the company in 1995 and retired as a director in October 2001, was dismayed when word of the baking switch got out in 2003 and expressed his disappointment.

Time marches on though, and loyal customers adjusted to the change, but some franchise owners are still having trouble swallowing it.

Their concern has more to do with their contention that an unfinished doughnut now costs them 17.9 cents, almost triple the former 6 cent price  when they baked it themselves from scratch, an increase that takes a serious bite out of their profit margins.

That’s one of the allegations made in a $1.95-billion class action lawsuit launched by two Burlington, Ont., Tim Hortons franchise owners in June 2008. After a series of delays, a two-week certification hearing is finally set to proceed on Aug. 19.

Judge George Strathy of the Superior Court of Justice in Toronto will hear it at the same time as Tim Hortons’ own motion to dismiss the claims.

Neither side will comment on the specifics of the case as it heads to this pivotal stage of the litigation. But David Morelli, a spokesman for Tim Hortons, said in an email, “We believe the lawsuit has no merit and that we will ultimately be successful,” recapping the position the company has taken from the start.

The company plans to fight the allegations by arguing the plaintiff franchisees in question were inefficient and that the new system is profitable, according to a judge writing in an earlier motion in the case.

The Tim Hortons chain of quick-serve restaurants, founded by the legendary Maple Leafs defenceman in Hamilton, Ont., in 1964, merged with Wendy’s International Inc. in 1995 as it pursued expansion into the United States. After an initial public offering, it was spun off as a separate company in September 2006 and now has more than 3,000 stores in Canada.

Read more: Financial Post

The test, which was launched by a Subway franchisee in an office building in Alexandria, Va., has expanded to about 15 locations, Les Winograd, a spokesman for the Milford, Conn.-based chain, said in an interview Monday. The company expects to add 10 more by the end of the year, he added.

“The landlord was looking for something more upscale and with more coffee choices in the building,” Winograd said.

The new concept is expected to help fuel Subway’s rapid growth. The chain said it has opened nearly 700 new outlets in 50 countries and 43 U.S. states since January and has plans to open a total of 2,000 North American locations this year.

While still in the early stages of development, the Subway Café is designed to be a cross between a sandwich concept and coffee bar and is “a little larger” than the average 1,200-square-foot Subway, he said.

Read more: Nation’s Restaurant News

Even though Canada’s coffee-and-donuts king has stumbled in the past in trying to replicate its success in the United States, it sees its latest marketing drive south of the border leading to strong sales momentum.

Indeed, the United States could eventually become Tim Hortons’ largest market, says Chief Executive Donald Schroeder.

“The United States is a developing market for the company,” he said.

The company, which has plans to open 300 more restaurants south of the border between 2010 and 2013, is investing heavily in advertising and marketing there to create awareness.

“People are getting to know Tim Hortons,” Schroeder said. He said brand awareness is likely to snowball into strong growth in the U.S. markets it has targeted.

“When the lights go on, and people become aware of what Tim Hortons is and what it stands for, you will see positive same-store sales growth for an extended period of time,” Schroeder told Reuters in an interview on Friday.

Tim Hortons is primarily focused on nine U.S. states, including New York, Michigan and Pennsylvania, with a combined population of 70 million people, twice the size of Canada’s.

 Read more at: Reuters

The company has already locked in its coffee costs for the year, John Culver, the president of Starbucks Coffee International told Swiss newspaper Tages-Anzeiger. So as other food producers struggle with the rising costs of raw ingredients, Starbucks has kept a lid on costs of its most important material.

Culver said he thinks the cost of coffee will come down. “We think that these prices are not based on facts given there is no supply problem,” he told the newspaper, according to Reuters. “Speculators are at work here.”

Watch the Video Here: http://money.msn.com/money-video?vid=5b8ce2f5-6e16-4c2f-b7cf-fd6645600b73

A Westerly resident and former executive for the coffee chain is opening three new locations.

The shops will be located in Westerly, South Kingstown and Pawcatuck, CT.

The Westerly Sun reports that all three are expected to open by mid-April.

Tim Horton’s operated the Westerly and Pawcatuck locations until last November when the company closed some of its underperforming restaurants.

Starbucks, which is pursuing growth outside its namesake cafes, has signaled that it is eyeing multiple single-serve deals around the world.

Reuters reported on Monday that the world’s biggest coffee chain is in partnership negotiations with Green Mountain Coffee Roasters Inc <GMCR.O>, citing a source close to the talks. Starbucks on Thursday declined comment on the issue.

Green Mountain dominates the single-serve market in the United States with its Keurig brewer, but is not a player internationally. Its shares fell 4.8 percent to $41.97 in afternoon trading.

In the memo to Starbucks’ top brass, Starbucks Chief Executive Howard Schultz said he is increasingly being asked about the company’s plans regarding Green Mountain, which has patents protecting some of the technology around its K-Cup coffee pods.

“Green Mountain has done a very fine job introducing single-serve brewer technology to the U.S. market. And as a result it has emerged as an early leader,” he said in the memo.

“But as I have said, these are very early days, and history has demonstrated time and again that patents alone do not determine market winners-deep customer engagement, best-in-class experiences and quality do,” Schultz said.

While small, the single-cup coffee segment “is growing faster than any other segment in the global coffee industry,” Schultz said.

 Read more at: MSNBC

The Vermont-based company’s stock rose 15 percent to $32.96 after backing a financial forecast that’s better than what some analysts expected.

“With sales growth driven by the strong sales of Keurig Single-Cup brewers and K-Cup portion packs during the holiday season, we are off to a very strong start for fiscal year 2011,” Green Mountain CEO Lawrence J. Blanford said in the earnings release.

Read more: Boston Business Journal