It has been six months since Joe Capp replaced Charles Cain as director of U.S. operations for TeaGschwendner, the Meckenheim, Germany-based company that claims to be the world’s largest specialty tea retailer. Despite its success with 145 stores in nine countries on four continents, TeaGschwendner has struggled to find its place in the U.S. market, where it has two company-owned stores in Illinois and two partner stores in Michigan and North Carolina.

WTN: Tell me about the process of getting to know the tea industry. Where did you start? Who did you talk to?

Capp: The opportunity with TeaGschwendner really appealed to me because of my background in coffee, having been with Dunkin Brands for several years and learned so much about coffee during that time, (the concept of) garden to cup was not unfamiliar to me.

When I saw that TeaGschwendner was looking for someone with tea experience, I visited tea stores – Teavana, Argo and others – and did some research on the Web. Since joining the company, I flew to Germany to learn about tea from (TeaGschwendner’s trade section managing director) Thomas Holtz.

WTN: Have you learned a lot about tea?

Capp: I’ve had an indoctrination through a number of resources, but I’m certainly not a tea expert. My expertise is in building profitable businesses.

WTN: What are your thoughts on where the specialty tea industry in the U.S. is headed?

Capp: I was excited about this opportunity because I see so many correlations between where specialty tea is today and where coffee was 20 years ago. At that time, there were a number of independent coffee houses and then some larger players came in like Starbucks and Dunkin and Caribou and Seattle’s Best.

I don’t want to say they took over, because there are still a number of independent players out there, but as the larger players like us and Teavana grow, there will be a lot of education around specialty tea, and that will drive significant growth in the specialty tea industry.

WTN: What sources did you use for your market intelligence?

Capp: We just engaged a company to do some extensive market research. We plan on taking that data and using it to continue to enhance our brand and ensure that we are where we need to be in terms of retail locations and are meeting the needs of both current tea drinkers and those who have yet to try specialty tea.

WTN: Tell me about your expansion plans. What is the overall vision?

Capp: The first thing I can tell you is that we are currently the largest specialty tea retailer in the world, with 145 stores in nine countries on four continents. Our goal in the U.S. is to become No. 1 in a number of different areas: customer satisfaction ratings and revenue, but also number of units, number of stores. That’s our goal. We’ve got a way to go, but we’re going to get there through franchising.

WTN: And what is the scope of the envisioned expansion?

Capp: We’ll be signing within a week two leases for locations in New York City. We have a number of leads on some other great locations in our target markets, the mid-Atlantic region – New York, New Jersey, Pennsylvania, Maryland, Virginia and Washington, D.C.Illinois, Wisconsin and Michigan. – then the Midwest –

Our goal is eight to 10 stores open this year, 15-20 the year after that and 25-30 the year after that. We plan on growing aggressively. As we do that, after these initial markets, we’ll look at secondary markets.

WTN: Where are the first two new stores going to be located?

Capp: I can’t tell you, but the New York store is going to be our U.S. flagship and company owned. All the others will be franchised, except one in Chicago, because we’re located there.

WTN: Why go with the franchise model?

Capp: Having worked for a retailer, Lifetime Fitness, and a franchiser, Dunkin Brands, I have experience with both and a passion for franchising. I see why Mr. (Albert) Gschwendner wants to go down this road. You can rarely replace the enthusiasm and excitement independent managers have about your brand and product with hired managers. In Germany, I was impressed with the people behind the counter in the stores there, and they’re all franchise owners there, except one.

WTN: What will happen with the location in Arizon?

Capp: We’re making changes to have the Scottsdale store go independent, sell our teas, but under their own brand name.

WTN: Tell me about the retail model of the stores.

Capp: The last couple of years, a lot of experimentation took place in the U.S. division of TeaGschwendner. The first store that was built was a little over 1,000 square feet, had primarily loose-leaf tea available, both packaged at the counter or pre-packaged, then a small tea-to-go bar. The next store had a bistro, foodservice, and was closer to 2,000 square feet. The third had a larger restaurant, more foodservice.

Even before I joined the company, the decision was made to discontinue the foodservice/restaurant aspect, because it wasn’t profitable. We don’t want anything to do with foodservice. My belief is, yes it can increase your revenue, but not necessarily your profitability. One of the nice things about the TeaGschwendner model is it’s simple. You focus on selling tea. That’s what we’re going to do, focus on selling tea.

WTN: What would you say to those in the industry who say the café or foodservice component helps increase buzz by building community?

Capp: We’re adding a new component to our stores. I can’t get into it in detail, but it has a focus on education. We will still do tea-to-go, but we’ll use it to focus on maximizing the education and experience.

We don’t want to be the Starbucks of tea, because Starbucks is all about going in, getting a cup of coffee as quickly as possible and leaving. Having been in the coffee industry, one of the largest differences I see between the two products is that coffee is trying to fill a need to give people a kick-start. Tea is the exact opposite. People have busy hectic lives, and tea is the beverage that allows them to take a moment, relax and enjoy that. The Starbucks model doesn’t fit the product, the role the product plays in customers’ lives.

WTN: Can you say any more about the educational component?

Capp: We’re meeting with our brand design and architect teams this morning to go through the second draft of what this is going to look like. I won’t be able to tell you anything until after it’s finalized.

When someone comes into our stores today, we’re very low pressure, we’re just there to help them make their selection. It’s really an experience. I know that’s a buzz word today, but I do hear repeatedly that the thing customers love about our stores is the people behind the counters, their knowledge of tea and their engagement. Even people who love a specific type of tea will engage our salespeople and try to learn more. Tea-to-go doesn’t fit that. It’s for somebody who wants to pop in, get some tea about pop out.

WTN: How will you structure your franchise agreements?

Capp: Under franchising law, we have to provide prospective partners with franchise due diligence, which includes all the numbers. We’re not allowed to share numbers with anybody until they see that. There is an initial franchise fee, a royalty which is a percentage of sales, and a contribution to a marketing fund which goes to campaign and marketing materials provided to our partners.

WTN: How will you find franchisees?

Capp: Actually, we’ve done a number of things: engaging our PR firm, advertising on franchise sites on the Web, engaging tea enthusiasts who come to our stores. We’re putting materials together to allow them to learn a little about us.

WTN: Will you be looking primarily for people who know their markets or people who know their tea?

Capp: A little of both. I spent the first eight years of my career in talent recruitment, building talent for companies. That was how I made my transition at Dunkin into franchising. They wanted to go away from selling franchises and toward recruiting the right franchise partners. I led that initiative in the Midwest.

At TeaGschwendner, we’ve established strict criteria in terms of their competencies, where they live, their background – ideally they would be in beverage retail, or even tea. We have competency-based interviews. It’s a process that, as we implement it, should enable us to bring in people who are ideal for this industry and this brand.

WTN: Speaking of the brand, do you ever feel the German name is an impediment because it’s hard for American’s to pronounce and remember?

WTN: That’s one of those things we’ve looked at it since I joined. We discussed changing the name. It’s based on our founder’s last name. We’re proud of our heritage and being a European company, and that shines through. Some people might look at it as a challenge, but we’re working with our marketing firm and internally to make sure it’s a positive for us.

WTN: What kind of tea do you like?