Business Model: Let the cutsomers pick the price, if any!

There is two new coffee shops in Downtown Kirkland: Kirkland's 5th (6th? 7th? 10th?) Starbucks, and Terra Bite. Both just a short block away.

Terra Bite has a very strange, business model. Either they're 'incredibly smart, or incredibly stupid!' Read on...

Terra Bite takes on Starbucks
Terra Bite is a new coffee house (and non-profit organization) that recently opened in Kirkland with an interesting twist for a business model (more on this below). Is this the beginning of the end for Starbucks? OK, stay with me now as I try to explain...

Like most coffee houses, Terra Bite offers espresso, blended drinks, baked goods, sandwiches, and desserts. They also provide a cool setting where you can hang-out, play your favorite XBox/PS3 games on huge flat panel TVs(for free!), or just pop-in and pop-out with your hot drink in hand. Can you play your favorite video game at Starbucks on a huge flat panel? No!

So what is so different about the business model that might have Starbucks on the run? Well, Terra Bite is operating based on a "voluntary-payment" basis. Confused yet? Well I was when I first heard of the idea. Basically they have no cash registers, no fancy way to swipe a debit card, no signs with pricing, and no tip jar either. What you will find is an unassuming gray box, similar to a large square piggy bank, at the end of the counter. After you order your triple tall nonfat latte, and grab a sandwich--it's up to you on how much you pay, when you pay, and even if you choose to pay. I wonder if our resident homeless guy, Paul, has been to the Terra Bite yet?

Sounds crazy, right? I learned more after talking to the founders during their private grand opening party in late 2006. The Terra Bite was opened/founded by Ervin Peretz and Susie Allsup. Ervin (a Google developer in Kirkland, WA) hatched the idea while slightly intoxicated during a trip to Vietnam. Ervin describes the the voluntary payment system as "a convenience measure for the mainstream: a regular patron can just drop in $20 once a week, or even pay on-line. There are no punch-cards, or any other complexity; it's all based on trust. For those in need, it is a source of free food that is healthier, more available, and (most importantly) more dignified than the alternatives."

Ervin indicated they are looking at more locations for expansion. Many at the grand opening party were skeptical to say the least. Can it really work? Why nonprofit? Will they get enough traffic? Will people really be honest? I don't get it? Why in downtown Kirkland? All good questions. I guess we will have to wait and see how the Terra Bites does in the coming months and hopefully years!

BTW, it hasn't slowed down Starbucks just yet. They just opened another new Starbucks in downtown Kirkland (where the old Seattle Best/Reality Coffee site was). Can Ervin take on Starbucks? Only time will tell.

So if you are by the corner of Kirkland Avenue and State Street please check out the Terra Bite--it doesn't have to cost you a thing! Seriously though...good luck to Ervin and Susie! As usual, comments encouraged...Steve

SOURCE:
http://kirklandweblog.typepad.com/kirkland_weblog/2007/01/terra_bite_take.html