15th Avenue became a neighborhood when Victrola opened. Then Caffe Ladro opened, and it became a different neighborhood. So what does this have to do with Starbucks, anyway?

In 1999, 15th Avenue had everything: good food to order, videos to rent, and a steady supply of books and magazines. If you needed a tool, there was City People's Mercantile. If you needed a bottle of wine, there was the little wine place. If you needed a haircut, there was Jim's Barbershop. If you needed to have sex with anonymous strangers, there was Volunteer Park. We even had a cemetery. All that was missing was a movie theater, a record store, and a cafe.

You could, of course, always find coffee--at the little bakery, the window of the QFC, or the place with the crappy bagels, among other options. But there was no place you'd want to go to hang out after you'd gotten it, unless you were willing to hang out at a Starbucks. The 15th Avenue Starbucks opened in September 1975, four years after the very first Starbucks opened in the Pike Place Market. By 1999, there were over 4,000 Starbucks stores around the world, including two within spitting distance of one another on a single block of 15th, between Harrison and John. So technically, yes, there was a cafe. But if I may state the obvious, when it comes to cafes, Starbucks doesn't count. You go there when there are no other options--in an airport, an office building, the suburbs. In a cafe city like Seattle, there's no excuse for going to Starbucks. It's like being in New York and eating Domino's pizza. There's always somewhere else to get a coffee. But this is not about just getting a coffee. It's about where you sit while you drink it.

The cosmology of 15th Avenue changed completely on July 30, 2000. That day marked the opening of a one-room cafe on the block between Republican and Harrison, in the space that had previously housed an upscale, crypto-ethnic clothing boutique called Mokie Dugway. The wood front of the building had been painted a strikingly subdued periwinkle blue and adorned with beautiful deco iron letters that spelled out "Victrola." Before the shop opened, when people found out a cafe was moving in, there was an automatic sense of anticipation on the street. And when Victrola made its debut, the reaction was celebratory. Right away, it seemed, the little cafe was bustling with people standing in line, sitting at the small tables and on the burgundy sofa, playing the piano, reading, writing, talking. Victrola opened its doors to a tiny explosion of community that was dying to happen. The human quality of the area up around 15th--with its highish-priced housing and smallish row of retail businesses--was a reasonably well-kept secret then. But the nature of the avenue was constant motion, on foot, bike, bus, and car. All it took was a cafe (a real cafe) to centralize the activity, to be its locus--and presto: a neighborhood.

"I always wanted a place to hang out on 15th that wasn't a bar," says Jen Strongin, Victrola Coffee & Art's co-owner. "I wanted a place to hang out during the day." Strongin is sitting with her husband and business partner, Chris Sharp, on the porch of their apartment, which is around the corner from their shop. The Albany, New York natives had been thinking of opening a cafe ever since Sharp moved to Seattle from Portland to work at Microsoft and be with Strongin, who came here in 1995. Neither had ever owned a business before, but they figured that with Strongin's 11 years of experience managing coffee shops, they could probably pull it off. Without the aid of a realtor, they spent a year looking at spaces, all the while harboring a desire to find one in their own neighborhood, probably the only street in Seattle where you could throw a rock and not hit at least one legit coffee house.

In a time of economic downturn and corporate oligarchy, the store was evidence that there was still some life left in the old American dream of hanging out a shingle and prospering through hard work, good will, and (self) determination. Victrola's instant popularity, its galvanic effect on the neighborhood, represented the best kind of capitalism. But with great capitalism comes great competition. Despite being almost kitty-corner to not one but two Starbucks stores, Victrola had no trouble establishing itself--and after only one run-in (in which Starbucks employees came across the street bearing sample Frappuccinos and were chased off), the two companies haven't troubled each other much at all. "It didn't seem to be an issue," Strongin explains, sounding somewhat bemused. "We felt like what we had to offer the neighborhood was really different and appealed to a different type of person than who would appreciate what Starbucks was about." Which was and is exactly true. Victrola has proven definitively that there is room for the independent business to compete with global chains on a local level and prevail. But what happens when another independent company--a prosperous local cafe chain, say, with similar ideas about offering an alternative to Starbucks--decides to get in on the action?

"LADRO• MEANS "THIEF•

The coffee plot thickened dramatically last year, when the fancypants flower store on the corner of 15th and Republican was replaced by Caffe Ladro, an eight-year-old local franchise with five other locations in Seattle (they have since opened a seventh store). As soon as the familiar Ladro sign went up, the street was abuzz with concern for what this would mean for Victrola. In many cases, people viewed the newcomer as a poacher, an affront to the neighborhood. What do we need with another coffee shop? We have Victrola! The nerve of these usurpers, opening not just on the same street, but on the same block! It was hardly a welcoming environment for a business whose name translates to "Coffee Thief." Nor was this a thing to be taken lightly. To the folks who lived around 15th, it was not simply a question of preference, but a declaration of solidarity with the shop that had transformed the neighborhood. I know several people who refuse on principle to go inside Ladro, people who are proud to say they never would. For a while, I was one of them. From where I live, I have to walk past Ladro to get to Victrola, and I do it happily and willfully (and even perhaps somewhat preciously). And I'm not alone. Oftentimes, on a Sunday morning, New York Times in hand, I walk past a half-empty Ladro only to find no seats available at Victrola, and a line to the door. And I get in it, because what I want when I go to Victrola is to be at Victrola--to be in an interesting room with interesting people, many of whom sort of know each other. Going to Ladro isn't an option, because coffee isn't the point--it's just the reason. To many people, going to Ladro feels like going to Starbucks. It doesn't count.

Of course, there are just as many people who won't go into Victrola, who don't care for the scene, or the coffee; some even despise the place. There are also plenty of people who don't care one way or the other. And so, with all the traffic on 15th, Ladro has customers, too. Look through the plate glass and you see what you see at every cafe: people sitting, reading, chatting, eating baked goods. On sunny days, customers fill the outside seating, and shoppers cruise in and out of the dappled orange cube, yellow paper cups in hand. Viewed objectively, it seems a typical upscale Seattle coffee place--not as crass as Tully's, but not as charming as, say, Dilettante Chocolates or B&O Espresso. Not my cup of tea, as it were, but hardly an enemy of the people. If we put aside the idea that moving into a storefront on 15th was a hostile gesture--which we'll get to later--we can see that on one level, Ladro is exactly like Victrola: a local independent business successful enough to expand. For Victrola, expansion meant tearing down a wall. For Ladro, it has meant building a second, third, fourth, fifth, sixth, and now seventh location in separate neighborhoods all over town.

Ladro founder Jack Kelly was a minority partner in Uptown Espresso, which opened on Queen Anne Avenue in 1987, when Kelly was 21. After ditching his dreams of becoming a marine biologist, he soon became a full partner in Uptown, and discovered something he loved doing. "It was just that old family deal," Kelly explains via cell phone. "I was just a kid, all my friends worked for me, and we just had a great time. It was a difficult thing to lose it." Kelly was bought out by his Uptown partner (not altogether amicably), and he opened the first Caffe Ladro in 1994, in a space only a few blocks away, which happened to be two doors down from a Starbucks. Kelly laughs about it now. "Everyone was like, 'What are you doing? Opening up next to Starbucks--you're crazy!' So basically, I told everybody, 'You know, hey! We can do a better product, we'll do a cooler place, and people are going to come to us. And we're going to steal some of Starbucks' business.' So that's where the 'coffee thief' came from."

On the phone, Kelly seems a perfect hybrid of CEO and college dude--a familiar combination in the aftermath of the dot-coms, but one that doesn't feel overly calculated. After seeing Kelly's picture in the Puget Sound Business Journal, it's easy to imagine him on the cover of Fortune. But it's also not hard to believe him when he describes his motivations for getting into the cafe racket. "I want to have cool people around me," Kelly says, "and have cool places, and a fun work life." That sounds like a fine reason to start a business; it's not radically different from the M.O. of Victrola's owners. But now that Ladro is a seven-store, multimillion-dollar concern, it's hard not to wonder if the whole "fun work life" principle mightn't be just so much marketing. I must confess that when I interviewed Kelly, I had every intention of finding the aggressive capitalist behind the regular-guy image he puts forth. But the more he spoke, the more I felt like I was listening to a reasonably intelligent businessman--far from guileless, but no mere shill--who landed in an industry where luck has a way of mushrooming.

The second Ladro store (or "lower Ladro") opened in 1997, and so began the transformation from small business to mini-empire. "So then we had two," Kelly recalls. "And we basically at that point decided that we would build up to five. We would do five, which required a bigger bakery, and stuff like that, but without changing the formula. We're really looking for unique people, and, you know, that kind of program. So as long as we continued to do that, and have cool places and fun doing it, we would continue. Up to five."

Without a pause or a single word of explanation, Kelly then adds, "And after five, we built two more." He chuckles. "So now we have seven."

This begs the question: Why not eight? Why not eighty? At what point does a small chain with a great run of luck become the launch pad for a dynasty?


THE PEOPLE AND THE NEIGHBORHOODS AND THE RELATIONSHIPS

Before we get too sanguine about Ladro's humble beginnings, it might be instructive to remember another Seattle success story, a single coffee house whose signature style spread to a thriving chain of local stores, which expanded into a wildly popular national chain, and onward to global dominion. In the early '80s, Starbucks looked an awful lot like Ladro. They had 17 stores in Seattle before going national in 1987, with shops in Chicago and Vancouver, BC. In 1992, they made an initial public offering, and the rest is branding history. "We have grown a global brand one cup of coffee at a time, one customer at a time, one store at a time," writes Audrey Lincoff, Starbucks' director of public affairs, via e-mail. "It was a grass-roots effort. We spend little on advertising and are only as good as our last cup of coffee served. It is our ability to 'stay small' even as we expand internationally that has kept us locally relevant and successful."

The difference between language like that and Jeff Kelly's maxim of growing Ladro by having fun is entirely dependent on how ready you are to believe the person speaking. No businessperson savvy enough to build a successful coffee chain with an image of independence would ever admit to wanting to be like Starbucks is now--but in its early years, neither would Starbucks. Kelly is firm that his company isn't looking toward massive growth--"I don't see us doing 20 stores, even," he says--but it's clear enough that the only thing preventing Ladro's continued expansion is Ladro itself. The best evidence for this lies in the story of the eighth Ladro store, which was to open in a new office complex in Bellevue. According to Kelly, the landlords offered to build Ladro a store and guarantee free rent until all the adjoining offices were full. It was a sweet deal, and it was all set to go. Then it didn't.

"I killed it," Kelly says proudly. "I just said, 'You know what? Everyone's stressed out, we've expanded really fast, and geez, you know, we haven't had our summer barbecue, where everyone comes and has a good time!' It was really one of those difficult decisions, just this unbelievable deal, which certainly has never come along in my history. My business partner wanted to do it, and most people wanted to do it, and there's a lot of societal pressure to go. Everyone's like, 'Oh, you're doing so great, you know, keep growing, you're kicking ass, and the American dream'--and it's like, wait a minute, that's not my dream. My dream is to have a great life, and to have managers who love their jobs, and cool jobs, and staff who get paid more than [they would at] other stores, and all these types of things that really create happy lives. And loyalty, and a difference."

Once again, a cynic could regard the story of this business opportunity snuffed in favor of a summer picnic as public-relations bluster. What really happened with the aborted Bellevue Ladro store is between Kelly and his would-be landlords, but the fact remains that the chain could have expanded and didn't--which brings a certain blurriness to the perceived conflict of purpose between Ladro and its beloved neighbor on 15th, a business that no one seems to think is in any danger of becoming a franchise. But speaking of cynicism, you never know. Every chain starts with a single store. If Ladro is Starbucks circa 1982, Victrola is Starbucks circa 1971.

"We don't really have a desire to open up a lot of stores, to tell you the truth," says Chris Sharp. "Maybe one other, but.... We like what we do right now, and it's important to kind of keep that focus. To stay with Victrola. We'll probably roast our own coffee, and maybe model ourselves after either [Espresso] Vivace or Lighthouse [Roasters] in that way. But it's not like we want to have this chain spreading out everywhere. And also I think that if we had, like, five shops, it would be Jen and Chris, the CEOs, sitting behind a desk. We like being behind the bar and talking to people. That's why we did it. There's already so much paperwork.... Our idea for Victrola is to focus on our neighborhood, because we love it here. Just right here. It's not about putting up a lot of shops. We just want to be Victrola, and that's our main concern."

While it may be hard to imagine a string of Victrolas in airports and malls around the country, it's just as hard to imagine a successful small business that expects to survive in the 21st century without expanding. After talking to Strongin and Sharp, I have no doubt that they mean what they say about staying put--especially considering that independence is a huge part of Victrola's appeal. But even the best kind of capitalism is still capitalism, and capitalism demands growth. It should be interesting to see how things look five years down the line. They might look like this:

"We are not going to be Starbucks, ever," Jack Kelly announces. "And we aren't looking to be like that. Starbucks is fine; I have nothing against Starbucks. They do their thing. It's a different thing than what I do. We're about the people, and we're about the neighborhoods, and the relationships.... The only thing that might one day be interesting would be a different market. Where these little niches that I feel--the neighborhoods that are key to that feeling--are available in a greater number. Maybe San Francisco, say."


THE PRICE OF DOING BUSINESS

The identity of Victrola made Caffe Ladro's appearance on the same block a very personal matter, not only for customers but for the proprietors of both businesses.

"I don't think we took it personally," says Jen Strongin. "But it was really stressful. It was just that fear of the unknown. We'd put all of our selves, and all of the money that we had--everything was invested in our shop. And it felt really threatening, to have someone who was supposedly another independent coffee shop open up and compete with us. You know, it felt like, we didn't know what would happen, we didn't know if our shop would survive. We didn't know if it would open up and everyone would recognize that--you know that brand recognition, Caffe Ladro. And see their sign that says, 'Voted best coffee by the Zagat survey.'"

"For me," Chris Sharp explains, "it was that when we went through the whole process of looking for locations, we would go to Fremont, and say, 'Oh, that's a good spot--but no, wait, there's Caffe Ladro, we can't open here. Out of respect for them, we shouldn't open nearby.' And we were naive about that."

At the risk of cynicism, I ask whether this naiveté wasn't just common business sense. Surely the thought of competing with an established independent couldn't have been too tempting.

"Well that, too," Sharp admits. "But we had respect. I mean, Ladro--I wouldn't really classify them as independent anymore, but back then it was really, 'Oh, there's an independent. I have respect for their business; I don't want to open up right there.' So that's why when this happened, it wasn't so much that I felt it personally. It was just like, 'Why don't they have respect for other businesses? What is Ladro, all of a sudden? Ladro isn't what I thought it was, if they're opening only a few doors down from us.'"

According to Jack Kelly, what Ladro was, all of a sudden, was legally bound to open a store on 15th. In the fall of 1999, Kelly says, he signed a deal with the landlord of the flower store to occupy the space when the current tenants moved out. "Victrola wasn't there," Kelly sighs. "We had a signed letter of intent, and an agreed-on lease, and all this stuff. And so when Victrola opened up, I immediately went up there--and sure enough, they're doing a great job, and I'm like, 'Oh, great.' But I couldn't just walk from the deal. I had a signed agreement, so I have to perform."

But before he could perform--or, perhaps, as his opening act--Kelly tried to reassure his competitors that the coffee thief wasn't out to steal their business.

"Basically I went in and talked to Jen," he recalls, "and said, 'Hey, look, this is what's happened. I'm not an aggressive businessperson, and definitely would not have chosen this spot knowing that you're here. But knowing that I already had that spot, I'm going to open it anyway. I have to.' They were very, very, very afraid. They thought that we were going to hurt them. And they thought that we were aggressively pursuing their business. I did everything I could to tell them that that's not the case, and that we would try and support them in every way we could."

The gesture didn't go over well. Strongin describes the encounter as "uncomfortable, and strange," adding, "We certainly weren't happy about the situation."

"I think it was more just initial fear," says Chris Sharp. "Because it was our first shop, we didn't know what to expect from competition."

Kelly knew their anxiety. "I understand what it's like to be starting," he says, "and be afraid of losing your business, and at certain points feel incredibly fragile. But now I've got a history, and I know that they're not as fragile as you think. I was confident that if they were doing a good job, they'd be fine. I'm familiar with competition in my stores, and know that if someone opens across the street, if you continue to do what you do well, you can do fine. You're not going to lose your business."

It's one thing for the head of a company with seven stores under its belt to feel confident, but Victrola understandably viewed Ladro and Kelly as a real threat--the first blush of anti-serendipity their charmed store had encountered. But luck cuts both ways. "To be honest," Kelly admits, "this whole 15th thing has been really difficult for me, personally. I still think that people feel like we're kind of bad guys sometimes."

That perception may have played a part in Caffe Ladro's decision in June to become the only cafe chain in the country to sell Fair Trade coffee exclusively, a move that raises the company's hard costs by approximately 25 percent. It was certainly a factor in Kelly's decision, prior to opening, to post his cell-phone number on the door of the 15th Avenue store at the end of a "funny little letter" explaining his business' motives for encroaching on Victrola's well-established turf.

Months later, Kelly sounds abashed by his declaration, which he describes as "kind of soaring-hearts, futon touchy-feely." But he stands behind its purpose. "It said something like, 'We like Victrola. We care about them and want them to do well.' I'm sure they don't like us, but that's okay.... We're a bigger company than we used to be. And we have different relationships than we used to have. And sometimes people get pissed off at our company, and they think that we're corporate and evil. Or whatever. But those things happened when I was one store, too, and I had eight employees."

The irony, of course, is that both Victrola and Ladro have done exceedingly well. Both shops have regular clientele and are loaded with customers almost all the time. The two Starbucks stores are doing fine, too. After an initial 10-15 percent dip in business when Ladro came in, Victrola is as busy as before. The neighborhood has only changed insofar as there used to be one cafe, and now there are two.

"We're just two different businesses," says Sharp. "I guess we do compete, but I tend to think of it more as: I like what we do, and I think we're just going to continue doing it."

Jack Kelly believes the moral of the story is that there's room enough for all. "People are loyal in Seattle," he says. "In our sophisticated coffee culture, people really do appreciate different coffees. With Vivace, and [Caffe] Vita, and what we do, and what Victrola's doing--All these coffees are phenomenal coffees, and speak for themselves. And each environment's different, and each barista's different, and you know, blah blah blah blah blah. It is a unique situation where everyone does well. And I believe that's been represented by their continued success, and the fact that we're doing well up there. Long story short, I'm happy to see that Victrola's kicking ass."

Kelly laughs. "I mean, it is a glorified lemonade stand, isn't it?"

Maybe so, but now that the commotion surrounding the 15th Avenue cafes has subsided, the stage is set for another shop to come along and stir things up again. Rumors have circulated that Seattle's Best Coffee is sniffing around the space that used to be Jack's Bistro (an SBC rep denied them), and Zootie's Café is interested in moving up the street, as well. Perhaps the neighborhood can sustain all these and more. But if the competition gets any fiercer, the little businesses on 15th will have to decide what kind of lemonade stands they want to be--the kind people like, or the kind that last.

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