San Diego-based Dlush blends smoothie, coffee concepts

Nation's Restaurant News, May 24, 2004 by Amy Spector

SAN DIEGO--Bridging the retail beverage categories of smoothie bars and coffeeshops, entrepreneur Jeffery Adler has brewed up a hybrid, his 2-year-old Dlush concept.

Dlush, a 500-square-foot San Diego prototype that Adler said is on track to surpass $1 million in sales this year, blends up a menu of juices, smoothies, coffees and teas into an edgy retail package targeted straight at the teen market. Adler, a Georgetown law school graduate who is founder and chief empowerment officer of Dlush, estimates the youth audience for his concept is 72 million consumers strong.

"We're putting a new spin on the Frisbee," he said.

On one side Dlush taps into the growing fruit-based-beverage market, which Dan Titus, founder of the Chino Hills, Calif.-based Juice & Smoothie Association, pegged at $1.5 billion in sales in 2003, up from just over $1 billion in 2002.

Dlush's significant other menu--the hot and cold coffee and tea beverage side--is pursuing a growing segment of coffee drinkers, those aged 18 to 24, according to Joseph DeRupo of the New York-based National Coffee Association of America. Daily coffee consumption in that age group jumped from 16 percent to 22 percent in 2004, and for the past five years the share of the U.S. population that drank coffee has remained relatively unchanged at 79 percent, he said.

Whether Dlush's mix of high-energy staff members, bold graphics, pulsating music and a $5-per-person average check will whip up a sales frenzy beyond the brand's debut site is the question that Adler plans to answer this year. Locations are under negotiation in Los Angeles and Orange counties, with prospects for overseas expansion to follow, he said.

To steer Dlush's rollout, Adler gathered an experienced board of directors who traded expertise for equity, beginning with John Roberts, the Newport Beach, Calif.-based retail consultant who convinced Adler to launch Dlush in San Diego. Graham Downs contributed the architecture, while David Maritz of Credit Suisse First Boston oversees financial issues. Consulting on operations is Howard Solomon, who fine-tuned Iron Wok in Temecula, Calif., created Studio Diner in San Diego and is part of the franchise group bringing two of Atlanta-based Raging Brands' concepts to Southern California.

Attorney Ira Blumenthal is laying the groundwork for Dlush's expansion to Southeast Asia, Adler added.

Meanwhile, although not a company director, real-estate developer Mark Masinter of Dallas-based Harberg Masinter Co. has opened the concept's doors for major mall developer.

Dlush joins Masinter's list of clients, which includes such restaurants as Brinker's Big Bowl division and the recently spun-off Cozymel's chain, Los Angeles-based House of Blues and Cameron Mitchell's Mitchell's Seafood brand. "If you surveyed the top mall developers, they spend time, energy and focus on finding the next new thing," Masinter said, adding, "Dlush has that potential."

Adler, in order to boost his beverage flavors, hired smoothie recipe book authors Mary Corpening Barber and Sara Corpening Whiteford of San Francisco-based Thymes Two to devise Dlush's drink formulas.

The beverages, which change seasonally, ranged this spring from top-selling "The Sassy," a $5 chilled concoction of strawberries, strawberry syrup and vanilla ice cream, to "Raspberry Rip," a blend of apple juice, raspberries and pineapple sherbet, $3.75.

Among the hot beverages, in two size options, are the "Yin Yang," layering white and dark chocolate and steamed milk and marshmallow, and the "Cha Cha Chai," a spiced tea medley with vanilla syrup, steamed milk and a cinnamon stick. The drinks are $3.25, for the "Less" size, and $3.75, for "More."

Chilled espresso-based beverages also find their way onto Dlush's list, starting with the "DLush," an iced mix of white chocolate, espresso and vanilla ice cream, $5.

Adler surrounded himself with retail pros after his first attempt to fire up a beverage concept, in Baltimore, failed. As he retooled the brand, which debuted in 2001, he also turned to retail industry captains, such as Starbucks' Howard Schultz and Mickey Drexler, former chief executive of the Gap, Adler said.

Instead of capitulating to Starbucks, as Adler's Baltimore partners had feared, Dlush planted itself diagonally across a mall corridor from the coffee giant. Each brand is promoting a lifestyle as well as a product, and each attracts its own clientele, Adler noted.

"Dlush is a youth market play," he said. "We transform [beverages] into an MTV type of experience: high-energy, hip, emotionally relevant and fun in a cool way."

Adler still recalls Schultz's warning: "How do you get $6.75 employees to make 40 different beverages?" The answer, Adler claimed, lies in training, coaching and "empowerment." He explained that the majority of his employees have been with him since day one, earning promotions as sales progressed, with lead cashiers, referred to as "drivers," now earning up to $13 per hour.

Labor costs at Dlush consume 28 percent of sales, the same percentage as for food cost. Adler pulls 25 percent of revenue to the bottom line, he said.