‘We’ve already identified almost 1,000 locations’: Black Sheep Coffee’s plans to take over the high street

Other factors include speed of service, which Holth says is often overlooked and hard to achieve for smaller operators.

The brand tries to appeal to all types of coffee customer, and has a student discount and a family offering. “If you can do it [all] really well you can win market share from competitors,” says Holth. “There isn’t one silver bullet, but we are getting better over time at serving different customer groups. We started off perhaps having a much more niche appeal, [but we are now] way more accessible to different groups – and as a result we’re seeing much younger customers than we did 10 years ago.”

When it comes to franchising, the brand believes it can offer something better than the competition: “We’re seeing a lot of operators with experience from the legacy brands looking at new options,” he says. “If you’re looking to grow a franchise business, you want to pick a brand that’s early in its journey and is growing fast.”

Black Sheep is also looking to strike while the sector is in flux. Last month, Pret A Manger reported an operating loss of £451.5m for 2024, down from a £28.3m profit in 2023. Meanwhile, Costa, Britain’s largest coffee chain with more than 2,000 outlets, saw global coffee sales fall by 3% in 2024. Costa’s owner, Coca-Cola, is now reportedly exploring a sale.

“For us, it’s really important that everyone is delivering the same experience as in the corporate stores, without exception”

All coffee shop operators are facing intense cost pressures. Labour costs have surged and coffee prices are at record highs amid global supply shortages. In September, Office for National Statistics data revealed UK coffee prices were up 15.4% year-on-year, and UCC Coffee data analysis found the price of a medium latte rose by up to 30% between 2021 and 2024. Today, a regular-size flat white with oat milk costs £4.69 at Black Sheep.

Holth says the fact that Black Sheep serves robusta – historically a cheaper bean – is not significantly helping the chain improve its margins. “It’s a common misconception that you have a big cost advantage with robusta,” he says – prices hit an all-time high a few months ago.

Black Sheep also has to compete with other premium challengers, including American export Blank Street Coffee, and more established chains are also still reporting strong results, with Caffè Nero delivering sales of £626.4m in the year to June, up 12% year-on-year.

Centralised model

Holth says he expects franchises to drive Black Sheep’s growth and believes the company’s centre-led model, where its technology and menus are decided at its London headquarters, will help it win long-term.

“For us, it’s really important that everyone is delivering the same experience as in the corporate stores, without exception. That means there’s no shortcuts: you hold everyone in the network to those standards religiously,” he says. 

However, Holth says the founders also look to harness franchisees’ creativity: “Franchising is a great way to really decentralise innovation,” he says. “Sometimes operators have a great idea with really valuable learnings that you can roll out to the rest of the network.”

Unlike other fast-growing chains, Black Sheep has managed to expand rapidly without taking on institutional capital – something Holth says “is definitely hard, but something we’ve felt very strongly was important”. It has instead taken cheques from angel investors including enthusiastic customers working in the City.

Now, over 12 years into the journey, Holth is excited for the future: “We really kind of enjoy competing,” he says.