On the evening of Sept. 24 one had to pine for a vacant table at the Lviv Handmade Chocolate café on Shevchenko Boulevard in central Kyiv. Several couples peered into the dimly lit sweets and coffee shop only to disappointingly leave. Gourmet coffee sippers sat as others dropped in to pick up a romantic morsel made of Belgium chocolate. The shelves beckon with their diversity: from chocolate figures and specialty items to branded passport covers, souvenirs and children books. Once a small café in central Lviv, LHC has successfully grown into an international chain with 18 venues in Ukraine and two in Poland.
The brand is part of Lviv-based iFEST holding known for its themed restaurants that border on kitsch – like a bar that is fashioned into a typical bunker that partisans in the Ukrainian Insurgent Army used during World War II. Lviv Handmade Chocolate (LHC) started in 2009 as a niche business to offer some 50 types of handmade sweets, including over a dozen truffles, marzipan candies and chocolate-covered nuts. The delightful candies get sold through carefully branded cafes with a penchant for detail – the franchisee has to get approval from the cloths – and on strategically placed horse carts in shopping malls and busy pedestrian areas.
It´s a specialized entity that offers the old world authenticity of Lviv to a variety of patrons: families with kids on weekends, business people during lunch hours, young couples in the evenings and tourists looking for genuineness.
Individually crafted sweets sell for Hr 5-6, chocolate bars for some Hr 30, while a chocolate figure ranges from Hr 25 to over Hr 100 depending on the size. Catching on with the patriotic mood as the nation stands up to Russian military aggression, LHC offers novelties, such as chocolate figures of Russian presidents. An espresso goes for Hr 20 and a trademark dessert is priced at Hr 27-30. Some milk shakes and other menu specialty items go up to Hr 40.
Some franchisees sell the sweets on wooden carts. There are 12 such vozyky in Kyiv alone, according to the Kyiv branch of LHC located on Horokoho Street, and four cafes.
Lawyer Andriy Domansky favors the comfortable lounge space that the cafes offer: “It´s a nice place in Kyiv to show to new people and have a nice chat. Its cozy atmosphere, friendly staff and great coffee and chocolate are among things that attract me the most.”
The atmosphere is what makes it the main feature of the niche business.
“iFest holding found their way to success through understanding that every customer values emotions more than the product itself and LHC is not an exception,” said Kyiv-Mohyla Business School associate professor Mychailo Wynnyckyj.
Business model
All the sweets are handmade in Lviv and further distributed to franchises in the regions. Each café retains a percentage of earnings from running the café and corporate orders unless they are made directly to the holding company.
In turn, LHC offers its partners the right to use the trademark as well as a 40 percent discount on products bought from the holding company. Franchisees bear all the business risks and run the business independently in consultation with and under the supervision of the main office. Usually, a single entity is chosen within an oblast to form a partnership and gets an exclusive franchising license for it.
The holding company strictly supervises the activities of franchisees.
“Corporate standards are very high and all the partners are required to follow them strictly, not only in quality, service and location of the coffee shop, but also regarding the interior, where everything up to the tablecloth must be approved by the central office. We care about the atmosphere in all our branches as this is vital to our reputation,” says LHC´s business development and communications manager Tetyana Boboshko.
Marketing strategy
One LHC café said it doesn’t need extra publicity.
“I am not quite sure that the owners would get interested in your proposal. The majsternia (coffee shop) doesn’t need advertisement,” said Denys Dobrovolsky, an assistant manager of a café in Kyiv in response to a request for information for this story.
The corporate strategy appears similar.
“The budget of LHC doesn´t include an item for direct advertisement. We work on providing impressions for our clients: every branch plans its parties, evening readings or contests they consider relevant on their own. Information is mostly distributed through social networks. Our chocolate master classes do not need announcements – viral marketing works perfectly on its own; birthday parties or family visits for that purpose are normally booked two-three weeks in advance,” said Boboshko.
Loyal customers also qualify for the “local” chain loyalty program which includes discounts to all other iFEST restaurants.
HR standards
Salaries are far from the highest in the sector. Servers usually earn Hr 2,000 a month but usually double that with the tips they get. The same applies to cart vendors who also enjoy profit-sharing benefits. Patience and advanced Ukrainian language skills are among the main criteria for making the team.
Business environment
“The Ukrainian political crisis did not influence our business too much. During the past six months we´ve opened five new locations in Ukraine and one more in Krakow, Poland. Despite minor increases in prices in July and September, people still don’t refuse a cup of good coffee at LHC,” said Boboshko, adding that corporate orders have started to decrease.
The chain also has expansion plans, with Rivne and Volyn oblasts being the target regions. Branches in Kyiv branches are currently hiring.
Kyiv Post freelance writer Olena Gordiienko can be reached at [email protected].
