From its humble beginnings in Sister Bay, Door County, to its current footprint of two – soon to be three – cafe locations in and around downtown Milwaukee, Discourse Coffee has broken into the local market with aspirations of growing into a $10 million business within the next five years. In the past year alone, Discourse saw revenue increase 90% to $500,000, says Ryan Castelaz, who founded Discourse in 2017, relocated it to Milwaukee in 2021 and now co-owns the business with partner Sean Liu. In January, Discourse will take its biggest step yet with the opening of an all-day cafe at Radio Milwaukee. BizTimes Milwaukee associate editor Maredithe Meyer recently caught up with Castelaz to talk about the recently announced cafe and his overall vision for Discourse. The following portions of their conversation have been edited for length and clarity.
Coffee shop of the future
“The Radio Milwaukee (cafe) is being designed as our exemplar for our retail operations going forward. It’s the cafe that we've always wanted to build, and it is the cafe that we will continue to grow within. It's a cafe that encompasses all of the things that we've learned over the years, all the things that we love: amazing coffee, amazing tea, amazing cocktails, amazing food, amazing music. All of that is a huge part of our experience and this is the first time we're able to offer it all simultaneously in one space.
“I believe strongly that the all-day cafe, celebrating a variety of offerings beyond (coffee), is the model of the future. There will be very few coffee shops left within the next 10 years if they do not embrace expansion of services. As overhead increases, it will be extremely difficult for coffee operators to turn a profit in what is already a tight-margined industry, so we need to be thinking about how we expand ourselves into areas that have traditionally higher margins. For us, that expansion is in the creation of the all-day cafe. Our first focus is really dialing in our retail model and new café and then expanding that to what we believe to be maybe two to three additional locations throughout the Midwest.”
Seeking investors
“We're in the midst of a fundraising round and rallying support for the work that needs to be done in the cafe. … We’re talking to investors in a variety of fields. Private equity investments, loans at prime or convertible debt arrangements are all options we're considering with our investing partners. It's a unique opportunity because it is not an investment in a parent company. We have insulated (the Radio Milwaukee cafe) as its own company and its own location. The growth potential is limited to what can be achieved within one retail footprint, so in talking with investors it's been interesting to go back and forth about the growth opportunities and the growth avenues we see in this space.”
Sustainable growth
“We have really strong beliefs about the potential of the parent company going forward. … I've had to dive a lot more into the numbers, the dollars, the cents, the levers, the business behind what we do. It's not just about making drinks; we're making drinks in a way that is sustainable and can achieve growth. So, the valuation I'm putting on the company now is, we are looking to achieve – and will achieve – a $10 million valuation within the next five years. …
“… We’re out to prove that coffee can be a sustainable industry for both the employees and the employer, and we can generate shareholder returns while also creating meaningful and valuable lives for our employees. It doesn’t have to be either-or.”
