Fusion Coffee Lab

Colorado Expansion Study

Expansion Planning

A study was undertaken by Fusion Coffee Lab in Tempe, AZ to locate candidate locations in the Denver, CO metro area to open a new and different location.

Background

Fusion Coffee Lab is a coffee shop that appeals to customers with leisure time and discretionary income with a taste for single-origin, house-roasted coffee and an edgy, 'hipster' vibe, like the coffee shops from the 1950's.

Motivation

Want to expand the business to offer sustainably grown, Colorado-roasted coffee to similar customers in the fast-growing Denver metro area.

Candidate Criteria

• Near an older but growing,possibly 'trendy' neighborhood
• Not near an international airport
• Have less than 50% independent coffee shops
• Good proximity to anchor locations like a university, medical campus, arts district, performing arts complex, and/or professional office buildings

Study Approach

• Obtain curated demographic data for target zip codes in the Denver metro area
• Obtain venue data for target zip codes from Foursquare, a Location-Based Social Network (LSBN)
• Utilize unsupervised machine learning to discover what groups emerge from the data
• Analyze the group most similar to home zip code

Unsupervised Machine Learning

• Unsupervised machine learning algorithms infer patterns from a dataset without reference to known or labeled outcomes.
• These algorithms "mine" patterns from data that are not directly observable by human beings.
• This study utilized K-Means Clustering, which allows us to automatically split the dataset into groups according to similarity.

Data Used in the Study

• A list of target zip codes in the Denver metropolitan area and for Tempe, AZ
• Demographic information for all the zip codes
• Categorical, venue and attraction data from the LSBN Foursquare
• A comprehensive list of franchise coffee shops

Data Acquisition and Cleaning

• Scraped Zip-Codes.com for Denver zip codes. Including Tempe, 94 zip codes were obtained.
• Scraped HometownLocator.com for demographics for all zip codes. Some zip codes were not available and were excluded. In all, 85 demographics observations with 19 features were obtained.
• Retrieved from Foursquare the top 100 recommended venues for each zip codee.
• Utilize Simpson's Diversity Index to allow us to measure the richness and evenness of venue categories obtained from Foursquare for each zip code.
• Final result set is composed of 85 observations with 31 features.

Methodology

• Perform an exploratory analysis of the main data sources to identify any patterns and to help with possible feature reduction
• Perform K-Means Clustering to identify candidate zip codes, which are those that are clustered with Tempe
• Explore the cluster containing Tempe, and identify the best zip codes, based on the stated criteria
• Provide guidance on the top zip codes, based on the mix of franchise vs. independent coffee shops in the candidates

Exploring Tempe

Cluster Six

Seven clusters were identified and are shown geographically in the diagram.

Nine zip codes similar to Tempe were identified and are shown in cyan in the diagram.

Top 5 Venues

The table shows the top five venues in each of the nine zip codes in cluster 6.

Coffee Shop is in the top 3 of nearly all the zip codes.

Percent Independent Shops

Recommendation 1 - 80110

• A mix of commercial and residential areas south of downtown Denver
• Close proximity to anchor locations like Swedish Medical Center and Craig Hospital, the Gothic Theater, University of Denver and Arapahoe Community College
• Coffee Shop is the second-most recommended category but only 36% of them are independent.

Recommendation 2 - 80236

• A largely residential neighborhood southeast of downtown Denver
• A growing neighborhood of homes built in the 1950s with unique architecture
• Close proximity to anchor venues like Marsten Lake, the University of Denver and Mullen High School, a prestigious Catholic preparatory school
• Coffee Shop is the second-most recommended category but only 38% of them are independent.

Recommendation 3 - 80204

• Urban neighborhood just west of downtown Denver
• Near the trendy LoDo and Lincoln Park neighborhoods.
• Close proximity to anchor venues like the Colorado Convention Center, Denver Center for Performing Arts, Mile High Stadium and Pepsi Center, Auraria Campus, and Sloan's Lake Park
• Coffee Shop is the third-most recommended category but 53% of them are independent.

Next Step - Further Analysis

• Examine more detailed demographics of recommended zip codes, including gender, age group and ethnic breakdowns
• Search for available and appropriate real estate, and compare prices, taxes and other aspects
• Possibly visit the areas and some of the independent coffee shops to assess competition to ensure our expansion is as unique in Denver as it is in Tempe