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Actor Patrick Dempsey beats ‘green monster’ to win Tully’s

Not enough people went to Tully's to make the company a success, but several investor groups wanted to buy the coffee chain. It appears "Grey's Anatomy" TV actor Patrick Dempsey will win the bid for Tully's. (Linda Thomas photo)

Actor Patrick Dempsey’s investment group has agreed to pay about $9 million for Seattle-based Tully’s Coffee.

Not enough people went to Tully’s to make the company a success. “Poor” management and burning through cash didn’t help, but several investor groups wanted to buy the coffee chain.

Dempsey, who stars in the TV Show “Grey’s Anatomy” set in Seattle, tweeted last night, “We met the green monster, looked her in the eye, and … SHE BLINKED! We got it! Thank you Seattle!”

The green monster of which Dempsey is speaking is apparently Starbucks, which wanted half of Tully’s 47 stores.

Dempsey’s group put in a bid for the whole chain, reportedly paying $9.15 million for Tully’s.

But The Seattle Times reports the fight over Tully’s may not be done, as Starbucks said it and another bidder offered $10.56 million.

Starbucks has not announced whether it will file an official objection.

If a bankruptcy court judge approves the acquisition a week from Friday, the deal for the sale of Tully’s is expected to close by the end of the month.

The Seattle coffee chain is named Tully’s after the founder’s middle name and college nickname.

Tom Tully O’Keefe told me in an interview, when he stepped down as CEO two years ago, he never set out to start a coffee company, especially since Starbucks was already established in Seattle. O’Keefe had other plans.

“I had gotten together with a pal of mine, another fraternity brother (Phi Delta Theta at the UW) and we were going to do a gourmet deli,” says O’Keefe. “We had written a business plan that we named Lescargot.”

The gourmet sandwich shop never happened. Instead O’Keefe continued developing real estate in Seattle in the 1980s. A few years later Starbucks approached him and wanted to lease space in one of his shopping centers. A woman who worked for O’Keefe suggested, “Why don’t you start your own coffee company?”

In 1992, the first Tully’s opened. O’Keefe was ready to take on Starbucks because he felt his company had four distinct points of difference. First, was the taste of the coffee, which he says isn’t as bitter, or that burnt sort of flavor that a lot of people associate with Starbucks.

From the beginning, Tully’s coffee shops were also more cozy than Starbucks with over-stuffed chairs and fireplaces and he didn’t mind if people “loitered” in his stores. Another point of difference O’Keefe planned on was that Tully’s service would be more friendly than at other coffee cafes.

“When you walked into my store, I not only knew your name, I knew your drink. I started it when I saw you getting out of the car,” he says. “What I found at Starbucks, being a Starbucks fan before I started Tully’s, is that I would go into a store where I had developed a relationship with a barista and 30 days later that barista was moved to a different store.” So, O’Keefe wanted his baristas to stay with one store for a year.

The fourth point of difference with Starbucks was something O’Keefe didn’t talk about much. His stores give back to the community through charity. He called it “because marketing” – because it was the right thing to do.

O’Keefe had a vision and business plan for Tully’s, but almost 20 years after it started the company has yet to turn a profit and is struggling. What went wrong?

Tully’s burned through cash as it tried to expand, and O’Keefe admits they made some bad hiring decisions after he stepped down as CEO in 2001.

“We’ve had a few leaders in the past that, God I’d love to meet their kids because I can’t imagine these people were ever compassionate towards their kids needs because they just beat the hell out of our employees,” he says.

A year ago, O’Keefe even took himself out of his own company to try and breathe new life into it, although he remains the largest shareholder.

“In one way, leaving was one of the most difficult decisions I’ve ever made, in another way it was the easiest thing because I was going to kill someone,” he half jokes. “The problem was I was concerned it was going to be me.”

He had made about 20 trips to Asia the 18 months before he left Tully’s and “lived and breathed” the company 24/7. Now he’s cut back, spending about 12 hours a day working with O’Keefe companies.

“I say I had 100 reasons why I retired from Tully’s and 98 of them are all the right reasons and two of them were for probably the wrong reasons but I had to do it,” O’Keefe says. “The bird had to fly. With me around, I was covering for people who were not as talented as they could have been or should have been.”

O’Keefe didn’t add any sugar to his coffee company’s history. He told me they made “poor choices” for company leaders over the years.


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