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Originally published Thursday, February 21, 2013 at 4:00 PM

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Starbucks to open in former Tully’s location at Broadway and Pike

Starbucks didn’t win the rights to acquire Tully's Coffee, but the big chain is about to open in a choice location where the smaller chain could not turn a profit — at Broadway and Pike.

Seattle Times business reporter

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Starbucks did not win the hard-fought battle to acquire Tully's Coffee out of bankruptcy, but the big chain is about to open in a choice location where its competitor could not turn a profit — at Broadway and Pike.

Starbucks knows the corner well.

Just across the street from the old Tully's space at 824 E. Pike Street is a QFC supermarket with a Starbucks inside.

Tinka Dailey, a regular at the QFC Starbucks, said she won’t change locations.

“I like the baristas here,” Dailey said. And she parks in the lot above QFC, “so it’s easier to come right down here” than come down and cross the street.

Still, Starbucks expects to have plenty of customers at the new shop, which is scheduled to open in about three months.

The cafe will include one of Starbucks’ coveted Clover machines.

About 400 of its stores in coffee-savvy neighborhoods in the U.S. and Canada sell coffee brewed in Clover machines, in addition to Starbucks’ regular offerings.

The Clover is a drip coffee machine so expensive (about $11,000) and highly specialized that fewer than 250 were delivered in the two years before Starbucks bought the Seattle-based company in 2008.

That hot-ticket profile fits with the current climate at Broadway and Pike, where Starbucks will be in the same block as the popular nightclub Neighbors and a two-minute walk to Elliott Bay Book Co. and a hip scene that has bubbled up around it.

The new vibe — and money — that have appeared in south Capitol Hill make it curious that Tully’s could not turn a profit at Broadway and Pike. It opened there in 2000.

The Pike Street location is one of 19 unprofitable cafes that Tully’s closed during its bankruptcy. It was closed before Tully’s was put up for auction.

Altogether, Tully’s has closed 32 stores in the past couple of years in an attempt to pull itself out of a financial hole. One of those stores is now Ballard Coffee Works, the sister shop to Seattle Coffee Works in downtown Seattle.

“It’s going great,” said office manager Rita Bergk, who said the Ballard store opened last March.

Tully’s made a profit for only two fiscal years since it was founded in 1992, and in both years, profits came from the sale of major portions of the company.

An investment group led by actor Patrick Dempsey won the bidding for Tully’s remaining business, which has 47 stores.

Starbucks and other bidders fought that decision in court but lost in early January when a judge upheld the Dempsey group’s $9.15 million bid.

The group was expected to close the deal by late January, when Tully’s was due to run out of money. They are awaiting resolution of some technical issues from third parties and expect to close in the next couple weeks, according to a source with Dempsey’s investment group. Meanwhile, the group has provided cash to keep the chain in business.

In another round of coffee shop closings, Starbucks-owned Seattle’s Best Coffee closed its location at Fourth Avenue and Pike Street in December and three other Seattle cafes — at 1530 Post Alley, 621 Second Ave., and 1100 Fourth Ave. — are scheduled to close in February and March.

After they close, Seattle’s Best will have 63 cafes, including 59 that are franchises. The company owns one each in Seattle, Redmond, Portland and Chicago.

Two of the four are drive-through cafes, which executives expect eventually to number in the thousands.

Melissa Allison: 206-464-3312 or mallison@seattletimes.com. Twitter @AllisonSeattle.

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