Behind Starbucks' New Venture: Beans, Beatniks, and Booze
By Mark Gimein

(FORTUNE Magazine) – With more than 2,200 coffeehouses, the lilting strains of Starbuckese (tall, skinny decaf latte, anyone?) have become a universal idiom of the urban morning. Packed into cities like San Francisco, New York, and Washington--and hometown Seattle-- Starbucks is ready for version 2.0. This spring FORTUNE spent a morning with Starbucks design head Arthur Rubinfeld in Circadia, an experimental restaurant Starbucks opened in San Francisco in 1998. Rubinfeld says he hopes Circadia, built in a former mayonnaise factory surrounded by San Francisco's pricey new loft apartments, resurrects the feel of the 1960s coffee shops of Greenwich Village. (But not the reality--Circadia's customers would probably be disappointed by the real no-frills beatnik hangouts.) Circadia may be the start of a bigger chain and a testbed of concepts for Starbucks' flagship stores.

--Mark Gimein

NEED AN OFFICE?: Scattered through Circadia are high-speed Net connections with credit-card swipe-through machines. In the morning Circadia becomes an impromptu office for some of San Francisco's free agents and hopeful entrepreneurs. There's a conference room equipped with audio-visual equipment that Circadia rents out for a steep $50 an hour.

CEO TESTED AND APPROVED: You might think that in a corporation the size of Starbucks, the menu, which includes prepared salads, sandwiches, and "nosh plates" would be focus-grouped to death. Not quite. The menu, selected by project manager Gail DiSantis and Starbucks exec (and chef) John Yamin, was tested on a tasting panel that included Chairman Howard Schultz.

STRANGE BREWS: Circadia's full bar features the usual and the creative. "Have you ever had a citrus tiazzi with a shot of Skyy Vodka?" Rubinfeld asks. He says he swears by it. Wine and beer make up the bulk of Circadia's sales, so future Circadias might lose the hard stuff (and the legal intricacies of getting a liquor license).

NO POETRY SLAMS HERE: In the daytime the raised stage is an inconspicuous platform, masked by a couch and coffee table. But it's actually one of Circadia's defining features, and the first to be integrated into some Starbucks. The hidden sound system, built with Bose components, usually pumps out jazz or blues. Circadia tried poetry readings, but don't expect them in your local Starbucks soon--they were a bust. Customers couldn't decide whether it was polite to chat while the poets read.

HAVE A SEAT: Rubinfeld and his colleagues trolled antique stores in San Francisco and Seattle for vintage furniture. The shapes and colors form a "palette" on which designers of future Circadias can draw. (Starbucks designers can choose from about a dozen such design schemes in building a new store.)