Business

University of Iowa Hospitals and Clinics replacing Java House

'We are deeply saddened by this decision'

People wait in line at the Java House location in the Roy Carver Pavilion at the University of Iowa Hospitals and Clinics in Iowa City on Monday, Jul. 16, 2018. (Stephen Mally/The Gazette)
People wait in line at the Java House location in the Roy Carver Pavilion at the University of Iowa Hospitals and Clinics in Iowa City on Monday, Jul. 16, 2018. (Stephen Mally/The Gazette)

IOWA CITY — Nearly 14 years after steaming its first latte inside the University of Iowa Hospitals and Clinics complex, locally-owned and operated Java House says it is “deeply saddened” by an administrative decision to oust it from all four of its hospital locations.

UI executives told Java House founder and owner Tara Cronbaugh nearly two weeks ago they’re not renewing a long-standing contract with her brewing business — which she dreamed up as a UI student for a class assignment in 1993, and since grew to nine locations across the community with a loyal following.

Java House has to be out of its UIHC stations — two in the Roy Carver Pavilion, one in the Pomerantz Family Pavilion and one in the new Stead Family Children’s Hospital — by Oct. 31, according to Cronbaugh.

The university issued a request for proposals for coffee concepts in March because, according to UIHC spokesman Tom Moore, “UI Health Care leaders are responsible for ensuring that the organization is operating in the most cost efficient manner possible.”

“From time to time, they review the arrangements with our vendors that are currently in place,” he said in an email. “In some cases, they begin a public competitive bid process to determine if a different vendor could offer a more cost-effective solution for our patients, visitors, faculty and staff.”

Moore said last Thursday “a finalist has not been selected yet.” But one week earlier, Cronbaugh said, UIHC told her it was going with a vendor that had offered to share a greater percentage of its revenue.

Over the weekend, Cronbaugh announced the news on Facebook. “We leave with our heads held high knowing we did everything that we could for our amazing guests,” it said in part.

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The UI commented on that Facebook post by saying in part that “Java House has gotten out ahead of us a bit” with the announcement, but the name of the new vendor could not yet be revealed.

“We know you’ll be excited to hear about them, but we can’t share that news yet. Stay tuned!”

Many Facebook commenters did not take kindly to that response.

“Why are you trying to interfere with their business and with how they choose to say goodbye? Leave them alone and let them say goodbye to their patrons in peace,” one wrote.

Moore called Java House “a great coffee partner” and said the business will continue to operate a shop in the Pappajohn Biomedical Discovery Building.

Java House also operates in the Iowa Memorial Union.

Cronbaugh said she’s concerned about her business’s long-term relationship with the UI, pointing to the experience at the Children’s Hospital location.

The UI asked her to open a fourth hospital location there, only now to cancel the contracts.

“They stuck us with all this equipment and asked us to leave,” she said. “How nice of them is that?”

To open the Children’s Hospital location in time for a November 2016 open house, Cronbaugh said, she had to take out a loan and then pay it off without any new revenue from that location for months — as it all sat unused until after the building finally opened in February 2017, months later than planned.

For years, according to the expiring contract, Java House has been sharing 15 percent of revenue up to $1 million, 16 percent of revenue up to $1.5 million and 17 percent of revenue over that. Cronbaugh said her company upped its sharing proposal as part of the rebidding process.

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But the university told her another company proposed a sharing agreement of a couple percentage points higher — although she has doubts any new business could soon generate the level Java House grew to.

Closing the four locations will affect about 35 employees, although Cronbaugh said she’ll try to accommodate them elsewhere and through attrition. And the Java House is expanding to The Eastern Iowa Airport once a new terminal opens in March.

The looming coffee house swap mirrors headwinds that hospitals nationally, and in Iowa, are facing. The hospitals are looking at ways big and small to generate money and cut costs to help cope with shifting payer mixes and tightening revenue streams.

l Comments: (319) 339-3158; vanessa.miller@thegazette.com

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