Starbucks Coffee, sometimes called Fourbucks Coffee will be the largest coffeehouse chain in the world. It opened its first store in 1971 in Seattle’s waterfront Pike Place Market by three partners: Jerry Baldwin, Zev Siegel, and Gordon Bowker to sell high-quality coffee beans and equipment. In 1982, Howard Schultz, the current Chairman and CEO joined the company as the Director of advertising. He was surprised by the popularity of the espresso bars in Italy after he traveled to Milan in 1983. Back to the US, he convinced the founders of Starbucks to sell both coffee beans and espresso beverages. However, the concept was rejected so he left the company and founded Il Giornale coffee bar chain in 1985. In 1987 Howard Schultz and Il Giornale bought Starbucks Thanksgiving Hours with $3.8M and renamed Il Giornale coffee bars to Starbucks and turned it into the Starbucks you know today. The company went public with the symbol SBUX in June 26, 1992 at $17/ share with 140 stores. Since then the stock has split 5 times. As of May 2008, SBUX is traded at about $16, down from the high of $39.43 in November 2006.
Starbucks opened the initial overseas store in Tokyo, Japan in 1996. The company currently has about 16,000 stores, employs 172,000 partners, AKA employees at the time of September 2007 in 44 countries. It offers annual sales well over $10B with a lot of recent quarterly revenue being $2.526B. About 85% of Starbucks revenue originates from company-operated stores.
Starbucks fails to franchise its operations and contains no plans to franchises in foreseeable future. In North America, most stores are company-operated. You may see some Starbucks stores inside Target, major supermarkets, University campuses, Hospitals, and Airports. These stores are operated under licensing agreements to supply access to real estate which would otherwise unavailable. Starbucks receives licensee fees and royalties from the licensed locations. At these licensed retail locations, the staff are considered employees of the specific retailer, not Starbucks. Since 2008 it provides 7087 company-operated stores and 4081 licensed stores in the US. Internationally it provides 1796 company operated stores and 2792 joint-venture or licensed stores in 43 foreign countries. The pace of expansion is slowing down because the company plans to open 1020 US stores in 2008, lower than 400 stores during 2009 down from 1800 stores in2007. Furthermore, in addition, it plans to close 100 stores in 2008.
Recession-sensitivity: a hungry man can survive with a Big Mac & fries but can live without a four-buck Frappuccino. This means Starbucks Hours Saturday is very understanding of economy downturn as observed in 2007 and 2008 in comparison to Burger Kings and McDonald’s. This may be the primary reason sales at stores in america open at the very least a year are required a mid single-digit percentage decline, the first drop ever. It triggers Howard Schultz to return to the CEO post. The company plans to double its marketing spending to $100M in 2008 to drum up sales. It began an aggressive coupons campaign offering free drinks every Wednesday through May 28, 2008. This may become a sign of desperation. On April 22, 2008 Starbucks cut its outlook for the year citing weak economy.
Calorie & Sugar: Starbucks drinks have more sugar and calorie where people are a lot more concerned due to explosion of obesity and diabetes epidemic in the US. As an example, its Strawberries & Crème Frappuccino® Blended Crème – whip has 120 grams (over 1/4 lb) of sugar, and 750 calorie on its Venti 24 oz size. If this becomes a trend that consumers opt to cut down on the sugar drinks, or stick to low-carb diets this will have effect on Starbucks revenue.
Competition: McDonald’s, Wendy’s and Dunkin Donuts now offer espresso at lower prices to compete with Starbucks. They are going to capture some revenue from Starbucks, especially from cost-conscious customers. The pvmpqb Starbucks charges are already pretty high; it’s very hard for Starbucks to improve the costs soon without affecting the traffic to its stores.
High-expenses business design: while Starbucks profit margin is high as it pays a typical $1.42 per pound for the unroasted coffee, its business is very labor intensive just like any other foods businesses. It requires between 10-20 employees to operate one store. All eligible part time and full time partners in the united states and Canada receive benefit package consisting of stock option plan, 401k with company matching, medical, dental & vision coverage. Starbucks is voted since the 7-th best company to work for in the united states in 2008 from the Fortune magazine employee’s survey. What is useful for employees may not be good for the employers. These benefits are usually only accessible to key employees or managers inside the restaurant industry. Historically, the expense of these health advantages rise faster than the rate of inflation. Inside the long run, they may have negative effect on Starbucks bottom line. Should Starbucks Headquarters Address not perform well, it may be under pressure being a public company to close more stores.