Starbucks Coffee, sometimes known as Fourbucks Coffee is definitely 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 market 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 impressed by the buzz 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 idea 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 Hours with $3.8M and renamed Il Giornale coffee bars to Starbucks and turned it in to 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 very first overseas store in Tokyo, Japan in 1996. The company currently has about 16,000 stores, employs 172,000 partners, AKA employees since September 2007 in 44 countries. It has annual sales well over $10B with most recent quarterly revenue being $2.526B. About 85% of Starbucks revenue arises from company-operated stores.
Starbucks does not franchise its operations and it has no intends 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 use of real estate property which would otherwise unavailable. Starbucks receives licensee fees and royalties from all of these licensed locations. At these licensed retail locations, the workers are considered employees of this specific retailer, not Starbucks. As of 2008 it offers 7087 company-operated stores and 4081 licensed stores in america. Internationally it has 1796 company operated stores and 2792 joint-venture or licensed stores in 43 foreign countries. The pace of expansion is slowing down since the company plans to open 1020 US stores in 2008, under 400 stores in 2009 down from 1800 stores in2007. In addition, additionally, it plans to close 100 stores in 2008.
Recession-sensitivity: a hungry man can survive with a Big Mac & fries but can live with no four-buck Frappuccino. This implies What Time Does Starbucks Close Today is quite responsive to economy downturn as noticed in 2007 and 2008 in comparison to Burger Kings and McDonald’s. This may be the key reason sales at stores in america open at the very least a year are expected a mid single-digit percentage decline, the first drop ever. It triggers Howard Schultz to go back to the CEO post. The company wants 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 be considered 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 by which consumers are increasingly more concerned due to explosion of obesity and diabetes epidemic in america. For instance, 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 it gets to be a trend that consumers decide to cut down on the sugar drinks, or stick to low-carb diets it will have effect on Starbucks revenue.
Competition: McDonald’s, Wendy’s and Dunkin Donuts now also provide espresso at lower prices to contend with Starbucks. They are going to capture some revenue from Starbucks, especially from cost-conscious customers. The pvmpqb Starbucks prices are already pretty high; it’s very hard for Starbucks to increase the values in the near future without affecting the traffic to its stores.
High-expenses business design: while Starbucks profit margin is high since it pays an average $1.42 per pound for that unroasted coffee, its business is very labor intensive just like any other foods businesses. It will take between 10-20 employees to perform one store. All eligible part-time and full-time partners in the US and Canada receive benefit package comprising stock option plan, 401k with company matching, medical, dental & vision coverage. Starbucks is voted as the 7-th best company to work for in the united states in 2008 by the Fortune magazine employee’s survey. What is good for employees may not be great for the employers. These benefits are normally only available to key employees or managers inside the restaurant industry. Historically, the costs of such health benefits rise faster compared to the rate of inflation. In the long run, they may have negative effect on Starbucks bottom line. Should Starbucks Address not perform well, it may be under pressure as being a public company to close more stores.