Starbucks Coffee, sometimes called 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 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 recognition of the espresso bars in Italy after he traveled to Milan in 1983. Back to the US, he convinced the founders of Starbucks to market both coffee beans and espresso beverages. However, the thought 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 Holiday 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 first overseas store in Tokyo, Japan in 1996. The company currently has about 16,000 stores, employs 172,000 partners, AKA employees as of 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 fails to franchise its operations and has no wants to franchises in near 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 offer usage of real estate property which would otherwise unavailable. Starbucks receives licensee fees and royalties from the licensed locations. At these licensed retail locations, the workers are considered employees of that specific retailer, not Starbucks. As of 2008 it has 7087 company-operated stores and 4081 licensed stores in the united states. 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 wants to open 1020 US stores in 2008, under 400 stores in 2009 down from 1800 stores in2007. Additionally, it also wants 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. What this means is Starbucks Hours is very sensitive to economy downturn as observed in 2007 and 2008 compared to Burger Kings and McDonald’s. This may be the primary reason sales at stores in the united states open at least annually are anticipated a mid single-digit percentage decline, the initial drop ever. It triggers Howard Schultz to go back 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 acquire more sugar and calorie by which individuals are more and more concerned as a result of explosion of obesity and diabetes epidemic in the US. 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 this becomes a trend that consumers opt to cut down on the sugar drinks, or stick to low-carb diets this could have influence on Starbucks revenue.
Competition: McDonald’s, Wendy’s and Dunkin Donuts now offer espresso at lower prices to contest with Starbucks. They will likely 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 prices in the future without affecting the visitors to its stores.
High-expenses business structure: while Starbucks profit margin is high because it pays the average $1.42 per pound for the unroasted coffee, its organization 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 america and Canada receive benefit package comprising stock option plan, 401k with company matching, medical, dental & vision coverage. Starbucks is voted because the 7-th best company to work for in the US in 2008 from the Fortune magazine employee’s survey. What is useful for employees may not great for the employers. These benefits are usually only available to key employees or managers within the restaurant industry. Historically, the expenses of these health benefits rise faster compared to the rate of inflation. In the long run, they may have negative impact on Starbucks bottom line. Should Starbucks Customer Service not perform well, it may be under pressure as being a public company to close more stores.