Starbucks Coffee, sometimes referred to as Fourbucks Coffee is the biggest coffeehouse chain on earth. 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 promote high-quality coffee beans and equipment. In 1982, Howard Schultz, the existing Chairman and CEO joined the business as the Director of Marketing. He was surprised by the recognition of the coffee bars in Italy after he traveled to Milan in 1983. Back to the US, he persuaded the founders of Starbucks to promote 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 what time does Starbucks close 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. Ever 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 organization currently has about 16,000 stores, employs 172,000 partners, AKA employees at the time of September 2007 in 44 countries. It has annual sales of over $10B with many recent quarterly revenue being $2.526B. About 85% of Starbucks revenue comes from company-operated443 stores.
Starbucks fails to franchise its operations and it has no intends to franchises in near future. In Canada And 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 property which may otherwise unavailable. Starbucks receives licensee fees and royalties from these licensed locations. At these licensed retail locations, the personnel are considered employees of this specific retailer, not Starbucks. As of 2008 it offers 7087 company-operated stores and 4081 licensed stores in the US. 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, in addition, it intends to close 100 stores in 2008.
Recession-sensitivity: a hungry man can survive having a Big Mac & fries but can do without a four-buck Frappuccino. What this means is Starbucks is extremely understanding of 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 US open at least a year are expected a mid single-digit percentage decline, the initial drop ever. It triggers Howard Schultz to go back to the CEO post. The business intends 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 is usually a indication of desperation. On April 22, 2008 Starbucks cut its outlook for that year citing weak economy.
Calorie & Sugar: Starbucks drinks acquire more sugar and calorie where consumers are increasingly more concerned due to explosion of obesity and diabetes epidemic in america. 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 turns into a trend that consumers decide to reduce on the sugar drinks, or stay with low-carb diets it could have impact on Starbucks revenue.
Competition: McDonald’s, Wendy’s and Dunkin Donuts now also offer espresso at less expensive costs to contest with Starbucks. They are going to capture some revenue from Starbucks, especially from cost-conscious customers. The existing Starbucks prices are already pretty high; it’s quite hard for Starbucks to boost the costs soon without affecting the targeted traffic to its stores.
High-expenses business model: while Starbucks profit margin is high since it pays an average $1.42 per pound for your unroasted coffee, its company is very labor intensive just like any other foods businesses. It takes between 10-20 employees to perform one store. All eligible part-time and full time partners in the US and Canada receive benefit package consisting uqfpxd stock option plan, 401k with company matching, medical, dental & vision coverage. Starbucks is voted since the 7-th best company to get results for in the US in 2008 by the Fortune magazine employee’s survey. What is good for employees might not be beneficial to the employers. These benefits are usually only accessible to key employees or managers in the restaurant industry. Historically, the expense of those health advantages rise faster compared to the rate of inflation. Over time, they could have negative impact on Starbucks bottom line. Should Starbucks not perform well, it may be under pressure as a public company to close more stores.