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 promote 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 promote 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 Hours Sunday 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 at the time of September 2007 in 44 countries. It has annual sales of more than $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 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 provide access to property which would otherwise unavailable. Starbucks receives licensee fees and royalties from all of these licensed locations. At these licensed retail locations, the staff are considered employees of the specific retailer, not Starbucks. As of 2008 it provides 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 because the company plans to open 1020 US stores in 2008, less than 400 stores during 2009 down from 1800 stores in2007. Furthermore, in addition, it wants to close 100 stores in 2008.
Recession-sensitivity: a hungry man can survive having a Big Mac & fries but can live without having a four-buck Frappuccino. What this means is What Time Does Starbucks Stop Serving Breakfast is quite understanding of economy downturn as observed in 2007 and 2008 when compared with Burger Kings and McDonald’s. This may be the key reason sales at stores in the united states open at the very least a year are required a mid single-digit percentage decline, the very first drop ever. It triggers Howard Schultz to return 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 a sign of desperation. On April 22, 2008 Starbucks cut its outlook for your year citing weak economy.
Calorie & Sugar: Starbucks drinks get more sugar and calorie by which people are increasingly more concerned as a result of 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 it becomes a trend that consumers opt to cut down on the sugar drinks, or stick to low-carb diets this will have influence on Starbucks revenue.
Competition: McDonald’s, Wendy’s and Dunkin Donuts now offer espresso at lower prices to contend with Starbucks. They will 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 improve the values in the future without affecting the targeted traffic to its stores.
High-expenses business design: while Starbucks profit margin is high as it pays the average $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 run one store. All eligible part-time and full-time partners in the united states 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 US in 2008 from the Fortune magazine employee’s survey. What is good for employees may not really beneficial to the employers. These benefits are typically only accessible to key employees or managers inside the restaurant industry. Historically, the expenses of such health advantages rise faster compared to rate of inflation. Inside the long run, they may have negative influence on Starbucks bottom line. Should Starbucks Customer Service not perform well, it may be under pressure as a public company to close more stores.