Starbucks Coffee, sometimes referred to as Fourbucks Coffee is 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 promoting. He was impressed 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 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 Breakfast 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 as of September 2007 in 44 countries. It has annual sales of more than $10B with a lot of recent quarterly revenue being $2.526B. About 85% of Starbucks revenue comes from company-operated stores.
Starbucks does not franchise its operations and contains 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 supply use of property which may otherwise unavailable. Starbucks receives licensee fees and royalties from the licensed locations. At these licensed retail locations, the workers are considered employees of this specific retailer, not Starbucks. Since 2008 it provides 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, lower than 400 stores during 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 having a four-buck Frappuccino. What this means is Starbucks Hours Saturday is quite responsive to economy downturn as observed in 2007 and 2008 when compared with Burger Kings and McDonald’s. This may be the primary 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 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 be considered a sign of desperation. On April 22, 2008 Starbucks cut its outlook for your year citing weak economy.
Calorie & Sugar: Starbucks drinks acquire more sugar and calorie by which consumers are a lot more concerned because of explosion of obesity and diabetes epidemic in america. For 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. When it turns into a trend that consumers opt to cut down on the sugar drinks, or stick to low-carb diets then it could have impact on Starbucks revenue.
Competition: McDonald’s, Wendy’s and Dunkin Donuts now also 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 costs are already pretty high; it’s very hard for Starbucks to increase the values in the near future without affecting the visitors to its stores.
High-expenses business model: while Starbucks profit margin is high because it pays an average $1.42 per pound for your unroasted coffee, its company is very labor intensive just like some other foods businesses. It takes 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 composed of 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 united states in 2008 by the Fortune magazine employee’s survey. What is good for employees may not great for the employers. These benefits are usually only available to key employees or managers inside the restaurant industry. Historically, the expense of these health benefits rise faster than the rate of inflation. Inside the long run, they may have negative influence on Starbucks bottom line. Should Starbucks Address not perform well, it may be under pressure as a public company to close more stores.