Starbucks Coffee, sometimes known as Fourbucks Coffee is the largest coffeehouse chain on the planet. 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 existing Chairman and CEO joined the company as the Director of advertising. He was surprised by the recognition of the coffee bars in Italy after he traveled to Milan in 1983. Back to the united states, he convinced the founders of Starbucks to sell both coffee beans and espresso beverages. However, the idea was rejected so he left the organization and founded Il Giornale coffee bar chain in 1985. In 1987 Howard Schultz and Il Giornale bought https://www.storeholidayhours.org/starbucks-holiday-hours-open-closed-today with $3.8M and renamed Il Giornale coffee bars to Starbucks and turned it into the Starbucks you know today. The organization went public with the symbol SBUX in June 26, 1992 at $17/ share with 140 stores. Since that time 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 as of September 2007 in 44 countries. It offers annual sales of more than $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 plans to franchises in foreseeable future. In North America, most stores are company-operated. You might see some Starbucks stores inside Target, major supermarkets, University campuses, Hospitals, and Airports. These stores are operated under licensing agreements to offer access to property which would otherwise unavailable. Starbucks receives licensee fees and royalties from these licensed locations. At these licensed retail locations, the staff are considered employees of this specific retailer, not Starbucks. Since 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 since the company intends to open 1020 US stores in 2008, lower than 400 stores during 2009 down from 1800 stores in2007. Furthermore, it also plans to close 100 stores in 2008.
Recession-sensitivity: a hungry man can survive having a Big Mac & fries but could do without a four-buck Frappuccino. This means Starbucks is very understanding of economy downturn as seen in 2007 and 2008 when compared with Burger Kings and McDonald’s. This may be the main reason sales at stores in the united states open a minimum of per year are anticipated a mid single-digit percentage decline, the first drop ever. It triggers Howard Schultz to go back to the CEO post. The organization 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 could be a symbol 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 in which consumers are increasingly more concerned because of 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 becomes a trend that consumers decide to minimize on the sugar drinks, or adhere to low-carb diets it will have impact on Starbucks revenue.
Competition: McDonald’s, Wendy’s and Dunkin Donuts now also provide espresso at lower prices to compete with Starbucks. They will capture some revenue from Starbucks, especially from cost-conscious customers. The current Starbucks costs are already pretty high; it’s very difficult for Starbucks to improve the prices soon without affecting the targeted traffic to its stores.
High-expenses business model: 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 as with any other foods businesses. It will take 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 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 america in 2008 by the Fortune magazine employee’s survey. What is perfect for employees might not be great for the employers. These benefits are usually only accessible to key employees or managers in the restaurant industry. Historically, the expense of such health benefits rise faster than the rate of inflation. In the long run, they may have negative influence on Starbucks bottom line. Should Starbucks not work well, it might be under pressure being a public company to seal more stores.