Starbucks Coffee, sometimes referred to as 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 sell high-quality coffee beans and equipment. In 1982, Howard Schultz, the current Chairman and Chief executive officer joined the company as the Director of Marketing. He was surprised by the buzz 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 Hours Of Operation 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 first overseas store in Tokyo, Japan in 1996. The company currently has about 16,000 stores, employs 172,000 partners, AKA employees since 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 arises from company-operated stores.
Starbucks does not franchise its operations and it has no wants to franchises in foreseeable 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 which would otherwise unavailable. Starbucks receives licensee fees and royalties from these licensed locations. At these licensed retail locations, the personnel are considered employees of the specific retailer, not Starbucks. At the time of 2008 it has 7087 company-operated stores and 4081 licensed stores in america. Internationally it provides 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 intends to open 1020 US stores in 2008, lower than 400 stores in 2009 down from 1800 stores in2007. Additionally, in addition, it 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. This means Starbucks Store Hours is very sensitive to economy downturn as noticed in 2007 and 2008 in comparison to Burger Kings and McDonald’s. This may be the key reason sales at stores in america open at the very least a year are required a mid single-digit percentage decline, the first drop ever. It triggers Howard Schultz to go back to the CEO post. The company 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 may become a sign 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 by which consumers are increasingly more concerned as a result 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. If it turns into a trend that consumers decide to cut down on the sugar drinks, or stick to low-carb diets it will have influence on Starbucks revenue.
Competition: McDonald’s, Wendy’s and Dunkin Donuts now also offer espresso at lower prices to contend 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 boost the values soon without affecting the visitors to its stores.
High-expenses business structure: while Starbucks profit margin is high as it pays the average $1.42 per pound for that unroasted coffee, its business is very labor intensive just like every other foods businesses. It requires 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 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 america in 2008 through the Fortune magazine employee’s survey. What is good for employees may not be good for the employers. These benefits are typically only available to key employees or managers within the restaurant industry. Historically, the expense of these health and fitness benefits rise faster than the rate of inflation. Within the long run, they may have negative effect on Starbucks bottom line. Should Starbucks Corporate Office not perform well, it may be under pressure as being a public company to close more stores.