Starbucks Coffee, sometimes referred to as Fourbucks Coffee is the largest coffeehouse chain on earth. It opened its first store in 1971 in Seattle’s waterfront Pike Place Market by 3 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 organization as the Director of promoting. He was impressed by the recognition of the coffee bars in Italy after he traveled to Milan in 1983. Back to the usa, he convinced the founders of Starbucks to promote both coffee beans and espresso beverages. However, the concept was rejected so he left the business 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 business 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 as of September 2007 in 44 countries. It offers annual sales of over $10B with most recent quarterly revenue being $2.526B. About 85% of Starbucks revenue comes from company-operated443 stores.
Starbucks fails to franchise its operations and has no wants to franchises in near future. In North America, most stores are company-operated. You could 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 will otherwise unavailable. Starbucks receives licensee fees and royalties from all of these licensed locations. At these licensed retail locations, the personnel are considered employees of that specific retailer, not Starbucks. Since 2008 it provides 7087 company-operated stores and 4081 licensed stores in the US. Internationally it offers 1796 company operated stores and 2792 joint-venture or licensed stores in 43 foreign countries. The pace of expansion is slowing down as the company wants to open 1020 US stores in 2008, lower 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 do without a four-buck Frappuccino. This implies Starbucks is extremely understanding of economy downturn as observed in 2007 and 2008 when compared with Burger Kings and McDonald’s. This might be the main reason sales at stores in america open at least annually are expected a mid single-digit percentage decline, the very first drop ever. It triggers Howard Schultz to return 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 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 by which people are a lot more concerned because of explosion of obesity and diabetes epidemic in the united states. 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 turns into a trend that consumers decide to reduce on the sugar drinks, or adhere to low-carb diets this will have effect on Starbucks revenue.
Competition: McDonald’s, Wendy’s and Dunkin Donuts now also provide espresso at less expensive costs to compete with Starbucks. They will likely capture some revenue from Starbucks, especially from cost-conscious customers. The current Starbucks prices are already pretty high; it’s very difficult for Starbucks to increase the values in the future without affecting the targeted traffic to its stores.
High-expenses business model: while Starbucks profit margin is high because it pays a typical $1.42 per pound for that unroasted coffee, its business is very labor intensive as with every other foods businesses. It will take 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 as the 7-th best company to work for in the united states in 2008 through the Fortune magazine employee’s survey. What is useful for employees might not be great for the employers. These benefits are usually only accessible to key employees or managers inside the restaurant industry. Historically, the expense of such health and fitness benefits rise faster compared to rate of inflation. In the long run, they could have negative impact on Starbucks financial well being. Should Starbucks not work well, it may be under pressure as being a public company to close more stores.