Starbucks Coffee, sometimes called 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 sell high-quality coffee beans and equipment. In 1982, Howard Schultz, the present Chairman and CEO joined the company as the Director of promoting. He was impressed by the popularity of the coffee bars in Italy after he traveled to Milan in 1983. Back to the usa, he convinced the founders of Starbucks to market both coffee beans and espresso beverages. However, the concept was rejected so he left the organization and founded Il Giornale coffee bar chain in 1985. In 1987 Howard Schultz and Il Giornale bought what time does Starbucks close 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 organization currently has about 16,000 stores, employs 172,000 partners, AKA employees since September 2007 in 44 countries. It has annual sales well over $10B with many recent quarterly revenue being $2.526B. About 85% of Starbucks revenue arises from company-operated443 stores.
Starbucks fails to franchise its operations and it has no plans to franchises in foreseeable future. In The United States, 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 usage of property which would 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 the specific retailer, not Starbucks. Since 2008 it provides 7087 company-operated stores and 4081 licensed stores in the united states. Internationally it offers 1796 company operated stores and 2792 joint-venture or licensed stores in 43 foreign countries. The pace of expansion is slowing since the company wants to open 1020 US stores in 2008, under 400 stores during 2009 down from 1800 stores in2007. In addition, additionally, it plans to close 100 stores in 2008.
Recession-sensitivity: a hungry man can survive using a Big Mac & fries but could live without a four-buck Frappuccino. This implies Starbucks is very understanding of economy downturn as observed in 2007 and 2008 in comparison to Burger Kings and McDonald’s. This can be the key reason sales at stores in the united states open at least per year are anticipated a mid single-digit percentage decline, the initial drop ever. It triggers Howard Schultz to go back to the CEO post. The organization 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 is usually 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 in which people are a lot more concerned as a result of explosion of obesity and diabetes epidemic in the united states. 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 decide to minimize 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 offer espresso at less expensive costs to compete with Starbucks. They are going to capture some revenue from Starbucks, especially from cost-conscious customers. The existing Starbucks prices 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 design: while Starbucks profit margin is high because it pays a typical $1.42 per pound for your unroasted coffee, its organization is very labor intensive as with any other foods businesses. It takes between 10-20 employees to run one store. All eligible part time and full-time partners in america 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 US in 2008 by the Fortune magazine employee’s survey. What is good for employees may not be beneficial to the employers. These benefits are normally only accessible to key employees or managers within the restaurant industry. Historically, the costs of these health benefits rise faster compared to rate of inflation. Over time, they might have negative influence on Starbucks main point here. Should Starbucks not work well, it might be under pressure being a public company to close more stores.