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 three partners: Jerry Baldwin, Zev Siegel, and Gordon Bowker to promote high-quality coffee beans and equipment. In 1982, Howard Schultz, the present Chairman and Chief executive officer joined the company as the Director of Marketing. He was surprised by the recognition of the espresso bars in Italy after he traveled to Milan in 1983. Back to the united states, he persuaded the founders of Starbucks to sell 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 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 Five times. As of May 2008, SBUX is traded at about $16, down from the high of $39.43 in November 2006.
Starbucks opened the very 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 provides annual sales well over $10B with most recent quarterly revenue being $2.526B. About 85% of Starbucks revenue originates from company-operated443 stores.
Starbucks will not franchise its operations and 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 provide use of property which may 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. As of 2008 it offers 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 reducing because the company intends to open 1020 US stores in 2008, under 400 stores during 2009 down from 1800 stores in2007. Furthermore, additionally, it intends to close 100 stores in 2008.
Recession-sensitivity: a hungry man can survive using a Big Mac & fries but can live without a four-buck Frappuccino. This implies Starbucks is very responsive to economy downturn as observed in 2007 and 2008 when compared with Burger Kings and McDonald’s. This can be the key reason sales at stores in the united states open at least per year are expected a mid single-digit percentage decline, the initial drop ever. It triggers Howard Schultz to return 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 is usually a indication of desperation. On April 22, 2008 Starbucks cut its outlook for your year citing weak economy.
Calorie & Sugar: Starbucks drinks have more sugar and calorie by which people are a lot more concerned because of explosion of obesity and diabetes epidemic in the US. 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. When it turns into a trend that consumers decide to cut down on the sugar drinks, or stick to low-carb diets this may have impact 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 current Starbucks prices are already pretty high; it’s very hard for Starbucks to improve the values in the near future without affecting the traffic to its stores.
High-expenses business design: while Starbucks profit margin is high because it pays an average $1.42 per pound for your 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 because the 7-th best company to work for in the united states in 2008 by the Fortune magazine employee’s survey. What is perfect for employees will not be good for the employers. These benefits are usually only accessible to key employees or managers in the restaurant industry. Historically, the costs of those health and fitness benefits rise faster than the rate of inflation. Over time, they could have negative effect on Starbucks main point here. Should Starbucks not perform well, it might be under pressure being a public company to seal more stores.