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Coffee is coffee, but you have to admit, the Starbucks brand is making a killing!
Over the last couple of decades, the company has shown that it has the Midas touch. And if you are looking to learn more about their business model, you’ve come to the right place.
In this article, you’re going to learn some things you probably didn’t know about the company.
But before we get to that, let’s dive into how it all works.
Let’s get started.
Table of Contents
What is Starbucks?
If you’re here, you probably know this, but it’s worth repeating. Starbucks is a successful coffeehouse chain. At the time of this article, the company is the largest in the world, with more stores than any other company, and shops set up in over seventy countries.
When Was Starbucks Founded?
Starbucks was founded in 1971 and opened its first store in Seattle, Washington, in the city’s Pike Place Market. I had the chance to stop into the iconic store when I was in town, and it has kept much of its early appearance over the years.
The founders of Starbucks were inspired to go into business by a coffee roaster named Alfred Peet.
Who Founded Starbucks?
In recent years, we have grown to know the company’s figurehead to be Howard Schulz, the chairman of the company. But the company was founded by Jerry Baldwin, Zev Siegl, and Gordon Bowker.
The trio, who named the store after the first mate in Moby Dick, had to borrow money to open their first store. They were aware of Alfred Peet. Peet was a Dutch immigrant who owned ‘Peet’s Coffee and Tea,’ a simple store he had opened in the mid-1960s.
Peet, who got his start by bringing Arabica coffee into the country, had a reputation for selling only the best coffees and teas. Baldwin and his colleagues nurtured a successful business relationship with Peet before using a roaster they had acquired from Holland to produce their unique flavors.
The store’s reputation grew in the 1980s, which is why they added four stores to their Seattle coffee empire. During this time, Siegl departed, leaving Baldwin to fill the position of president within the company.
A year later, Howard Schulz, a sales representative, visited the company after noting the impressive size of their orders. Confident that Starbucks had a bright future, he joined the company, becoming the head of marketing.
The first few years of his tenure in the position were a little rough. Schultz knew that Starbucks had the best coffee around. But, their customers did not know enough about coffee to care. Even worse, he took issue with their lack of knowledge about coffee.
He resolved this problem by fine-tuning their employees’ sales skills while also using brochures to educate customers on the company’s offerings.
Following a trip to Milan, Schulz wanted to turn Starbucks into a cafe. But Baldwin and Bowker refused. So Schulz left and started Il Giornale.
He used the coffee chain store to implement his ideas, and he quickly became successful, opening branches in multiple cities.
Once Baldwin and Bowker put their business up for sale, Schulz purchased it and added his stores to the Starbucks brand. From that point onward, Starbucks expanded at an unprecedented level.
By 1992, they had gone public. By 1996, they had opened stores in international markets.
By the mid-2000s, you could find a Starbucks store in most corners of the globe. Schulz was the CEO of the company until 2016, when Kevin Johnson took over.
How to Open a Starbucks Store?
You cannot own a Starbucks franchise. Despite this widespread misconception, the company doesn’t offer that option. However, you can open a licensed store, a process that involves the following:
1) Identify a retail location that suits your interests. The company has an affinity for busy locations that are bound to attract a lot of customers.
2) Visit the Starbucks website. They have applications that you can use to submit your request.
3) Starbucks will vet your request before responding. You are encouraged to follow up on your application because there is no telling how long it might take them to get back to you. A proactive approach will get you a quick answer.
You have to keep a few things in mind before you pursue this opportunity.
1. First of all, Starbucks hasn’t revealed the criteria they use to vet applicants. However, they are quite strict. They want entrepreneurs with experience in the field. They also favor individuals that have operated businesses with multiple branches.
2. Not only are you expected to display a passion for coffee, but you must show that you are compatible with the Starbucks brand and culture.
How Much Does a Starbucks Franchise Cost?
This company doesn’t offer franchising opportunities, at least not to people in the US or Canada. For the moment, Starbucks franchises are only possible in Europe.
If you want to run your own Starbucks coffee store in the US or Canada, you can apply for a license. This allows you to manage a Starbucks store. However, you do not own it.
Despite this limitation, many entrepreneurs have chosen to invest in these licensed stores because the Starbucks brand is profitable. As you can imagine, you will need quite a bit of money to get a Starbucks-licensed shop off the ground.
Considering the cost of designing the store, buying the necessary equipment, and training the staff, you can expect to spend an estimated $350,000. You need to contact the Starbucks branch in your area to acquire a more accurate figure.
Many branches only approve applications from entrepreneurs with liquid assets of $500,000-$700,000.
Don’t forget that you are expected to pay a monthly fee for the opportunity to use the Starbucks brand. You should take that fee into account when you draw up your budget.
How Much Does a Starbucks Franchise Owner Make?
The absence of a Starbucks franchise opportunity hasn’t stopped people from using its brand to profit from the fascination that people in Europe and the US have for coffee.
Licensed Starbucks stores make an estimated $108,000 per year. This margin is based on the company’s tax filings, though some people are convinced that the profit margins are higher.
Who Is Starbucks’ Target Audience?
The target audience varies depending on the country and region. In the US, the target audience for Starbucks is broken down into two segments.
The biggest target market for Starbucks is men and women between the ages of 25-44. This segment accounts for 49% of the company’s revenue.
The second-largest segment is young adults. This consists of young men and women between the ages of 18 and 24, which makes up 40% of the company’s business.
Why Is Starbucks Not A Franchise?
Starbucks doesn’t offer franchising opportunities because this would eliminate the company’s control over the quality of its products and services.
Howard Schultz, the man behind the company’s success, has said that the Starbucks brand is associated with a particular set of values. It wouldn’t be possible to nurture that same culture if their chain of coffee stores were operated by people that did not work for the company.
The people that work for Starbucks understand its vision and rarely stray from it. They ensure that everyone that walks into a Starbucks cafe receives the same quality of service regardless of their location in the world.
Starbucks has succeeded despite Schulz’s decision to reject franchising.
The Starbucks Business Model
Most of the money that Starbucks makes comes from its coffee stores. Not just those that it operates but the ones that their licensed partners manage.
Even though their licensed stores are quite wide-spread, most of their revenue has come from company-operated stores.
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Licensed stores contribute to only 11% of the company’s revenue. They use licensed and company-operated stores to sell coffee, tea, food, and various novelty items. This is on top of all the money they make from selling coffee brewers, espresso machines, and other tools.
How Many Starbucks Are There?
At the time of this article, Starbucks has over 31,256 locations worldwide. That number is growing steadily. The company’s revenue has been rising every year and was in the neighborhood of $26.5 billion in 2019.
How Many Starbucks in the US?
Starbucks is well represented in the US, with states like California having over 2,000 locations and New York coming in at around 600. In total, the US accounts for roughly 14,624 locations in over 3,000 cities, and this number is increasing as we speak.
What Coffee Does Starbucks Use?
When looking to open a Starbucks store or doing research on the subject, it only makes sense that one would wonder what’s so special about their coffee. When looking at competitors like Dunkin’ Donuts, Starbucks does charge premium prices for coffee.
But does that mean that they use premium coffee beans? Not necessarily. Starbucks uses Robusta beans, which are considered to be of lower quality than its Arabica bean counterpart.
The Robusta beans are known for their deep dark flavor and suitable for espresso. It is also known to be less flavorful than the Arabica bean and has twice as much caffeine.
Ironically, Dunkin’ Donuts uses the Arabica bean, which is more expensive than the Robusta bean, yet Dunkin’s coffee is priced substantially lower than Starbucks.
What is the Starbucks Logo?
The Starbucks logo is distinct from most logos out there. Most people have no idea what it symbolizes. But you know it when you see it.
I did my research to figure out what the logo means, and I learned that an Italian medieval character inspired this logo.
If you look closely, you’ll notice the character in the logo is a mermaid. And the two arms that appear to be on the right and left of the mermaid are tails. So yes, a double-tailed mermaid is the logo.
As the logo has evolved over the years, the double-tail isn’t as noticeable as it once was. The logo as we know it today is of a siren, which comes from a maritime book.
The original version was first seen in 1971 when the company was founded. It changed in 1987, again in 1992, and once more in 2011 to the version that we know of today. In 2011 there was a slight refresh of the logo, but it still resembles the earlier version from 1992.
Starbucks has a strong brand awareness, which is essential when launching a business, not to mention its marketing machine. This is why they have been so successful versus competitors who price their coffee much lower.
Coffee Franchise Alternatives
Starbucks doesn’t offer franchising opportunities. But if you are determined to enter the industry, there are plenty of coffee franchise alternatives for you to explore. Here’s a list of some popular ones:
1) Dunkin’ Donuts
Dunkin’ Donuts is one of the biggest franchises in the world. In fact, at the moment, it only exists as a franchise.
So you couldn’t ask for a better umbrella for your business. They have thousands of locations in the US, not to mention a strong brand that enjoys a lot of public interest.
2) Tully’s Coffee
Tully’s Coffee isn’t necessarily the biggest name in the world. But the reputation it has garnered as a neighborhood shop has made the brand quite strong in coffee-drinking circles. They sell coffee in physical stores and over the internet.
3) 7-Eleven
Some people forget about 7-Eleven. As far as most people are concerned, it is more of a convenience store than anything else. However, plenty of people rely heavily on 7-Eleven to meet their coffee needs, which is why the company enjoys so much success.
7-Eleven is not restricted to the US and has over 60,000 stores around the world. That makes them a suitable rival for Starbucks.
7-Eleven is attractive to entrepreneurs because it provides the locations. This is the opposite of Starbucks, which wants applicants to offer new areas.
4) Scooter’s Coffee
Scooter’s Coffee is a financially friendly coffee franchise. It caters to the needs of serious franchisers with a lot of capital.
However, you can also opt for drive-thru coffee kiosks, which are much easier to set up and administer. These kiosks require less investment capital.
Scooter’s Coffee is not as old as Starbucks. It has been in business since 1998, and its staying power speaks to the quality of its offerings.
5) Maui Wowi
This is another friendly coffee franchise that first-time investors in the industry may appreciate.
Not only do they specialize in coffee and smoothies, but they encourage their franchisees to develop relationships. The company wants the people with whom it has partnered to support one another.
They have gone out of their way to create a strong sense of family, which puts business owners at ease.
6) The Coffee Beanery
The Coffee Beanery has been around for a long time. Their stores came onto the scene in 1976. They have grown over the decades, becoming a recognizable name in the coffee business.
The company is versatile. They permit franchisees to open and manage multiple stores. They are not necessarily as well known as Starbucks, but they have a decent presence abroad.
Conclusion
Starbucks is a whale of a brand. The name speaks for itself. By now, you know that if you’re looking to get involved, they don’t offer franchise opportunities.
But that doesn’t mean you can’t partner with the company and leverage their brand recognition to profit handsomely. There are other coffee companies out there, but Starbucks has revolutionized the space.
I hope you learned more about this fantastic company. Maybe you discovered a thing or two that you didn’t know before.
In the end, if you’re looking to get started with Starbucks, there are very few chains today that can compete with what this giant has built. Just be sure to do your due diligence to make sure it makes sense for you.
Starbucks FAQ
How much does it cost to own a Starbucks franchise?
This company doesn't offer franchising opportunities, at least not to people in the US or Canada. For the moment, Starbucks franchises are only possible in Europe. If you want to run your own Starbucks coffee store in the US or Canada, you can apply for a license. This allows you to manage a Starbucks store. However, you do not own it. Considering the cost of designing the store, buying the necessary equipment, and training the staff, you can expect to spend an estimated $350,000.
How can I own a Starbucks franchise?
You cannot own a Starbucks franchise. Despite this widespread misconception, the company doesn't offer that option. However, you can open a licensed store, a process that involves the following: 1) Identify a retail location that suits your interests. The company has an affinity for busy locations that are bound to attract a lot of customers. 2) Visit the Starbucks website. They have applications that you can use to submit your request. 3) Starbucks will vet your request before responding. You are encouraged to follow up on your application because there is no telling how long it might take them to get back to you. A proactive approach will get you a quick answer.
Why is Starbucks not a franchise?
Starbucks doesn't offer franchising opportunities because this would eliminate the company's control over the quality of its products and services. Howard Schultz, the man behind the company's success, has said that the Starbucks brand is associated with a particular set of values. It wouldn't be possible to nurture that same culture if their chain of coffee stores were operated by people that did not work for the company.
How profitable is a Starbucks licensed store?
Licensed Starbucks stores make an estimated $108,000 per year. This margin is based on the company's tax filings, though some people are convinced that the profit margins are higher.
