Posts Tagged ‘bob phibbs’

Numerous articles covered Starbucks shareholder meeting late last month where they talked about the 900 store closings in the US and Canada in 2009. One of them can be read here.

With Starbucks unique ability to spot great locations, the leases already signed and the equipment already there, is Starbucks preparing to franchise those locations?  All signs seem favorable.

While they do have some partnerships with notably Magic Johnson in inner-city areas, as a whole franchising is not something  Starbucks has or will pursue under their ubiquitous green logo.

The stores aren’t generally big enough to support a Dunkin’ Donuts and I doubt if Starbucks would want any other company such as Caribou Coffee, It’s A Grind Coffee or the coffee company with the worst name ever for marketing -Bad Ass Coffee -to capitalize on their pioneer work to land coffee customers . But…

But what if Starbucks sold off their lower performing stores as Seattle’s Best franchise units? You would have the power of the national brand, they could look like they are taking on Starbucks and since Starbucks already knows the market, they could help individual franchisees build on what Starbucks learned. In the end, it would all still feed the same shareholders.

In a press release dated February 3, Seattle’s Best Coffee announced “it will expand its franchising program to offer cafe opportunities in the U.S. This strategic decision to build Seattle’s Best Coffee through franchising allows its parent, Starbucks Corporation, to utilize a multi-brand strategy that leverages both the Starbucks and Seattle’s Best Coffee brands to capture more of the growing specialty coffee segment, ultimately providing options and variety in the marketplace. This decision comes after nearly four years of successful development of the Seattle’s Best Coffee brand, through a national licensing program, to more than 550 cafes across the U.S.”  In essence they would be building their own phantom competitor.

It wouldn’t work to sell the 900 Starbucks locations off piecemeal to mom & pop owners as it would take too much time and the new owners would enjoy no name recognition. It would be too much of a leap for coffee lovers to go from the preeminent national chain with high standards to for instance, Vivian’s Espresso House. Plus the fact that the leases, even with depressed demand, would still be more than most single unit owners would be willing to pony up; I know this from experience.

If they asked your opinion on a location and you told them, “the money is at Third & Main, but it’s going to cost you,” a few would come back to you with a location a block in off Main with little foot traffic and impaired sight lines.   They would justify it by telling you, “My rent is 1/3 less so I’ll still make money even if demand is 1/3 less.”

This was always a ridiculous way to justify being pennywise and pound-foolish. The best opened at Third & Main.

If you don’t pay it in rent, you are forced to pay it in some type of advertising to get people to find you.  The smart money as we all know is location, location, location.  You don’t want to be 100 feet from success.

Times are tough for Starbucks, you may have read my post about their new “value meal” breakfast a few weeks ago.  They are looking for the transition from coffee craze trend, to staying in business.  Franchising,  just might do the trick due to their locations.