Starbucks does not franchise stores and has no long-term corporate programs like starbucks franchise. These stores are operated through licensing agreements to provide access to otherwise inaccessible land. Starbucks receives license fees and royalties for these types of licensed spaces. In these licensed stores, workers are considered employees of the respective retailer, not Starbucks. As of 2008, there are 7,087 company-owned stores and 4,081 licensed stores in the United States. If you are considering investing in a Starbucks-occupied property, you should understand the following risks to your investment.
Vulnerability to Recession
Starbucks Coffee, sometimes called Fourbucks Coffee, is the most critical coffee show in the world. About 85% of Starbucks’ revenue comes from the company’s managed stores. Since then, the stock has dissipated in five events. Starbucks coffee shops remain a popular investment for many investors. A hungry person can digest a Big Mac and fries but be left without a $4 Frappuccino. There are concerns that Howard Schultz is returning to the CEO position; this could be a sign of desperation.
Calories and Sugar
Starbucks drinks consume more sugar and where users tend to be more stressed due to the explosion of obesity and the diabetes epidemic in the United States. If it becomes a trend for customers to decide to cut back on sugary drinks or follow low-fat diets, it will impact Starbucks’ bottom line. It will take some profits away from Starbucks, especially from cost-conscious customers. Starbucks’ current prices are already quite high; it is quite difficult for Starbucks to raise prices in the future without affecting store traffic.
High-cost Business Variant
Although Starbucks’ profit margin is large, paying an average of $1.42 per pound of its unroasted coffee, the company is labor-intensive, just like any other food company. It takes between 10 and 20 employees to run a store. Starbucks is known as the seventh-best company in the U.S. to work for, according to Fortune magazine’s 2008 employee survey. In the restaurant industry, these benefits are often only available to key employees or managers.
Historically, health benefit costs are rising faster than the rate of inflation. In the long run, they could harm Starbucks’ bottom line. As a publicly-traded company, if Starbucks does not do its job well, it could be pushed to close more stores.
The Starbucks stand-alone structure is a special structure designed specifically for Starbucks. If Starbucks decides not to close or renew its lease, it will be difficult to re-let. Few tenants are willing to pay as high a rent as Starbucks does. The lease typically has a 10% increase every five years. This lease study is based on the leases of only 30 Starbucks locations, 18 of which are freestanding and were in the U.S. market as of April 2008. It is difficult to use it as a fast-food restaurant because the square footage is relatively small. In any case, it has no kitchen.