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Starbucks Franchise - Is Starbucks a Franchise?

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WASHINGTON, DC - DECEMBER 27: An exterior view of a Starbucks, on December 27, 2012 in the Chinatown neighborhood of Washington, DC. Starbucks CEO Howard Schultz announced Washington locations would serve coffee with the words 'come together' written on the cups intended as a message to lawmakers about the damage being caused by the divisive negotiations over the 'fiscal cliff.'
Drew Angerer/Stringer/Getty Images News
Starbucks was initially founded as one store in Seattle in 1971. The establishment sold fresh roasted gourmet coffee beans in addition to teas, spices and other coffee-making supplies.

In the early 1980’s Howard Schultz, vice president and general manager of Hammerplast USA noticed that Starbucks was purchasing quite a few of his company’s espresso machines. This attracted his attention so he decided to take a look at this business for himself. When he arrived in Seattle, he found out that there were four locations in operation under the ownership of Gerald Baldwin and Gordon Bowker.

Shortly after his visit, Schultz joined the owners’ team to offer his marketing and business expertise. Approximately a year after that while Schultz was vacationing in Italy he realized that in Italy coffee shops were an important part of people’s social lives.

At that time he left Starbucks to open one of his own coffee shops that would more closely mirror the type of shop found in Italy. However, he later found out that the Starbucks owners were interested in selling their stores. He then purchased the chain for $3.8 million and combined them with his own coffee shop.

What is the structure of Starbucks? Is it a Franchise?

Schultz quickly set out to overhaul the entire operation through several strategically planned adjustments. First, he expanded the items that Starbucks would offer to include more gourmet type drinks such as espresso, café latte, and iced coffee.

Even more importantly he enhanced the company’s interaction with its employees. He trained his employees to provide top notch customer service and also made Starbucks an enjoyable place to work offering many perks and benefits.

The company experienced tremendous growth throughout the 1990’s and took its place as the country’s number one specialty coffee retailer. With well over 16,000 locations worldwide many people believe that Starbucks is a franchise. However, in reality it is considered the world’s leading coffee chain.

In North America, most of the Starbucks stores are company-operated. However, the company sometimes enters into licensing arrangements with companies who provide the right to use particular locations that would otherwise not be accessible such as airports, grocery chains, and colleges/universities.

However, Starbucks’ subsidiary, Seattle’s Best Coffee does franchise the operation of its cafes and kiosks. As of the middle of 2008, the subsidiary had over 540 cafes in the U.S. as well as nearly 100 espresso bars.

What has led to the success of Starbucks?

Although Starbucks is not considered a franchise, it is still thought of as a valuable example of a well thought out franchising concept through the business principles it operates on. Clever marketing, a superior product, as well as good old fashioned hard work has led to its success as a multi-billion dollar business. This company demonstrates that it is possible for a small business operating on these principles to become very large and successful.

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