Growth strategy - Starbucks eyes the franchise model

As of 1 January 2012 there are 17,244 Starbucks outlets around the world. Not one of them is operated as a franchise - until now. Starbucks has announced that it is looking to the franchise model as part of its organic growth strategy, with the first franchise store likely to be opened in London later in 2012.

In this interview in The Independent, the MD of Starbucks in the UK describes the use of franchising as a significant change in strategy and he outlines some of the potential advantages of this approach:

- Starbucks will be able to open in smaller towns
- Franchisees will be able to contribute their local knowledge
- Starbucks will improve its competitiveness in what is a highly competitive UK market

Starbucks currently operates around 700 stores in the UK, to the move towards franchising is unlikely to have a significant effect on their revenues in the UK in the short-term. However, the strategy here is really about sustaining a growth rate in revenues, so the firm is looking to squeeze even more locations into the available space.

According to the Telegraph:

Kris Engskov, the Starbuck managing director for Britain, said: “I hope by the end of the calendar year we will have the first franchise in the South of England. That wil be our first franchise anywhere in the world.”
Currently the company operates its own stores and via licences - it recently is signed a deal with Euro Garage to open 100 such stores - but it is now seeking franshise partners in smaller towns.

Organic growth is the single-minded focus for Starbucks and its charismatic CEO Howard Schultz. The latest financial report for Starbucks Inc outlines the key parts of the new store growth plan.

Starbucks continues to target the opening of approximately 800 net new stores globally to support a corporate objective of 10% annual revenue growth. The new store target is split as follows:

Approximately 400 net new stores in the Americas, with licensed stores comprising approximately one-half of the new additions.

Approximately 300 net new stores in China and Asia Pacific, with licensed stores comprising approximately two-thirds of the new additions. One-half of the China and Asia Pacific new stores are planned for China.

Approximately 100 net new stores in EMEA (Europe, Middle East, Russia and Africa), with licensed stores comprising approximately two-thirds of the new stores.