With over 33,000 stores in more than 70 countries, the Starbucks franchise is one of the first choices for business investors who want to start franchising business. If you are one of them, we have bad news for you; the Starbucks franchise can’t be open in the US and Canada because Starbucks does not offer a franchising model in the territory of these countries.
But don’t despair. There are other options for starting some kind of business cooperation with Starbucks. Also, a lot of people are wondering how much it cost to start the Starbucks franchise, which can tell us that people are not familiar with the fact that Starbucks don offer a franchising option, and because of that, we decided to tell you a little more about Starbucks opportunities for starting a business.
Investing in the franchising business is a dream of many entrepreneurs. Most franchisors are already well established in the market, and therefore, they offer guaranteed returns. Being part of a winning team is definitely enticing. But, when you want to be part of some large corporation as an owner of the franchise, you must be aware that you will need to fulfill some requirements in order to be accepted as a business partner of a company that offers a franchise business model.
One of the most successful corporations is Starbucks. The Starbucks Corporation has numerous outlets in the form of stores as well as kiosks. It will be unlikely that you will lack one in any part of the United States of America and Canada. Also, since 1998 Starbucks start expanding to Europe, and at this moment, they have more than 2,500 stores in Europe.
However, it is disappointing to know that Starbucks franchises do not exist. They were doing a franchises business model in Europe, but at this moment option for starting a Starbuck franchise is only available in Asia.
This should, however, not pull any investor’s ambition of being associated with the corporation in disarray. There are ways in which you could be part of Starbucks.
Two ways in which you can be part of Starbucks without buying a franchise:
- Open a Starbucks licensed store
- Rent location to Starbucks
How to Start a Starbucks Licensed Store
Selling the Starbucks products and using its trademarks would require that you obtain a licensed store. There are 8,941 company-operated and 6,387 Starbucks licensed stores in the US. This offers an opportunity as Starbucks franchises would, but you must be aware that you will pay a one-time fee to get the right to use Starbucks, and you will pay royalties for Starbucks products that you sell in the store.
To open Starbucks licensed store, you must have a very attractive location(airports, Supermarkets, malls, etc.), and that is something that cannot fulfill a lot of people. But don’t despair because there are many different coffee franchises that you can start; Donkin Donuts is one of them.
To get a Starbucks license, you will need to invest roughly about 315,000 dollars. Also, you must be aware that Starbucks doesn’t give as much flexibility as would give you, starting some other franchisee. Also, they don’t have plans, for now, to start a franchising business model, so will you get a license will depend on that will your location satisfy the managers of Starbucks.
This doesn’t open a lot of space for you as an investor. We write about the franchise vs. license business model in one of our past articles; it is a good source of information to understand the difference between these two business models.
3 Steps to Start Profitable Starbucks License Store
Until Starbucks starts giving possibilities to start a franchise as an owner, your only option is a license. Acquiring a Starbucks license is not easy, so it is good to be prepared to have a better chance of getting one.
1. Choose an excellent location for the store
Choosing an excellent location for retailing the products is the same thing you would have been required to do if you were operating Starbucks Franchise. A good location is considered some space in high-traffic areas like airports, universities, hospitals, or even resorts.
When you combine the location with high fluctuation of people and Starbucks popularity, then you have two most important ingredients for a successful business venture. Starbucks Corporation will give you training and other services that will help you with obtaining this mark quality.
Licensed Starbucks coffee shops are very common; about 40% of Starbucks cafe shops are licensed stores. If you pass the test, that is, if your location for the store becomes considered to get a Starbucks license, you will get a lot of help from the company.
Starting Starbucks licensing store include:
- Store design help
- Helping with marketing
- Education for staff
2. Contact Starbucks
It would be essential to contact the corporation as pertaining to opening a licensed store in your space. This does not have to be difficult as all you will have to do is to go to their website. It would, however, be vital that you peruse through their financial performance records as well as their policies and their mission statements to get a better picture of them.
Note, however, that your proposed store location for a license has to be in their indicated categories. Your location must be near travel lodging, health, retail, school, recreation, air travel, or grocery facilities. Also, it would help if you had a financial plan devised to show all benefits of your proposed Starbucks licensed shop location.
It is important to note that you will require quite some money to run the store just as you would with the Starbucks franchise. This corporation has varying license fees depending on the category that you want to pursue. The full cost for starting Starbucks licensed store is about 315,000 dollars; as you can see, you will need to have a lot of investment funds to start this business venture.
Starbucks will give you training as well as support programs once they have approved your request. They will also provide their equipment, supplies, and products, not to mention offering a helping hand in setting up the operation. But, you must be aware that they are very rigorous, and they want to give top-quality service to customers of Starbucks licensed stores so that customers don’t see the difference between company-owned and licensed stores.
3. Combine Starbucks branded products with other products.
It would be essential to start trading also the products that would go well with the Starbucks products. These could include groceries, candies, ice cream, soft drinks, books, etc. – this depends on the size of your space. Obviously, it would not be sensible to incorporate other products if you would not have enough room for Starbucks products.
But, if you have a lot of space, you can fulfill that space with other products that would be of interest to many customers. Starbucks license doesn’t forbid you to sell other manufacturer products, and you must take advantage of this fact. When you start a franchise, you can sell products only that are from the franchisor; a licensed store gives more flexibility in this part of operating.
In this way, the Starbucks logo will attract people to your store, and you can make a profit, not just from coffee. This is essential because you must find a way how to maximize Starbucks ‘ potential profit, and diversity in product offers can help you with that.
Cost to Open a Starbucks Franchise/Licensed store?
As we mentioned before, Starbucks doesn’t offer franchises; you can only buy a license for running a Starbucks coffee store. To start this type of business venture, you will need to have some initial investing funds.
Costs of Starbucks License:
- Total investment- approximately $315,000
- Licensing fee- $30,000
- Royalty fee- monthly Royalty equal of the 7% Gross Revenue
- Advertising fee- monthly advertising fee equal to the 1% Gross Revenue
To find out how much Starbucks licensed stores cost, it is best to see a Starbucks contract for licensed store owners.
This is not cheap, but your investment can return to you multiple times with a good business plan. You will profit from this corporation’s popularity, and you will save a lot of money on the marketing and branding of your store. Also, you must be aware that if you don’t fulfill the obligated terms, Starbucks contract can be nullified.
Starting Starbucks licensed store has a lot of pros and cons. Every investor must write down the advantages and disadvantages of this $315,000 investment.
Pros and Cons Of Starbucks Licensed Store
Pros:
- Ready-made customer base
- Increased brand recognition
- Starbucks support system- education, marketing, and store design help
- Less risky than independent business
Cons:
- Expensive initial investment
- Fees- royalty and marketing fees must be paid every month
- Flexibility can be restricted
- A lot of research and planning is necessary
Rent Property to Starbucks
If you own property that can be a good location for Starbucks coffee shop, you can contact the Starbucks development team. You will find contact information on Starbucks ‘ regional map. In this way, you can get a monthly renting fee from Starbucks.
This is maybe an even better option than a licensed store because you will have a good passive income throughout the whole year. But, you must be aware that only property where is a high fluctuation of people will be considered for renting.
Also, if you are located in Europe, you have a better chance to start doing some kind of business with Starbucks. Starbucks starts expanding its business across Europe in 1998. Most of the shops they have in the UK. So if you are a European citizen, you will be in a better position to start cooperation with Starbucks.
Why Starbucks Doesn’t Franchise
The business vision and philosophy of Starbucks is developed by Howard Schultz, who, before that, gained business experience at the American branch of the Swedish company Hammarplast in New York. In 1987, for $ 4 million, he bought Starbucks from the founders, creating a business empire that we know today. That corporate start is reminiscent of Ray Kroc’s move and the beginnings of McDonald’s development.
Schultz’s business development strategy is based on a “conservative policy” of opening new cafes. In other words, the outlets are largely owned by the corporation, and only a small portion is opened with the help of a franchise model of operation. Business expansion in the USA and other countries is carried out by respecting local specifics.
From a profitability standpoint, this model has proven successful for Starbucks, as has the franchise business model for McDonald’s. Starbucks expansion is going in line with Howard Schultz’s business vision, so the concept of franchise business is not applied in this company. However, many investors hope that the business strategy will change in the future and that it will become possible to start the Starbucks franchise.
Reasons why Starbucks does not offer the franchising option:
- Better control over stores
- Employers better understand the vision and value system of the company
- More portion of the profit stays in the company
However, when it comes to Starbucks cafes located in Europe and Asia, it is a very common situation that they operate as franchises, which puts US and Canadian citizens at a disadvantage to launch this franchise into their country’s territory.
But who can blame Howard Schultz and Starbucks for their business strategy when we know that this is a company very profitable, and the number of locations, that is, the expansion, is happening at a speed that would be envied by companies that offer the option of franchising.
Summary
As you can see, there is no possibility of buying or starting a Starbucks franchise for you as an investor. A licensed store is the only option if you want to start some kind of cooperation with this company.
So if you have capital, you can start considering some other companies that do similar business like Starbucks, but they offer the option to buy and operate franchises. Dunkin Donuts offers a franchise model of operation, and the service and company brand awarenes are very similar to Starbucks.