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Location, Location, Location: Why so many Starbucks’?

Location, Location, Location: Why so many Starbucks’?. Jamin Gordon, Ciearra Weston, Koya Wilson, Terrance Nixon, Neshia Simpson, Amber Jones. What are my Options?. Outlet Centers . Urban Locations/Central Business Districts. Free Standing (Convenience Store).

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Location, Location, Location: Why so many Starbucks’?

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  1. Location, Location, Location:Why so many Starbucks’? Jamin Gordon, Ciearra Weston, Koya Wilson, Terrance Nixon, Neshia Simpson, Amber Jones

  2. What are my Options? Outlet Centers Urban Locations/Central Business Districts Free Standing (Convenience Store) Neighborhood & Community Shopping Centers (Strip Centers) Enclosed Malls (Oglethorpe Mall) Power Centers Lifestyle Centers Theme/Festival Centers Fashion/Specialty Centers

  3. Take that into Consideration • Economic Conditions • Metropolitan Statistical Area (MSA) • Micropolitan Statistical Area • Competition • Strategic Fit • Costs of Operating Stores

  4. Starbucks is for You • Many people who are on the “GO” • College Students • On breaks at work or school • People who just adore Starbucks!

  5. Where & Why? • The Beginning: • 1971 • Single store in Seattle (Historic Pike Place Market) • Starbuck’s today • -17,018 stores in 50 countries WHAT DO WE WANT??? LOCATIONS THAT HAVE HIGH TRAFFIC & HIGH VISBILITY BUT WHY Starbucks is a neighborhood gathering place for meeting friends and family

  6. What will it Cost? Common Area Maintenance costs come from leasing commercial space • fees that come from more than just actual square footage that will be occupied. There are two basic calculations for CAM fees: • Variable CAM Fee • Flat CAM Fee Square Footage/ Gross Leasable Area = CAM

  7. Who Bears the Cost? Starbucks does not provide the operating costs for their stores because they do not focus on the cost of chairs and average supplies. They focus more in terms of depreciation. Selling/General/Administrative Expenses, Total 569.5 Research & Development 0.0 Depreciation/Amortization 510.4 Interest Expense (Income), Net Operating 0.0 Unusual Expense (Income) 53.0 Other Operating Expenses, Total 293.2

  8. It’s All about the Bottom Line • Starbucks unique location strategy • Clusters stores • Total market share & total revenue • Absorbs losses

  9. Will We Fit In? Starbucks actually isn't a franchise, they are a coffee chain. Starbucks offers a variety of flexible coffee and tea stores for a variety of different markets. • Colleges & Universities, • Healthcare, • Hotels & Resorts • Existing Restaurants Starbucks will also consider qualified high volume or high traffic retail locations.

  10. We’re on the Map • Starbucks has many locations around the world • As of July 3,2011 there hare 17,018 stores • There are ten Starbucks stores in Savannah, GA

  11. A Lot Can be Too Much • Cannibalization defined • Pros and cons of cannibalization

  12. Starbucks VS. Cannibalization • What is Cannibalization? • Starbucks at risk of Cannibalization? • Starbucks’ 10 Key Lessons to Being Successful: • Start with a good business concept. • Think big. • Think outside the box. • Partner smart. • Create a unique experience. • Keep customers happy. • Dig deep into customers’ wallets. • Ability to roll out new initiatives. • Good management. • Diversified revenue stream

  13. Analyzing the Situation • Huff Gravity Model • Probability of customers • Linear Regression • Sales and profitability • Previous stores • Analog Approach • Sales and profitability • Similar areas

  14. Applying What We Know • Huff Model • Starbucks in mall • Starbucks at airport • Regression • Starbucks on Skidaway VS. Starbucks on campus • Analog • Pooler, Hwy 17, Whitemarsh Island

  15. Starbucks Leasing Case • Starbucks vs. Landlords • Was it ethical/unethical • What do you think should be done?

  16. Some Strings Attached • Along with different leasing contracts there can be restrictions and disadvatages Starbucks located in shopping centers encounter: • Shopping center managers placing restrictions on: • Operating hours • Signage • Types of merchandise being sold • Neighborhood Locations: • Limited trade area • Lack of entertainment and other resources • No protection from the weather

  17. Continued Shopping Mall Locations: • Higher occupancy costs • Excessive management control over their operations • Example: control of signage Issues dealing with traffic flow: • Zoning • Restrictions on tenant mix • Safety code restrictions • signage

  18. Questions

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