Starbucks Corporation (NASDAQ: SBUX) is an international coffee and coffeehouse chain based in Seattle, Washington. Starbucks is the largest coffeehouse company in the world,[1] with 15,012 stores in 44 countries.[2] Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, snacks, and items such as mugs and coffee beans. Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also sold at grocery stores.
From Starbucks' founding in Seattle as a local coffee bean roaster and retailer, the company has expanded rapidly. In the 1990s, Starbucks was opening a new store every workday, a pace that continued into the 2000s. Domestic growth has since slowed, although the company continues to expand in foreign markets and is opening seven stores a day worldwide.[citation needed] The first location outside of the United States and Canada was established in 1990s, and they now constitute almost one third of Starbucks' stores.[3]
By late March 2008, Starbucks had more than 16,226 stores worldwide, including 11,434 stores located in the United States. On July 1, 2008, the company announced it was closing 600 under-performing company-owned stores and cutting U.S. expansion plans amid growing economic uncertainty.[4][5] On July 29, 2008, Starbucks also cut almost 1,000 non-retail jobs as part of its bid to re-energize the brand and boost its profit. Of the new cuts, 550 of the positions are layoffs and the rest are unfilled jobs.[6] These closings and layoffs have effectively ended the period of prolific growth and expansion of the company which began in the mid-1990s.
Starbucks store ownership
As of October 2007, Starbucks had 10,200 company-owned outlets worldwide: 6,893 of them in the United States and 1,722 in other countries and U.S. territories. In addition, the company has 6,506 joint-venture and licensed outlets, 3,891 of them in the United States and 2,615 in other countries and U.S. territories.[citation needed] These joint ventures most notably include Barnes & Noble bookstores, Target Corporation retail centers, and Safeway Inc. grocery stores. This brings the total locations (as of November 2007) to 15,011 worldwide.[2] Starbucks can be found in many popular grocery chains in the U.S., Canada and the UK, as well as in many airports.
There is growing concern, however, that many licensed stores are hurting the image of the Starbucks brand. Employees at these stores are not employees of Starbucks, but rather the locale in which they're located. Customers complain that these stores do not meet expectations by citing poor customer service, sub-standard drink quality, and an unfriendly atmosphere. [7] Since most customers do not differentiate between a licensed and corporate location, Starbucks takes these complaints seriously. In April 2008, Starbucks closed 45 licensed locations in Nevada and Northern California, and a Starbucks spokeswoman did not deny ending license relationships at other sites in the future. [8]
History
The original Starbucks was opened in Pike Place Market in Seattle, Washington, in 1971 by three partners: English teacher Jerry Baldwin, history teacher Zev Siegel, and writer Gordon Bowker. The three were inspired by Alfred Peet, whom they knew personally, to open their first store in Pike Place Market to sell high-quality coffee beans and equipment. The original Starbucks location was at 2000 Western Avenue from 1971-1976. That store then moved to 1912 Pike Place; it is still open. During their first year of operation, they purchased green coffee beans from Peet's, then began buying directly from growers.
Entrepreneur Howard Schultz joined the company in 1983, and, after a trip to Milan, Italy, advised that the company sell coffee and Espresso drinks as well as beans. The owners rejected this idea, believing that getting into the beverage business would distract the company from its primary focus. To them, coffee was something to be prepared in the home. Certain that there was much money to be made selling drinks to on-the-go Americans, Schultz started the Il Giornale coffee bar chain in 1985.
In 1984, the original owners of Starbucks, led by Baldwin, took the opportunity to purchase Peet's (Baldwin still works there today). In 1987, they sold the Starbucks chain to Schultz's Il Giornale, which rebranded the Il Giornale outlets as Starbucks and quickly began to expand. Starbucks opened its first locations outside Seattle at Waterfront Station in Vancouver, British Columbia, and Chicago, Illinois, that same year. At the time of its initial public offering on the stock market in 1992, Starbucks had grown to 165 outlets.
The first Starbucks location outside of North America opened in Tokyo in 1996. Starbucks entered the U.K. market in 1998 with the acquisition of the then 60-outlet, UK-based Seattle Coffee Company, re-branding all its stores as Starbucks. By November 2005, London had more outlets than Manhattan,[9] a sign of Starbucks becoming an international brand.
In 1999, Starbucks experimented with eateries in the San Francisco Bay area through a restaurant chain called Circadia.[10] These restaurants were soon "outed" as Starbucks establishments and converted to Starbucks cafes.
In April 2003, Starbucks completed the purchase of Seattle's Best Coffee and Torrefazione Italia from AFC Enterprises, bringing the total number of Starbucks-operated locations worldwide to more than 6,400. On September 14, 2006, rival Diedrich Coffee announced that it would sell most of its company-owned retail stores to Starbucks. This sale includes the company-owned locations of the Oregon-based Coffee People chain. Starbucks has converted the Diedrich Coffee and Coffee People locations to Starbucks as of summer 2007, although the Portland airport Coffee People locations were excluded from the sale. [11][12]
Starbucks' chairman, Howard Schultz, has talked about making sure growth does not dilute the company's culture [13] and the common goal of the company's leadership to act like a small company.
In January 2008, Chairman Howard Schultz resumed his roles as President and Chief Executive Officer after an eight year hiatus, and replaced Jim Donald, who took those posts in 2005 but decided to leave the company in late 2007. Schultz's principal challenge is to restore what he calls the "distinctive Starbucks experience" in the face of rapid expansion. Analysts believe that Schultz must determine how to contend with higher materials prices and enhanced competition from lower-price fast food chains, including McDonald's and Dunkin' Donuts. On January 31, 2008, Schultz announced that Starbucks would discontinue its warm breakfast sandwich products, originally scheduled to launch nationwide in 2008, in order to refocus the brand on all things coffee.
As Starbucks often tests new products as part of its ongoing innovation and transformation, Starbucks started testing selling an 8 oz "short" brewed coffee for $1 and giving free refills on all brewed coffee. This test was limited to the greater Seattle market, with no plans for expansion to national markets. Per an internal email this program was cancelled in late March 2008.
In March 2008, Schultz made several announcements to Starbucks shareholders. Shultz introduced Starbucks' "state of the art espresso system",[14] the Thermoplan AG manufactured Mastrena, which will replace the Verismo 801. Starbucks also announced that the company hopes to enter the energy drink market and introduce a customer reward program. Pre-ground beans will also no longer be used, in order that the additional grinding of all whole bean coffee will "bring aroma, romance and theater" to American stores. [15] The company also announced the recent acquisition of The Coffee Equipment Company,[14] the manufacturer of the Clover Brewing System. They are currently test marketing this unique "fresh-pressed" coffee system at six Starbucks locations, three in Seattle, and three in Boston.[16]
In May 2008, a rewards program was initiated for registered users of the Starbucks Card. Previously simply a gift card, the Starbucks Card has undergone a transition into a rewards card, similar to cards offered by other retail outlets. Perks and rewards offered to registered users are 2 hours of free Wi-Fi Internet service per day, free refills of brewed coffee, a free tall beverage with the purchase of 1 lb. of whole bean coffee, as well as free milk (e.g. soy) and syrup drink modifiers. [17] This is a new and aggressive approach by Starbucks to create and strengthen customer loyalty.
Products
A Starbucks Java Chip Frappuccino to go (590 calories)
Starbucks serves a variety of beverages including brewed coffee, hot chocolate, espresso, teas, Frappuccinos and, in some branches, fruit smoothies known as Vivanno Nourishing Blends. Also available are bottled beverages, sometimes including Naked Juice, Ethos water, San Pellegrino, Izze soda, and Horizon Organic Milk.
Cappuccinos, and all other beverages with steamed-milk and/or foam can be customized to order with pumps of flavored syrups, reasonable temperature changes and additional espresso shots. Starbucks also offers blended beverages, such as the "Frappuccino Blended Coffee", a flavored drink of coffee, milk, and sugar blended with ice. However, coffee is optional in the Frappuccinos. The name is a portmanteau of frappé and cappuccino and was introduced in 1995. Starbucks markets seasonal beverages as well, such as the Pumpkin Spice Latte (September to January) and Eggnog Latte (November to January). There is also seasonal brewed coffee, like the "Christmas/Holiday Blend" of whole bean coffee.
Starbucks supplements the beverage offerings with pastries, ready-to-eat salads and sandwiches, coffee merchandise, at-home brewing equipment, and whole bean coffee.
Starbucks sells a variety of ready-to-eat and drink products that are kosher, but due to business hours and sandwich products a Starbucks store cannot be certified 'kosher' according to Jewish law.[18]
Starbucks does not franchise with individuals within North America but does enter into licensing arrangements with some companies.[19] One example is of Starbucks store locations in airports, most of which are operated by HMSHost, owned by the Italian Autogrill group. Other licensed locations include grocery stores, theme parks, major food services corporations, university campuses and hospitals. In addition, Starbucks has partnered with Magic Johnson's Johnson Development Corporation to form Urban Coffee Opportunities, which opens retail locations in low-income urban areas.[20]
Staffing
There are usually from two to six partners (as Starbucks employees are called), all of them trained baristas, in each retail store at any one time. Black aprons labeled "Coffee Master" are worn by employees who have completed the Coffee Master course, which educates employees in not only the tasting, but also growing regions, roasting, and purchasing (including fair trade practices) aspects of the coffee industry. Many who successfully complete the Coffee Master use it as a stepping stone to a managerial retail position.
In the United States and Canada Starbucks offers full benefits such as health, dental, and vision insurance, as well as stock-option grants and 401(k) with matching to employees who work an average of 20 hours per week over a three month period. Each employee can receive a box of tea or a pound (0.45kg) of coffee each week if they choose. Many of these benefits, including the weekly free coffee or tea, continue in the case of temporary disability or familial leave. Employees also enjoy a 30% discount on all regular and sale-price merchandise. Beginning May 2008, all Starbucks employees receive complimentary wifi Internet access at any U.S. Starbucks through the new Starbucks/AT&T partnership. As of 2008, Starbucks was ranked by Fortune magazine as the 7th best company to work for in the United States, up from 16th in 2007. In 2006 it was ranked 29th and in 2005 it was 11th.[21] Starbucks was also voted as one of the top ten UK workplaces by the Financial Times in 2007.
In February 2008, Howard Schultz announced that he would eliminate over 600 positions within the Starbucks Corporation (the majority of which were unfilled "openings" in the company which were taken off the job market). Schultz said that the company needed restructuring, and "unfortunately, we have not been organized in a manner that allowed us to have a laser focus on the customer."[22] “I am responsible for ensuring the success of the company for the long term, which means that difficult decisions must be made. Personally, I continue to struggle with the outcome, because I realize how painful it will be for some partners” said Schultz.[23]
Starbucks Employment
Interviewing with Starbucks
Starbucks interview candidates report the interview process relies heavily on the 1:1 format, especially for in-store positions. Over 70% of the candidates rated the interview experience as "Positive," and indicate the overall difficulty as "Easy" (2.6 out of 5) compared to interviews at other employers.
Salaries at Starbucks
As the ubiquitous international coffeehouse, Starbucks employs over 150,000 worldwide. Most of Starbucks common in-store positions are compensated on an hourly basis, while store managers and headquarter roles are compensated on a salary basis. Starbucks salary details can be found below for common jobs:
"The Third Place"
Starbucks envisions local outlets as a "third place" (besides home and work) to spend time, and store design is intended to achieve this. The café section of the store is often outfitted with stuffed chairs and tables with hard-backed chairs. Most stores provide free electricity for customers, and many stores also provide wireless Internet access (provided in American stores by AT&T,[24] in Canadian stores by Bell Mobility,[25] in New Zealand outlets by Telecom NZ,[26], T-Mobile in the UK, Germany, Austria & Switzerland, in Mexico by Telmex and in Australia by Telstra).
The company operates a non-smoking policy at almost all of its outlets, despite predictions that this would never succeed in markets such as Germany, which used to have few restrictions on smoking. This has changed in 2007 with many German states issuing smoking bans for restaurants and bars. Outlets in Vienna and Mexico City, which have smoking rooms separated by double doors from the coffee shop itself, and a smoking room upstairs in the Largo do Senado, Macau, branch are the closest the company has come to making exceptions. Starbucks generally does not prohibit smoking in outside seating areas, unless required by local codes.
According to the company, the smoking ban is to ensure that the coffee aroma is not adulterated. The company asks its employees to refrain from wearing strong perfumes for similar reasons.[27] The aroma issue was also mentioned when the company announced it would stop serving hot breakfast sandwiches in early 2008, although in the end the sandwiches were retained in less-odorous versions.
Howard Schultz has said, "We're in the business of human connection and humanity, creating communities in a third place between home and work."
Employee (Partner) Benefits
Starbucks is #7 on Fortune Magazine's "100 Best Companies To Work For" for 2008. [28] One reason for this is that Starbucks is one of the few companies to offer "full-time" benefits to part-time partners. As long as a partner is paid for at least 240 hours each quarter (quarters range anywhere from 12-14 weeks), the partner is eligible for benefits. This is roughly 18.5 hours per week. Benefits include full medical, dental, and vision insurance for the partner and any applicable family members, as well as very inexpensive supplemental life insurance and disability insurance. A partner covering himself/herself usually pays $22.00 per paycheck for the full health insurance package.
Stock benefits offered are a 401(k) retirement plan, a stock investment plan where partners can use paycheck deductions to buy Starbucks stock at a discount, and yearly granted stock options to all eligible partners. Other benefits include a tuition reimbursement program, adoption assistance, and an Employee Assistance Program, which supports all partners in need. After the first six months of employment, part-time partners also receive paid vacation that accrues based on the amount worked per week. Based on the partner's average weekly hours, this averages to about 2 weeks of paid vacation per year. Plus, all partners can receive discounts on anything from cell phone service to auto insurance through the PerksCard program. This is all in addition to partners' receiving one free pound of coffee per week.
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