Franchising Starbucks does not offer franchise opportunities, but can you obtain a license to operate an outlet?
In the Philippines, as in many other countries, Starbucks is by far the most well-known and frequented coffee shop chain. Most people wouldn’t need the word “coffee” appended to “Starbucks” for them to know what you’re talking about.
Owning and franchising Starbucks will undoubtedly be profitable due to the brand’s widespread recognition and popularity, the fact that many people enjoy spending time there, and the fact that many others enjoy collecting the annual planners (and thus spending a lot of money on drinks just to get one).
Since all Starbucks locations around the world are owned by Starbucks, the company does not offer franchises for the business.
But you are not out of luck if a Starbucks franchise is something you’re interested in. Some of the company’s stores are licensed, which is functionally very similar to owning a franchise.
Even better news is that the potential for a Starbucks license is quite sizable. As of the year 2021, 6,497 out of more than 15,000 Starbucks locations around the world had been granted a license.
You should be aware of the following expenses and difficulties if you decide to pursue this option.
And so, the question becomes, how does one go about franchising a Starbucks? The problem is that Starbucks doesn’t allow franchises. The good news for would-be business owners is that it is still possible to open a store once a license has been obtained.
Unfortunately, as Rustan Coffee Corporation, a subsidiary of the Rustan Group of Companies, is the sole authorized licensee of Starbucks Coffee International in the Philippines, your application to open a store there is highly unlikely to be successful.
However, there is still hope if you are a Filipino citizen interested in opening a Starbucks franchise outside of the Philippines.
What is the Initial Startup Capital on Franchising Starbucks
An average Starbucks license will set you back $315,000. In addition, you’ll need $700,00 in cash or liquid assets to be considered.
Differences Between Franchising Starbucks and Licensing Starbucks
Howard Schultz, CEO of Starbucks, proposed licensing stores rather than franchising starbucks.
The forward-thinking and well-liked founder has always maintained that Starbucks is in the best position to handle all the working parts involved in providing a quality customer experience, from the explanation of its products to the actual presentation and operation of its stores.
As a result, franchising starbucks isn’t something the company focuses on.
However, this is just the beginning of the philosophy. To further increase sales, the company also adheres to certain licensing starbucks requirements.
To be more specific, it does not grant licenses to anyone who applies. Instead, licensees must already operate successful businesses in prime locations where Starbucks can expand.
Starbucks maintains that franchisees have more creative control over their businesses when they obtain a license, allowing them to tailor their coffee shops to the preferences of their local communities.
However, franchisees still need to model their stores after one of Starbuck’s 18 design studios.
Even so, proprietors could construct a highly personalized store, which is not possible with conventional franchises like Jollibee or McDonald’s.
Sources from Pinoy Money Talk estimate that the licensing fee for a Starbucks store in the United States could be between $300,000 and $400,000, although Starbucks does not publicly disclose this information.
For instance, the firm is on the lookout for opportunities to expand into these markets by opening licensed Starbucks cafes:
Business
University
Fine Dining
Military or Government Facility
Healthcare
Lodge and Hotels
Recreation and Travel
The list demonstrates how Starbucks’ business model is superior. Adding a Starbucks near a busy shopping mall, campus, or tourist attraction is a surefire way to increase sales, just as adding a hotel near a major airport increases revenue.
The company also gains from partnering with a licensee who has previous business experience.
The following are included in the license of Franchising Starbucks Agreement:
- Unique Starbucks food and bakery program Tailored store layouts
- Professionalism, advice, and assistance, on-going, and also visits to your location
- Exclusive collection of hardware and fittings
- Seasonal discounts and promotions
- Starbucks’s food, tools, instruction, and support
- Licensing Starbucks trademark and Copyrights
- Extensive product line, including coffee sold in bags containing whole beans
The necessary license amount is substantial; however, if you are granted one, and you find a good location, you will not likely go bankrupt.
This is based on the sheer number of people who can be seen in any given Starbucks location at any given time.
What is The Process for Franchising Starbucks in The Philippines?
It takes a lot of work to get a Starbucks license, but the process as a whole is straightforward. Here’s how it’s done:
- Submit an application to become a Starbucks licensee on their website.
- Apply formally by filling out an application.
- Please select your preferred place of business.
- Give the business an update on your assets, liabilities, and cash flow.
- Please elaborate on why your location would make a great fit for a Starbucks franchise.
- Send in your application and patiently await a response.
These are, of course, merely the preliminary stages. When a company is interested in doing business with you, they will likely pay you a visit and conduct a thorough review of your finances and records.
Problems with the System of Franchising Starbucks
Starbucks does not currently offer franchises in the United States or anywhere else in North America, but it does have a small number of franchise locations in other countries, primarily the United Kingdom.
A Starbucks franchise may be within reach if you are a successful businessperson living abroad. But there are strict requirements for entry.
You need to be a business owner or a very senior manager in the food and beverage industry, have a liquid asset portfolio of at least £500,000 (roughly $630,636), and be ready to open a large number of stores in a short period of time.
That is to say, you won’t have much success opening multiple stores unless you’re a wealthy, successful business owner with a foreign address, lots of relevant experience, and lots of money.
The Sure Way of Franchising Starbucks in the Philippines
You’ll need a different approach unless you happen to be located in a country with a high concentration of Starbucks franchises.
The following are three paths you can take to bring your ambition of Franchising Starbucks to reality.
1. Franchising Starbucks: Own a 7-Eleven Franchise
It’s easy to look down your nose at the convenience store as a legitimate coffee shop, but 7-Eleven offers coffee and means business, ranking second on Entrepreneur’s Franchise 500 in 2018 and first in 2017.
7-Eleven, like Dunkin’ Donuts and Starbucks, is a long-standing company that is also experiencing rapid growth; at the beginning of 2017, there were more than 62,000 7-Elevens in operation across the world.
That’s a lot more than the sum total of Dunkin’ Donuts and Starbucks.
Whereas Starbucks is actively seeking out business owners who can provide them with new locations, 7-Eleven is looking to provide new locations to prospective business owners.
A map, analogous to the one found on the Dunkin’ Donuts website, is available on the 7-Eleven site.
The difference is that 7-Eleven emphasizes existing locations you can buy rather than potential sites for new builds, allowing you to bypass a significant portion of the startup and construction phases.
This business model may also explain the wide range in the price of a 7-Eleven franchise, which can range from $37,550 to $1,149,900.
Naturally, the price of real estate in New York City is going to be higher than the price of a corner store in Missouri, where I grew up.
The franchise fee alone can cost anywhere from $10,000 to $1,000,000, with discounts of 10 to 20 percent for veterans and access to special financing; in addition, 7-Eleven recommends having a net worth of at least $100,000 but no more than $250,000.
If you’re looking to open a coffee franchise in the Midwest of the United States but don’t have the capital for a Dunkin’ Donuts or a Starbucks, you might want to look into 7-Eleven.
Entrepreneur has compiled comprehensive lists of the top franchise opportunities in a wide variety of fields. More than a dozen different sectors offer us opportunities for business.
From automobiles to home improvement to child care to restaurants to spas to health and beauty products and everything in between.
2. Franchising Starbucks: Open and Own a Licensed Starbucks Store
In fact, Starbucks does sell franchises. Consequently, if you own a business or have access to a location that could expand Starbucks’ customer base, you may want to get in touch with them about opening a Starbucks there.
This occurs quite frequently. Statista reports that as of October 2017, there were 13,930 Starbucks cafes and shops in the United States, of which 5,708 (41% of the total) were licensed stores.
Store layout, Starbucks menu items, equipment, training and support, food, promotions, and onsite visits are just some of the areas in which licensed stores can expect assistance from Starbucks, as evidenced by the company’s licensing website.
However, not everyone will find this to be the most convenient or inexpensive choice. You need to have both the resources and a desirable location for a Starbucks to consider opening there.
For those who are considering opening a Starbucks as their first business venture or primary financial outlay, this is likely not the best course of action.
However, there are numerous other cafes that do provide franchise opportunities. In fact, two of them are ranked in the top three of Entrepreneur magazine’s 500 best franchises.
3. Franchising Starbucks: Own and Open a Dunkin Donut Franchise
I won’t get into a debate about whether Dunkin’ Donuts or Starbucks serves better coffee, but I will say that Dunkin’ Donuts is, by definition, the superior American coffee franchise.
In fact, it’s almost the polar opposite of Starbucks in that it’s entirely franchise-based; as of the beginning of 2018, not a single Dunkin’ Donuts location anywhere in the world was owned by the parent company.
There are more than 9,000 locations in the United States alone, making it the second best franchise opportunity this year, according to Franchise 500.
Even though it has been franchising since 1955, it continues to add new locations each year.
There is always a cost associated with achievement. Dunkin’ Donuts franchisees must have a minimum net worth of $250,000 and at least $125,000 in liquid cash in addition to paying an initial franchise fee between $40,000 and $90,000.
Veterans receive a discount of 20% on the first five franchises they purchase. In total, you can expect to spend between $228,620 and $1,691,200 on a startup.
It’s a lot of money, but you own the business, and Dunkin’ Donuts even provides a map showing where they’re looking to expand so you can see if that’s in your neighborhood.
References:
- “Starbucks Corporation 2022 Form 10-K Annual Report”. U.S. Securities and Exchange Commission. November 18, 2022.
- Krishnan, Unni (February 22, 2023). “Starbucks Launches Olive-Oil Coffee Drinks”. Bloomberg News. Retrieved February 22, 2023.
- Robinson, Melia (July 29, 2017). “Starbucks is opening premium stores where you can buy coffee flights and cold-brew floats — take a look inside”. Business Insider.
- “Starbucks targets new market, in coffee exporting Laos”. Associated Press. November 2, 2020. Archived from the original on May 24, 2022 – via The Independent.
- “Starbucks”. Forbes.
