How much does it cost to franchise a Starbucks? In this post I go into depth on the options available to entrepreneurs.
- What is the Starbucks experience?
- How much does it cost to franchise a Starbucks in 2022?
- Seattle’s Best Coffee
- Licensed stores
- The next step
- The verdict
How much does it cost to franchise a Starbucks?
The Starbucks coffee company brand is huge. There are over 32,000 Starbucks stores worldwide at time of writing, making it the biggest and most successful coffee chain in the entire world. Having a piece of that as a franchisee is obviously an attractive prospect.
There are many benefits to the franchise model. It’s a quick way to build a successful business, and you have plenty of support from the brand. In this post I will take a close look at Starbucks and it’s franchise options. If you’re interested in hospitality franchises, this one’s for you.
How much does it cost to franchise a Starbucks: What is the Starbucks Experience?
The Starbucks Experience is a way of serving coffee essentially. If you remember the last time you were in a Starbucks, it probably all seemed rather effortless. However, employees are expected to promote the ‘experience’ by focusing on the three P’s:
- People. This refers to the Baristas and their relationship with customers
- Place. This is all about the place, right down to the unique coffee smell
- Product. This refers to the coffee (obviously) as well as the merchandise in the store
The concept is all about the Starbucks values. These were established when Howard Shulz, original CEO of Starbucks, set up the company.
How much does it cost to franchise a Starbucks in 2022?
The first thing you need to know is the bad news. If you live in the United States or Canada you can pretty much forget owning a franchise with this company. Starbucks just won’t let it happen. Instead, the company likes to offer licenses to business owners, rather than franchises.
In 2003, Starbucks CEO Howard Schulz, discussed the rationale behind the approach:
“We believed very early on that people’s interaction with the Starbucks experience was going to determine the success of the brand. The culture and values of how we relate to our customers, which is reflected in how the company relates to our [employees], would determine our success. And we thought the best way to have those kinds of universal values was to build around company-owned stores and then to provide stock options to every employee, to give them a financial and psychological stake in the company.”
You have more of a chance of franchising a Starbucks in the United Kingdom, where there is a different approach.
So where does that leave The United States and Canada?
Starbucks hasn’t abandoned entrepreneurs. It has a number of different ways for people to get their hands on a slice of the business.
Seattle’s Best Coffee
Starbucks bought this back in 2003, and it is just one of the ways in which you can capitalize on the brand as an entrepreneur.
Seattle’s Best Coffee has stores and machines all across the United States, and the number of locations is rising. While it may not be considered ‘Starbucks coffee’ it has the full backing of the company. It is generally seen as a great way to start a business with lower costs and little risk.
This coffee is served in businesses too, including retail (You’ll find them at KFC, for example) and there are Seattle’s Best Coffee business units on university campuses and public buildings.
The marketing and training support is phenomenal, with Seattle’s Best Coffee offering:
- Messaging and marketing tactics.
- Marketing ideas to drive sales and trial/repeat purchase.
- Full line of branded cups (hot and cold) to get the “word out” on your offering.
- SBC van to drive awareness and trial when you need it.
- Live launch training
- Online training support
- Webinar support
- Video library
(All information taken from Starbucks Branded Solutions)
This is a franchise opportunity, and as regards franchise fees and other costs, you will need:
- At least $125,000 in liquid capital
- A minimum net worth of $1 million
- A full investment of between $180,000-$445,000
This is a more affordable option compared to a licensing agreement.
How much does it cost to franchise a Starbucks: Licensed Stores
This is where you get to run a Starbucks coffee house. While you may not be a franchise owner, it at least allows you to run it as a business.
This option is overseen by Starbucks. The company will set you up as a licensed seller of the food and beverages, and do a number of things that will get you started. According to the company website, you will receive:
- Unrivaled, customizable store design (you will still have to follow the core Starbucks aesthetic to a degree, chosen from their 18 designs)
- Starbucks menu, equipment, training and support
- Seasonal promotions
- Proprietary equipment and fixture package
- Exclusive Starbucks® food and bakery programme
- Whole bean packaged coffee and comprehensive merchandise assortment
- Ongoing expertise, consulting and support including onsite visits
So why do Starbucks only offer licenses?
That’s the way things are in the US and Canada. The general feeling is that Starbucks seems to want to have complete control over the product and the brand image in these two countries. And fair enough, it did all start in Seattle.
A licensed coffee shop is controlled by Starbucks. Entrepreneurs who take on this particular challenge and have their own Starbucks coffee shop will need to understand that the coffee retailer has high standards. Each store is very much held to the exact same high standards and product quality that you would expect from the corporate office.
The company has also been able to grow its store count by offering a diverse selection of products to a diverse group of coffee buyers. Starbucks distinguishes itself from its competitors by not franchising.
How many Starbucks licensed stores are there in the United States?
According to Statista.com, there were 6,497 Starbucks licensed stores in the US in 2021. That is compared to 8,947 company-owned stores.
How much does the average Starbucks make per day?
This is obviously down to differences regionally and so on. Bear in mind that Starbucks is very quick to close down under-performing stores, so the average revenue must be consistent across all stores.
On average, Starbucks stores make around $500 per day profit.
When thinking about Starbucks, think location
The coffee shop chain has strict control over many aspects of the Starbucks license agreement. One of the key aspects is an attractive location, or what is often referred as ‘position’. You need to have a prime position before Starbucks will even consider offering you a license.
The main concern is foot traffic. If you don’t have a location that is busy with coffee-loving patrons, then you have a very slim chance of acquiring that license. This is why so many licensed stores are in airports and hotels.
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How much does it cost to franchise a Starbucks: The next step
If you think you are the type of person who can make a Starbucks successful, then begin the license application process. Go to the Starbucks Branded Solutions website and fill out the application form. The form is quite detailed, and will ask for:
- What kind of business you manage
- Business information such as your name and address
- Contact information
- Products that you will offer
Then, the more detailed part of the process kicks in. Expect to be asked specific questions about you and why you would make a valuable licensed store owner. The company will also look at your vision for competitiveness in the food and beverage industry. It’s quite heavy stuff, but if you want your own Starbucks store badly enough, you should be ready for this.
And the money?
Starbucks usually expects that you have around $700,000 in liquid assets (cash you have to spend) for the funding part of the operation. Add to that the $315,000 for the actual licensing fee (permission to use the name and other branding elements).
What about the store design?
You will know the brand ‘look’ for Starbucks. It’s very much iconic now. As a license owner, you get all of that as part of the deal.
When it comes to store design, there is a little bit of a perk here. While the Design Studio for Starbucks has 18 designs that you will have to use as a starting point, after that you can customize to some degree. Many license holders tailor their stores so they fit in more naturally to the particular location. This gives you an opportunity to create a truly local Starbucks.
What does the license actually include?
There is a comprehensive licensing package supplied by Starbucks, which includes:
- Store design that can be customized
- Food and bakery items that are exclusive to Starbucks
- Expertise, consulting, and onsite visits to provide ongoing support
- Fixtures and equipment proprietary to the company so you know they are the best available
- Promotions during the year
- Menus, equipment, training, and support for Starbucks
- A comprehensive product line of packaged Whole bean coffee and merchandise based on the Starbucks trademark
In 2022 there is a real sense that the time is right to start your own business. The pandemic is approaching a different phase, where vaccines are widely available and part of everyday life for many.
If you live outside the USA and Canada, go for the franchise option. That makes sense (presuming you can work long hours and truly love the brand). If you don’t live in the rest of the world, your only option is licensing the business model in North America and Canada.
And that’s not a bad thing. You get an amazing package of materials and support, and a ready customer base. The only thing that might stop you from taking the opportunity is the cost of the total investment. While investing over $1,000,000 in a licensed operation or franchise is par for the course for big-brand restaurants and fast food places, it is still a cool million plus for a license fee.
To sum up, it’s an amazing opportunity, if you can afford it.