When we think of coffee franchises, Starbucks stands out as a world leader. With more than 38,000 stores worldwide, this brand has become synonymous with premium coffee, innovation and customer experience. However, is Starbucks a traditional franchise? How can you invest in this brand and how profitable is it?
In this article, we explain in detail the value of the Starbucks franchise, how its business model works, the requirements for acquiring a licensed store, and the expected profitability. Read on to find out.
Is Starbucks a franchise?
The answer is not as simple as it seems. In the United States, Starbucks does not operate under the traditional franchise model. Instead, the company uses a licensed store system.
What does this mean?
While a franchise allows investors to operate more independently, a license implies that Starbucks has much tighter control over the operation. This includes oversight over store design, quality of service, and products offered. As a result, the operator of a licensed store works under very defined standards.
Why does Starbucks choose this model?
Starbucks says this approach allows it to maintain a consistent customer experience and protect the value of its brand, which is one of the most valuable in the world, estimated at more than $45 billion, according to Forbes.
How much does a Starbucks franchise cost in the USA?
Although Starbucks does not operate under a franchise model in the United States, you can purchase a licensed store. The initial costs to set up a Starbucks franchise are broken down as follows:
- Initial License Cost: Approximately $315,000.
- Financial requirements: Have at least $700,000 in liquid assets.
- Additional expenses: They include design, equipment, and opening costs, which may vary by location.
These costs are higher than many traditional franchises, but they come with the backing of a globally recognized brand and an established customer base.
Requirements to set up a Starbucks franchise
If you’re wondering how to open a Starbucks franchise (or more specifically, a licensed store), you’ll need to meet certain requirements set by the company. First, you must have a solid financial capacity, which implies having the necessary liquid assets and demonstrating economic solvency to cover operating costs. In addition, Starbucks values previous experience in the food, beverage or retail industry, as it seeks partners with in-depth knowledge of the sector. Another crucial aspect is brand engagement, which means aligning with Starbucks’ values and standards, which include quality, sustainability, and a strong focus on customer experience. Finally, the choice of strategic location is key, as Starbucks prioritizes opening its stores in high-traffic, high-visibility areas to ensure business success.
How many franchises does Starbucks have operating in the United States and in the world
Starbucks has more than 16,300 stores in the United States and 21,700 in other countries, for a total of more than 38,000 global stores. Of these, approximately 40% are licensed stores, while the rest are operated directly by the company.
Relevant data about its expansion:
- Steady growth: Starbucks opens an average of 2,000 new stores a year in strategic markets.
- Key Markets: The United States and China account for more than 60% of its total revenues.
Profitability of a licensed Starbucks store
How profitable are Starbucks franchises? The figures are promising:
- Average Income: Starbucks stores generate between $1 million and $1.5 million annually, depending on the location.
- Operating Margin: It is estimated that the net profit margin for a licensed store can range from 10% to 20%.
Factors that influence profitability:
- Location: Stores in urban or high-traffic areas are usually more profitable.
- Operating costs: They include rent, staff, and supplies, which vary by market.
- Competence: Although Starbucks is a leader, it competes with local and global chains such as Dunkin’ Donuts.
How long does it take to recover the investment?
The return on investment when opening a licensed Starbucks store is a process that usually takes between 2 and 5 years. This range depends on various factors that can accelerate or delay the return on investment. Let’s dive deeper into each of them to understand how they impact results:
1. Location: The Key to Success
Starbucks prioritizes strategic locations with high traffic and visibility, such as city centers, shopping areas, and busy transportation points. A location in a prime area can generate significantly higher annual revenues, reducing the time needed to recoup the investment.
- Example: A store in an airport or financial center is more likely to attract a steady stream of customers compared to one located in a residential area.
2. Operating costs: Control makes all the difference
Operating costs include rent, wages, supplies, and services. These expenses vary depending on the city, the size of the store, and local regulations.
- How does this impact? In cities with high rental costs, such as New York or San Francisco, it is crucial to have a high volume of sales to maintain positive profit margins.
- Our advice: A detailed cost analysis before opening the store can help you make smarter financial decisions.
3. Efficient management: A skilled partner is a key asset
Starbucks requires prior industry experience to operate a licensed store, and it’s no coincidence. The ability to efficiently manage the business, lead the team, and ensure customer satisfaction directly impacts sales and profitability.
- Why does it matter? Good management can increase sales through effective promotions, streamlined operations, and excellent customer service, reducing recovery time.
4. Season and consumer trends
Store performance can also be affected by seasonality and consumption trends. For example, launching seasonal products like the Pumpkin Spice Latte can lead to revenue spikes, while off-seasons require creative strategies to maintain sales.
Recouping your investment in a licensed Starbucks store in the shortest amount of time requires more than meeting brand standards. It is essential to implement a comprehensive strategy from the beginning, which includes a solid business plan and a clear focus on profitability and operational efficiency.
How to get a Starbucks franchise?
Investing in Starbucks can be an excellent decision, but it’s not a straightforward process. Unlike many traditional franchises, Starbucks demands to meet strict requirements and fully align with its values and standards.
To get started, you need:
- Submit a request: You can do this directly on the official Starbucks site, providing information about your financial capacity, experience in the sector, and proposed location.
- Evaluation Process: The company will analyze if you meet the requirements. This step is key, as Starbucks selects its partners carefully to ensure that each licensed store reflects its commitment to quality and customer experience.
- Approval and contract: If you pass the evaluation process, you will sign a license agreement with Starbucks, which includes the specific conditions for operating your store.
Why is it better to do it with business consultants?
While you can go through the process on your own, doing so with the support of experts significantly increases your chances of success. Here’s why:
- Access to key information: Business consultants have a thorough understanding of Starbucks’ business model and will help you submit a solid application, highlighting your experience and strategic proposition.
- Financial Counseling: You’ll get a guide to structuring your finances appropriately, ensuring that you meet liquid asset and operational capacity requirements.
- Location Analysis: They will support you in selecting the right location to maximize profitability.
Your decision, accompanied by experts
Buying a licensed Starbucks store is more than an investment, it’s the start of a business backed by one of the world’s most valuable brands. But you don’t have to do it alone.
And if beyond the brand what interests you is the industry and its returns, you should be attentive to the offer of other coffee franchises that are just as positioned as Starbucks, and that allow you to diversify your investment with lower initial cost and greater margins of operational flexibility.
Contact us at Interlink FBC and schedule a free consultation. Together, we’ll analyze your goals and help you make the best investment decision. We have a portfolio of +750 franchises from 35 different industries, and we are ready to accompany you in every step of the process, from selecting the right franchise to strategically planning your business.
