Franchising in Starbucks
Many big companies in the United States of America have adopted the aspect of franchising for various reasons, especially those corporations that are in the fast-food industry. In fact, some of the most successful companies are already operating a franchise because the economic scheme can expand the brand more quickly than when the business is on its own or through a lender or an investor (Inma, 2005). Therefore, the collection of ongoing royalty and franchise fees allow the business to build its brand without necessarily putting pressure of repaying the lenders or sacrificing the control in favor of outsiders.
To start with, franchising benefits both the buyer and the seller. In fact, there are higher chances of success for both sides because there is an already established business model. Moreover, the brand is known and does not require an ongoing support, making the initial training quite easy. Still, there is a lower cost because of group purchasing and already established regional and national advertising campaigns (Inma, 2005). Another important aspect of franchising is that it is anchored in the perception that the company finds talented people to manage the outlet and also incentivizes them to continue working hard.
Starbucks is fairly successful without franchising concept. Indeed, the company has a large number of stores, more than 7,000 in the United States alone. With this in mind, one would be eager to understand the difference if the company sells a franchise or develops independently. In addition, it is believed that the company is backing the common trend of the other food-service stores. Notably, the explanations would be based on several considerations undertaken by the company. Firstly, it is worth noting that Starbucks grants a franchise, but on a limited basis (Santamaría & Ni, 2008). However, the company has resisted the full concept, especially retaining control of its brand and culture in the United States. On the contrary, several franchised owned stores exist in the European markets.
Secondly, Starbucks has maintained its chain in the United States so that it can offer continuity of services across its stores. In addition, the company has resisted letting the price of the stock define its operations, which is the largest part of the enterprise renewed philosophy for success (McKinsey, 2011). By and large, the chain concept has enabled the company to remain firm to its values; for instance, when business slowed down after the 2008 recession, the firm continued offering health care to temporary and part-time employees to keep the employees’ morale high despite the low turnover.
Thirdly, through the concept of chain stores, the company was able to avoid stagnation by expanding and reinventing its interior design and the products on offer. In fact, if the franchise were awarded, Starbucks would not have any control over other business subsidiaries attached to it in the name of contracting. Therefore, the company, through its traditional values, was able to offer innovative loyalty plans to its customers, including mobile payment options and reward cards (McKinsey, 2011). In addition, Starbucks also made sure that it promoted the greater good to its customers by requesting the gun owners to desist from bringing their firearms into the company stores.
Nowadays, Starbucks ensures that every store operates from the headquarters and hires general managers who can be transferred and replaced at any time. In this approach, the managers are responsible for reporting to the headquarters about the progress of their stores. In addition, such business model boosts the uniformity and control over the business operations. It is worth noting that if the company decides to close any of its stores, there are no restrictions attached,, as in the case with the franchised stores where certain penalties must be paid. In essence, Starbucks’s marketing and operation preferences are aimed at safeguarding its brand and uniqueness in the food industry.
Inma, C. (2005). Purposeful franchising: Re-thinking of the franchising rationale. Singapore Management Review, 27(1), 27-48.
McKinsey. (2011). Starbucks. McKinsey Quarterly, 34-43.
Santamaría, B., & Ni, S. (2008). Entry modes of Starbucks. International Business, 71.