This blog is about the information on Starbucks franchise.
When people think of starting a business, one of the first businesses that come to their mind is the food business. If we look around, we will notice many food businesses in our vicinity. There are a wide range of food items, from simple roadside street food to exquisite ones at a five-star hotel. There are many food business options to choose from. While on the one hand, people with limited means wish to begin with a small cafe or kiosk. On the other hand, people with deep pockets want to start one of a kind cafe or restaurant. Whatever the financial status may be, the desire to own a cafe is exceptionally high among the people who want to start a business.
Cafe Business
Owning a cafe is one of the dreams that many people harbor. Unlike in other parts of the world, where only coffee is synonymous with the cafe, teas are also an integral part of India’s cafe culture. Undoubtedly tea being the favorite hot beverage of Indians finds a place of pride among most of the cafe menus. It is not surprising that today many cafes in India predominantly serve a variety of teas while coffee is there for the sake of formality. As per a survey, the favorite tea of Indians is masala tea, and their favorite coffee is instant coffee.
A few decades back, when cafe culture started spreading its wings in India, then the cafes predominantly served coffee-based beverages only. Barista and Cafe Coffee Day (CCD) are prime examples of such cafes. These cafes were inspired by the cafes found abroad. But as the Indian cafe market matured, cafes felt the need to serve tea to get more footfalls. Some entrepreneurs found it more lucrative to start a cafe with tea as its main product, like Chai Point and Chaayos. After all, people say that ‘India runs on tea.’ Hence it was about time that tea cafes found their place of pride in the Indian cafe market.
A question for people who love trivia. Can you guess which was the first cafe chain in India? The answer is at the end of this blog.
Cafe Franchise
When people think of starting their cafe, they have two options: create their brand or take the franchise of an existing brand. While starting own cafe brand has its rewards and risks, alternately taking the franchise route is more straightforward and equally rewarding. There are multiple cafe franchise opportunities in India. These cafe franchises start from a few lacs and go up to few crores. As a result, people can choose the most suitable cafe franchise opportunity within their budget. It is not surprising that people who have good money prefer to take an international cafe brand’s franchise. The most desirable franchise of a global cafe brand is the Starbucks franchise.
Starbucks
Starbucks is an aspirational cafe brand with its headquarter in Seattle, Washington (USA). Jerry Baldwin, Gordon Bowker, and Zev Seigal started this brand in 1971. At the beginning of the 1980s, the three founders sold their brand to Howard Schultz. Since then, Starbucks began to be identified closely with its new owner. Under the leadership of Schultz brand expanded rapidly across America and went international in the second half of the 1990s. Since then, there has been no looking back for Starbucks. By the end of 2019, it was present in more than thirty-one thousand (31,000) locations worldwide with a revenue of little over $38billionUSD.
Starbucks is known for its variety in coffee, including ‘Frappuccino,’ its patented products. The company also sells various types of bakery products and heat & serve (ready-to-eat) food items. In the late 1990s company introduced its tea range under the brand name Teavana. The name Teavana is effectively derived from the words tea and nirvana.
In the initial years, the expansion of Starbucks happened through the franchise route. However, after Howard Schultz took over its reins, Starbucks stopped giving franchises and started expanding through the licensing way. There was a time in America when Starbucks Franchise was one of the most sought-after franchise businesses. But Schultz remained adamant and persisted with no Starbucks Franchise policy.
Why doesn’t Starbucks Franchise its Stores?
Franchising is a preferred mode of expansion for brands, especially in the food and beverages industry. If we look around ourselves, we will see many stores and outlets of international food brands, and they are all franchise stores. The reason companies take the franchise route is because they get a new location with hardly any investment. Additionally, they do not have to spend their time and resources managing a store as the franchisee does this for them. Hence, the franchising company can focus on product development, marketing, and expansion. For these reasons, McDonald’s, Subway, Burger King, KFC, Dominos, Pizza Hut, and other international brands expanded through the franchising route.
Then naturally, the question arises, why does Starbucks not franchise? In his book “Pour Your Heart Into It,” Howard Schultz answered this question. He says,
“To me, franchisees are the middleman who would stand between our customer and us. If we had franchised, Starbucks would have lost the common culture that made us strong.”
Howard Schultz
It is a fact that most of the food and beverages franchisors, while franchising, leave the entire product delivery and customer experience with franchisees. And this is what Howard Schultz wishes to avoid when expanding Starbucks in new territories.
How Starbucks Expands Without Giving a Franchise?
Apart from the company-owned and franchise-owned stores, another way to expand is by licensing the brand. This third way to expand the brand is the favored option of Howard Shultz and Starbucks. Under the license agreement, Starbucks, who is the licensor, manages the product and customer experience. Simultaneously, the person investing in Starbucks is the licensee and controls the other aspect of the business. This licensing arrangement in franchising terms is somewhat similar to the ‘Franchise Owned and Company Operated’ (FOCO) model. The two most significant advantage of the FOCO model or Starbucks’s licensing model are
1. Food quality remains with the franchisor or licensor.
2. Customer experience is also with the franchisor or licensor.
As a result of constantly good quality and satisfying customer experience, Starbucks sees more sales every passing year despite charging a premium on its products.
However, there are some exceptions to Howard Schultz’s no Starbucks Franchise policy. Starbucks Store at Airports, Hospitals, Colleges, and Department Stores are the franchised stores. In America, a little over 40% of the outlets are franchised outlets. Another exception to the no Starbucks Franchise policy is a few international markets. In other global markets, Starbucks is entering by partnering or forming a joint venture with the local business houses.
Starbucks in India
Starbucks entered India in 2012 with a 50:50 joint venture with Tata Global Beverages (a TATA group company). This joint venture in India is called ‘Tata Starbucks Private limited.’ They started their operations that year itself with their first store in Mumbai. Today Mumbai boasts of the maximum Starbucks store in India, followed by Bangalore and Delhi. As of now, Tata Starbucks Private limited has over 200 outlets across fifteen cities of India. The company plans to add another fifty outlets in the coming year. Starbucks has been second time lucky in India. Previously they made an unsuccessful attempt in 2007 also. But not much is known why that attempt failed.
Like other food multinationals who localised their menu as per Indian tastes, Starbucks has also given Indian touch to its menu. Some of the popular beverages on Starbucks’s menu are various Coffees, Frappuccinos, cold brew & shakes, and Teavana Tea. On the other hand, some of the menu’s food items are the sweet bakery, savory bakery, sandwiches & wraps, salads & muesli, and desserts.
Despite the high prices of Starbucks products, Indians have taken their liking to them. Sale of Starbucks in India defies price sensitive image of the country.
Starbucks Franchise in India
As we have discussed earlier, Starbucks does not franchise. But in India, the company does not even give a license for their store. Tata Starbucks Private limited own all the stores. Also, in the future company’s prefers to open only self-owned stores. Hence those interested in taking Starbucks Franchise or licensed store will have to wait for some more time.
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How to Associate with Starbucks?
Though Tata Starbucks Private limited is not giving Starbucks Franchise or license to open the store, yet there is a way to associate with Starbucks. The only way right now to associate with the company is to give the property on rent. If somebody owns a property at a prime location that is more than 2500 square feet, they can contact the company and provide it on a long-term lease. Suppose the company finds that site suitable and that city is on its list for expansion. In that case, the company will contact back the property owner.
Alternatively, if somebody thinks they will take a property on rent and then further sub-lease to Starbucks, the company does not respond to such requests. The company prefers to deal directly with the property owners.
People interested in leasing their property or interested to know more about Starbucks Franchise can contact
Email id: partner.resources@tatastarbucks.com
Website: Starbucks India
Facebook: Starbucks India (Facebook)
Customer Care: 18602660010
FAQs on Starbucks Franchise in India
Frequently asked questions and their answers on Starbucks Franchise in India are as follows.
How To take Starbucks Franchise in India?
As a rule, Starbucks does not give franchises except under exceptional circumstances. Besides, Starbucks offers only the licensed stores. As of now, Starbucks is neither giving franchise nor licensed stores in India.
What is the Starbucks Franchise cost in India?
Though Starbucks doe not gives franchise but starting a store like Starbucks would cost approximately INR five crores.
What is the Starbucks Franchise investment in India?
The answer to this question is the same as above.
How much is the Starbucks Franchise profit?
As ‘Tata Starbucks Private limited’ is not a listed company, hence getting their income, expenses, and profit & loss statements is difficult. But if we believe some experts, the average store sale is INR thirty lacs a month. After deducting all the store expenses, per store gross profit would be 25-33% of the monthly sale.
Who is the owner of Starbucks India?
‘Tata Starbucks Private limited’ is a 50:50 joint venture between Tata group and Starbucks in India.
Which country owned Starbucks?
No country owns Starbucks. The company headquarters is in Seattle, Washington (USA). Hence can say that American citizens own Starbucks.
Which was the first cafe chain in India?
The first Indian cafe chain was ‘India Coffee House,’ and the first outlet opened in Mumbai in 1936. The Indian Coffee board operated this cafe.
Conclusion
In conclusion, we can say that Starbucks is one of the most popular brands in the food segment. Across the world, Starbucks has created a name for itself by creating the second wave in coffee culture. While on the one hand, people aspire to consume its products. On the other hand, businesses desire to associate with Starbucks in some or another way. As a rule, Starbucks does not franchise but gives license to run its store except in certain circumstances.
In India, Starbucks joined hands with a Tata group company to form a 50:50 joint venture in 2012. As of January 2021, it has 200 stores across 15 cities of India. All these stores are company-owned and operated. There is a possibility that Starbucks India may start licensing or franchising (under exceptional circumstances) its stores in the future.
Disclaimer
This blog is created solely for informational and educational purpose. Ideas and suggestions given in this blog are not substitute for the guidance of an expert. Readers are advised to do own due diligence before taking action based on this blog. This blog is not warranted for content accuracy. Reader’s discretion is required on Starbucks franchise.