Starbucks success Essay
Nowadays Starbucks is the largest coffee house chain, which has more than 16,000 points in 49 countries. The company belongs to one hundred best employers the world, and the brand Starbucks is one of the most recognizable names in the United States and all over the world. (Michelli, 2006; Starbucks, 2006)
Now the company is positioning itself as a coffee house chain, where except for coffee customers are also offered breakfasts and lunches. In any of the coffee stores the visitor can simply relax, work in a pleasant atmosphere (all cafes are equipped with WI-FI-spot) or to speak with business partners in an informal atmosphere, or listen to music. (Schultz, 2011)
When purchasing the Starbucks franchise, we can talk about the potential success of the business for many reasons: the company already has a popular brand (so we do not need to launch special advertising and promotion), there are ready business plans. Franchisors are also ready to provide more favorable conditions for the purchase of equipment under the brand from its suppliers. In case of difficulties the licensee can always seek help from financiers and lawyers of the parent company.
When purchasing a Starbucks franchise, we first of all get a working business model. The franchisor already has a history of successful work, and the buyer must be licensed to avoid many mistakes. Thanks to the original well-aligned business processes of the company, the payback period for new cafe store is shorter.
But each company when starting its activity, should have a clear perspective of the financial, material, labor and intellectual resources, the sources of receipt, and be able to precisely calculate the efficiency of resources needed. An important task is the problem of attracting investments for the new project. It is necessary to make a substantial and justified project (proposal) of the required investment, that is, to make a business plan. The business plan describes the process of functioning of the firm, shows how its leaders are going to achieve their goals and objectives, primarily to increase profitability. Well-developed business plan helps the company to grow, win new positions in a market where it operates, to make long-term plans of the enterprise. Business plan allows us to solve several problems, but the main ones are as follows:
Rationale for the economic feasibility of development of the company;
The calculation of the expected financial performance, primarily in sales, profits, return on capital;
Defining the intended source of funding for implementing the chosen strategy, methods of concentration of financial resources;
Selection of employees who are able to implement this plan.
The main center of the business plan is concentration of financial resources, as business plan is an important tool to increase the company’s capital. Financial plan is the main criterion for acceptance of the project to realization. In the case of insufficient development of this section of the business plan, the adoption of the project for implementation is unrealistic, as the proposed business plan does not answer the main question of interest to the investor – how quickly and in what forms the capital invested will be returned.
The process of preparing a business plan allows to carefully review the business start-up in every detail. We may write such a financial scheme of the future cafe:
– Area – 160 square meters, with 75 seats;
– Menu: coffee, sandwiches, snacks for coffee, breakfast
– Equipment:
• 5 Professional semi-automatic espresso machine (3 horns) = $10, 000
• Other coffee equipment – $2 500
• Refrigeration equipment, refrigerated display cases, bar – $ 11 000
• Tableware (china, glassware, flatware) – $ 11 500
• Furniture – 15 000 USD
Repair, decoration, sign – 40 000-50 000 dollars
– Staffing: 3 shifts of 10-15 people.
The total amount of initial investment – $100 000 – $120 000. The capital will be obtained through Bank of America commercial loans.
Next it is necessary to assume the future profits and to calculate the approximate payback period. But we must bear in mind that the calculations used hardly predictable factors as: the planned sales volume, cost, and many others, to develop a strategic plan and analysis of the effectiveness of the project used a scenario approach.
We assume the amount of cash flow each month during the year according to the average rates of similar Starbucks cafes in other cities. The net cash flow will be approximately 10,000 (Pic 1) and so can assume the payback period of about 2 years. We must acknowledge that this business is quite profitable in the current financial conditions.
