Does Starbucks Need More Caffeine to Stimulate Sales?
Starbucks recently announced that it would shutter 600 of its more than 7,000 stores (8%) nationwide, shedding up to 12,000 full and part-time jobs. The price of this stock reached a new 52-week low of $15.62 on July 1st.
Many people believe that Starbucks opened shops too close to each other. The company reported that seventy percent of the stores affected are less than three years old.
The company has yet to disclose which stores will close.
There is no doubt recession fears have not helped the company, but I believe Starbucks' decision to close stores has more to do with competitive pressures other than just the economy.
Getting rid of stores that were cannibalizing each other is a good financial move but they may need more to prevent things from going bad to worse.
Troubles at Starbucks come at a time that Dunkin' Donuts has been aggressively expanding and McDonald's has introduced low-cost premium coffee.
See the Let's Talk Franchising post on: Franchise coffee sales need some perking
Coffee Wars
There is a finite number of coffee drinkers and the coffee market has become oversaturated primarily because of the Starbuck's expansion. The economy is slow, and Starbuck's coffee is little to no better than McD's. Many of those who paid the $4 for coffee when times are good are paying $2 now that time aren't so good.
Starbucks should be in a stronger position once it makes the changes it talks about. The real losers in this are the independant coffee houses that are trying to take on Starbucks, McDonald's, Dunkin' Donuts, ect., simultaneously. Yeah some have a niche or have become the primary coffee house in an area despite the competition but I know a couple of coffee shop owners who may close due to the downturn and increased competition.
Franchise Power
Starbucks, now you know the power of large franchise systems.
The biggest franchise network of all, McDonald's, has just made its first latte sips and look at the headache it has cost you. Get ready for some more sipping and shaking. Dunkin' is coming to the party too.
Alls fair..
All's fair in love and war... and business
Re: Franchise Power
Starbucks does not sell franchises
Re: Re: Franchise Power
McDonalds and Dunkin do, they are the franchises causing the headaches.