company summary
Starbucks Coffee, sometimes called Fourbucks Coffee is the largest coffee shop chain in the world. It opened its first store in 1971 in Seattle's waterfront Pike Place Market, three partners: Jerry Baldwin, Zev Siegel and Gordon Bowker to sell high quality coffee and equipment. In 1982, Howard Schultz, the current president and chief executive joined the company as director of marketing. He was impressed by the popularity of espresso bars in Italy after he traveled to Milan 1983rd Back in the U.S., he is convinced the founders of Starbucks to sell coffee and espresso drinks. However, the idea was rejected, so he left the company and founded the Il Giornale coffee bar chain in 1985. In 1987 Howard Schultz and Il Giornale bought Starbucks with a $ 3.8 million and renamed Il Giornale coffee at Starbucks and turned it into a Starbucks know danas.Tvrtka went public with the symbol Sbux at 26 June 1992 at $ 17/share with 140 stores. Since then the stock divided by 5 times. Since May 2008 Sbux traded at around $ 16, down from the high $ 39.43 in November 2006.
Starbucks opened its first overseas store in Tokyo, Japan 1996.Tvrtka currently has about 16,000 stores and employs 172 000 partners, otherwise known as the staff in September 2007 in 44 countries. This is the annual sales of more than $ 10B to the latest quarterly revenue to be $ 2.526B. About 85% of revenue comes from Starbucks company operated stores.
Starbucks does not franchise operations and has no plans for a concession in the foreseeable future. In North America, most stores are company operated. May you see a Starbucks in Target stores, major supermarkets, university campuses, hospitals, and airports. These stores are operated under licensing agreements to ensure access to property that would otherwise be unavailable. Starbucks receives license fees and compensation from these licensed places. At these locations, licensed small, workers are considered employees of that particular retailer, not Starbucks. Since 2008 the company operated 7087 stores and 4081 licensed stores in the United States. Internationally, in 1796 the company has stores in 2792 and joint-venture or licensed stores in 43 foreign countries. Expansion rate slows down as the company plans to open a 1020 U.S. trade in 2008, fewer than 400 stores in 2009, a series of 1800 stores in2007. In addition, it also plans to close 100 stores in 2008.
The risks of real estate investors
Starbucks Coffee facilities remain a popular investment for many investors. When you consider investing in real estate occupied by Starbucks, you must understand the following risks of investing:
- sensitivity of the recession: the hungry man can not survive with a Big Mac and fries, but I can not live without four-buck Frappuccino. This means that Starbucks is very sensitive to the economy as seen in the fall of 2007 and 2008 compared to Burger King and McDonald's. This may be the main reason for the sale of stores in the U.S. open at least a year are expected mid-single digit percentage decline, the first decline ever. It activates Howard Schultz to return to the CEO post.Tvrtka plans to double its marketing spending to $ 100 million in 2008 to drum up sales. It began an aggressive campaign offering coupons for free drinks every Wednesday until 28 May 2008. This may be a sign of desperation. On the 22nd Starbucks in April 2008 reduced the prospects for the year citing the weak economy.
- calories and sugar: Starbucks drinks have more sugar and calories in which consumers are increasingly concerned about the explosion of obesity and diabetes epidemic in the United States. For example, his Strawberries & Creme Frappuccino ® Blended Crème - whip is 120 grams (over 1 / 4 lb) sugar and 750 calories per 24 ounce Venti size. If this becomes a trend that consumers opt to reduce the sugar drink, or put on low-carb diet then you will have an impact on Starbucks revenue.
- competition: McDonald's, Wendy and Dunkin Donuts are now offering espresso at lower prices to compete with Starbucks. They will capture some revenue from Starbucks, especially from the cost conscious kupaca.Tekuće Starbucks prices are already quite high. It is very difficult for Starbucks to raise prices in the near future without affecting traffic in its stores
- high-cost business model: while Starbucks profit margin is high as it pays an average of $ 1.42 per pound for unroasted coffee, your business is very labor intensive as well as any other food companies. It takes between 10-20 employees to run a store. All eligible part-time to full-time partners in the U.S. and Canada to receive the compensation package consisting of a stock option plan, 401k with company match, medical, dental and vision coverage. Starbucks has been chosen as the 7-th best company to work in the United States in 2008 by employees of Fortune Magazine's survey. What is good for the employees can not be good for employers. These benefits are usually available only to key employees or managers in the restaurant industry. Historically, the costs of health increase faster than inflation. In the long run, may have a negative impact on Starbucks bottom line. If Starbucks does not perform well, it may be under pressure as a public company to close more stores.
- special purpose building: Starbucks freestanding building special purpose building designed specifically for Starbucks. If you choose not to Starbucks to close or not renew the lease, it is difficult to re-lease the property. There are several tenants out there willing to pay high rents as Starbucks. It is difficult to use it as a fast food restaurant, because of the relatively small sizes. In addition, no commercial kitchen. After leaving Starbucks, the value of the property will most likely go down.
Starbucks Real Estate Operations
Starbucks divides the U.S. and Canada in 17 real estate territory, each office has its own trade development for developing markets for its teritoriju.Programeri constructed freestanding building with approximately 1800 SF drive in a location with high visibility, heavy traffic. After the site was approved by the territory office, Starbucks typically signs 10 years NNN lease with two five years options in which landowners are responsible for roof and structure. All leases typically have a corporate guarantee, which means Starbucks will continue to pay rent in case you must close trgovine.Najam often 10% rent increase every 5 godina.Najam between $ 1.65/SF in the store in Utah to $ 5.84/SF in New York . This rent study is based on rents at the Starbucks just 30 properties, 18 of them are free standing, the market for sale through the U.S. since April 2008.
Starbucks site with minimal opportunities Store Closing
During difficult times, for example, in 2008, when sales decline Starbucks will try to reduce costs and closing weak stores. As a real estate investor considers investing in building Starbucks, do not want to invest in assets that will be closed in the future.
Place ------ 1mile------3miles-------AHI/yr-----Size (SF )---- base rent / year --- Rent / SF / mo - ----- Price Cap (%)
Ohio ............... 296 ........ 2609 .........$ 88,375 .... 1613 ......... $ 58,590 ........... $ 3.03 ..........$ 868K ....... 6.75
Table 1: Rental comparables for free-standing Starbucks building
Place ------ Sbux rent / yr --- Size --- Sbux Sbux rent / SF / month --- Other tenant Size---Rent/SF/mo---Difference
California .......$ 30,096 ........ SF 1248 .....$ 2.01 ........................ 1245 SF .................$ 2.50 .............- 19%
Kansas ..........$ 43,200 ........ SF 1600 ....$ 2.25 ....................... .. SF 1600 ..................$ 1.33 ............. 68%
Utah ...............$ 38,568 ........ SF 1950 .....$ 1.65 ................. ........ 1200 SF .................$ 1.86 ............- 11%
New Mexico .. $ 92,004 ......... SF 2000 ....$ 3.83 ......................... 2500 SF .. ...............$ 1.92 ............ 100%
New York .......$ 125,004 ...... SF 1785 ....$ 5.84 ......................... SF 2819 ..................$ 2.75 ............ 112%
Table 2: Rent Difference in Multi-tenant Starbucks Retail Center
of Starbucks does not release sales for a particular location, you just need to make an educated guess. Based on annual revenue and number of stored manages Starbucks, the average annual revenue per store is about $ 1M. In addition, if the annual rental income ratio is less than 10% is a good chance the place is profitable. For example, if the base rent for the Starbucks in Ohio is $ 58,590 and annual income must be more than $ 585,590. Besides picking a shop in a good place (see article entitled "What" Location "Means in Commercial Real Estate" by this author), a cap rate that you should consider the following:
- densely populated area: more people means more customer size, and thus more prihoda.Starbucks in FL, GA, and TX in Table 1 are more promising. Note: The author tries to be sensitive by not revealing the exact location.
- Low-rent: Starbucks in MS paid $ 112,184 for base rent. In order to be reasonably cost-effective to have an annual income of $ 1.12m. However, since there are only 188 people within 1 mile and 4923 the population within a 3 km radius of the shop, it is less likely to store achieves all that revenue. Besides Starbucks pays $ 5.15/SF, which is very high as compared to only $ 3.52/SF in a fast growing, high income, densely populated in the GA, where there are 57,201 residents within 3 km radius and average household income (AHI) over $ 143K / year. It is difficult to understand how Starbucks in MS could be an irreplaceable position in the field with only 188 people within a 1 mile radius of the property! While offering a maximum 7.2% cap, this property appears to be a good investment, but it's actually the greatest risk of poor and could be closed down in the future. Alternatively, Starbucks would attempt to renegotiate the lease with low rent in difficult times. While Starbucks has not asked for a rent reduction is still not surprised if Starbucks would do to improve your bottom line in the future. In any case, the value will go down.
- Lease premium: while the majority of Starbucks detached property which occupies 100%, you might see a Starbucks in a small multi-unit strip center with several other tenants. This usually takes the end of a drive through and so are expected to pay a premium compared to neighboring units. However, most of the time Starbucks pays a much higher rent. For example, in Table 2 are worth $ 5.84/SF compared to only $ 2.75/SF is a tenant in the unit next door to the center in New York or 112% more. The center lane should rent for a unit occupied by Starbucks to be reduced (due to the closure or lease negotiations) value of the center will be significantly reduced. You certainly do not want to invest in this property.
Land: the people who invest in raw land often hope to buy agricultural land near commercially-zoned land at a few thousand dollars per acre. You should consider invest in land if youIf one of your investment objectives is to get high cash flow, you may want to stay away from apartments. In general, apartments are easy to buy and harder to sell. Special Purpose Properties: These are properties designed for a specific business, e.g. restaurants, gas stations, and hotels/motels.The restaurant operators sell the real estate to investors higher cap rate and lease back the property for 20 years. They in turn use the sale proceeds to expand their business by building more restaurants. 
The single net lease assigns the real estate tax expense to the tenant. The triple net lease, or NNN lease, has the tenant cover the real estate taxes, insurance costs and maintenance fees in addition to the rent. A bondable lease is also called an absolute NNN lease or the very scary "hell or high water lease." 
Understanding the seller's motives can be a powerful negotiating tool.
With many business loan borrowers, banks have already declined their loan application. 
