Remember the adage, “Location, location, location?” Starbucks forgot this gem. Starbucks was so determined to meet its growth promises to Wall Street that it relaxed its standards for selecting new store locations.
In some cases, brokers say, Starbucks misjudged the risks of putting stores close to each other, leading to the decline in same-store sales that the company started reporting for the first time in its history this year.
It also overextended itself in certain regions, like in the South and in Southern California, which are among the hardest hit by the housing crisis, and whose older demographics and hot weather are not generally conducive to creating long lines of customers eager to pay $4 for foam-top lattes.
“The economy exposed all the flaws in their thinking,” said one commercial real estate broker, who, like some others interviewed for this article, did not want to be named in order to preserve his relationship with the company.
That “flaws” and “Starbucks” are even in the same sentence when it comes to commercial real estate is a reversal for the company. For much of the last 15 years, Starbucks commercial real estate executives were known for their rigor in selecting locations.
In evaluating locations, Starbucks looked past commonly used community demographic information to analyze nitty-gritty specifics, like the education level in various neighborhoods. It also studied traffic flow on both sides of each street, to make sure drivers could make an easy right turn for their java fix on their way to the office.
“Starbucks rewrote the book on expansion and how to grow multiple store units, really in the world,” said Craig Sweitzer, founder of Urban Works Real Estate in Portland, Ore., who has worked with Starbucks for 18 years. “No one had ever done that before, and now everyone copies them.”
Not so fast all you “copy cats”
Extra point…now that Starbucks has raised the bar for what is accepted as a good cup of Joe everyone can attack the seattle boys! I would like to thank “wheretonext2 for this telling icon!