Starbucks have only just started exploring franchising in the UK, without any plans to do the same in the US. Why is now the time and the UK the place?
Starbucks have recently began franchising their stores in the UK with nine franchisees under their belt so far. Although they have licensing deals in the USA and across EMEA previously, the move into widespread franchising on the continent is a new one. But without plans to make a similar move in the USA, what is it about Europe that is making them change their minds?Firstly, it should be noted that Starbucks has previously entered into joint ventures in China with a Chinese company, and recently in India. Although their coffee shops are not franchised in the United States, licensing agreements do permit small kiosks in stores and airports. They have announced plans to expand these licenses in Europe and of the 200 planned new openings in EMEA during this fiscal year, it is estimated that approximately 75 per cent of these will be franchised branches.
Why Now?
It is no big secret that the British aren’t the biggest fans of the corporation. After Starbuck’s tax scandal which saw many boycott the chain, the corporation paid a large sum to the government as compensation. Franchisement would allow the brand to become slightly more humanized and will enable to company to open in smaller towns, such as the first franchised branch which opened in Liphook, Hampshire.
On their part, franchisement is an acknowledgment that a more flexible brand strategy is needed in Europe. In America, standardization is key: people want to know that they can pick up their same no fat soy latte in New York that they can get in Arkansas. However, Europe being a continent complicates things. Starbucks have to be able to cater to different countries, nationalities and languages; there are a multitude of different tastes and cultural approaches to selling. A different approach is needed.
Workshoppin’
Notoriously protective over their brand and image, the franchisees are expected to attend a three day workshop and training at their regional headquarters in Amsterdam to gain a better understand of what the brand is about. Expansion of the licensing agreement will allow Starbucks to put themselves directly in the line of the customer, on trains, at stations, in supermarkets and such.
The move may also have something to do with the state of the European economy. Worries rocky markets means that investors are more likely to be dipping their toes in the water, with one foot firmly on the shore. Investing in franchisement means that the corporation can spend less money in setting up new branches, but expect a predictable profit from the royalty fees paid by the franchisees.
The decision to franchise their stores could pay off for Starbucks in Europe. Not only will the brand be able to reach smaller towns and cash-in on the fact that for many they are seen as aspirational, but they will be able to do so in a way that their brand and finances are protected against a difficult European economy which is trying to rebuild itself.
Featured image courtesy of AP Monblat.
