Starbucks. Franchising

Ural Federal University named after the first President of Russia B.N.Yeltsin 
 
 
 

The report                                                                  on a theme: « Starbucks. Franchising» 
 

                                                                                  

Student: Sokolov M.M.

                                                                                   Teacher: Yazovskih E. V. 
 

Ekaterinburg 2010 

Content

1. Introduction ……………………………………………………………………………………………………………………… 3
2. Theory

Franchising   4

1. Concept of a franchising …………………………………………………………………………………… 5
2. History of franchising………………………………………………………………………………….…….6-7
3. Franchising in Russia…………………………………………………………………………………….……...8
4. Advantages for franchisors…………………………………………………………………..……………9
5. Benefits for franchisees…………………………………………………….………………………………10
6. Disadvantages of franchising..………………………………………………………….……………..11
3. Practice

Starbucks Corporation…………………..………………..………………………………………………….………….12

1. History..........................................................................................................................13
2. Sale and expansion…………………………………………………………………………….……………….14
3. International expansion …15-17
4. Corporate governance 18
5. Resent changes 19-20
6. Activity indicators 21
7. Starbucks in Russia……………………………………………………………………………………………..21
4. The conclusion 22
5. Appendix 23-24
6. Literature 25

 
 
 
 
 

      2

Introduction

My work on a theme the Franchise.

The purpose of my work to learn that such at a franchising and to look as it works on a firm example Starbucks. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Franchising

Franchising — the developed form of licensing at which one party (franchiser) gives to other party the paid right to act on its own behalf, using trade marks and-or franchiser brands.

Franchising— a method of duplicating of successful small enterprises.

Filip Kotler allocates following signs of a franchisee:

1. The franchiser receives deductions for use of the trade mark;
2. franchisee pays an initial installment for the right to become a system part;
3. The franchiser gives franchisee business dealing system.

 
 
 
 
 
 
 
 
 
 
 

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Concept of a franchisee

In a general sense, the  franchising is "rent" of a trade mark. franchisee use is regulated by the agreement between the franchiser and franchisee. The agreement maintenance can be variously, from simple, to very difficult, containing the smallest details of use of a trade mark. As a rule, in the agreement the sum of deductions for franchisee using is regulated. The requirement of deductions can and be absent, but in that case, franchisee undertakes to buy from the franchiser n quantity of the goods/works/services. 

As separate point of contracts conditions of use of a commodity sign/brand can serve. These requirements can be as very simple (for example franchisee can use a brand in certain industry), and rigid (for example, franchisee undertakes to use the equipment in shop in exact conformity with franchiser requirements, from the sizes and color of shelves to a personnel uniform) 
 
 
 
 
 
 
 

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History of Franchising

The first prototype of the modern franchise system is considered to be the system of selling and servicing sewing machines Singer. The founder of the world famous company «Singer Sewing machine company» Isaac Singer was the progenitor of modern franchising. Beginning in 1851, the firm Singer concluded with distributors of the goods a written agreement on the transfer of a franchise agreement transferred the right to sell and repair of sewing machines in a certain area of the United States.

At the time of organizing the world's first full-fledged franchise system firm Singer had a mass scale production of sewing machines in order to maintain the most competitive prices, but the Singer company had no established system of serviceThat would organize the maintenance and repair of machines throughout the United States. In this regard, and was established franchise system that provides financial and independent firms exclusive rights to sell and service sewing machines in a certain area. These are the first franchise, in essence, been operating a distribution agreement with the additional responsibilities of the franchise (dealer) to service the machine.

Modern franchising has experienced a real upturn in 1898, when the company "General Motors has adopted a franchise dealership.

In the 20s of last century in the United States began to develop a standard trademark franchising. According to the principle of franchising began to build its relationship with the owners of retail stores larger wholesale suppliers. Wholesaler (or franchisor) enabled the small retail trade organizations receive many additional discounts, use the stamp trading firm and still maintain their independence.                                           6

After the crisis in the U.S. economy in 1930 franchising began to explore the oil companies. Thus appeared the first gas station network, owned by independent franchisees. Typically, gas stations were transferred to small local entrepreneurs on lease terms.

Classic trademark franchising, distributing in the franchisor - franchisee goods and services began to evolve only in the 50s of last century.

In 1945, Ray Kroc, the future founder of McDonald's, became interested in the reasons of popularity of a small restaurant in San Bernardino in the West, U.S.. As a result, he appealed to owners of successful restaurants, and soon received a license to purchase the same restaurants. In 1955, Ray Kroc founded McDonald's System, Inc. Which is the ancestor of the franchising business format (Business Format Franchisings), that is franchising in its modern form, when coupled with the franchise transferred to a whole system of doing business. 
 
 
 
 
 
 
 
 

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Franchising in Russia: the commercial concession agreement

 

In Russian law relationships are governed by franchise agreement franchise.

Under the contract of franchise, one party (owner) shall provide the other party (the user) fee for a period or without specifying the period the right to use business complex user-owned holder of exclusive rightsIncluding the right to trademark, service mark, as well as rights to other facilities provided by the contract of exclusive rights, in particular to a commercial designation, production secrets (know-how).

Commercial concession agreement provides for the use of a complex of exclusive rights, reputation and experience of commercial rights holder to a certain extent (in particular, with the establishment of minimum and (or) the maximum amount of use)With or without the use of territory in relation to a particular area of business (sales of goods received from the copyright holder or produced by the user, the implementation of other trading activities, works and services).

Parties to the contract of commercial concession can be found in business organizations and citizens who are registered as individual entrepreneurs. 
 
 
 
 

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Advantages for franchisors  

For the franchisor, the priority benefit of franchising is that it gets a small, but guaranteed, steady sales of its products, as well as the franchisee must buy from him certain consignment contract, supplies or other products / services. If the income is stable, it can successfully plan for the future, and hence to develop new directions.

In all of this, the franchisor is not burdened by difficulties associated with a number of costs that are in ordinary players - training and recruitment, quality control and so on. 
 
 
 
 
 
 
 
 
 
 

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Benefits for Franchisees

1. For franchisees, the priority benefit of franchising is that it immediately gets "promoted" by well-known brand business is ready to immediately generate an income.
2. Typically, the franchisee gets the products / services from the franchisor at the lowest possible price, and thus he can dictate the rules of the game on the market in its region.
3. Franchisee not burdened with difficulties related to the cost of "promotion" of the new brand, which could take years and large sums.
4. Participation in the overall advertising.

 
 
 
 
 
 
 
 
 
 
 

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Disadvantages of franchising 

1. Franchisee must follow the rules and limitations set out the franchisor, even if they do not bring the maximum benefit business.

 

2. Franchisee often obliged to procure raw materials and products from suppliers designated by the franchisor, which may limit their access to the free market and force to buy raw materials and products at inflated prices.

 

3. For the franchisee can be set tight restrictions on exit from the business, including a ban on opening of competing organizations for a specified period or for a certain territory.

 

4. Franchisee can rarely affect the central questions of marketing and advertising, but it may be forced to pay for a centralized marketing and advertising campaigns. Thus, their funds could be used not in their best interest.

 
 
 
 
 

                                          11

Starbucks Corporation 

Starbucks Corporation is an international coffee and coffeehouse chain based in Seattle Washington.

Starbucks is the largest coffeehouse company in the world, with over 17,000 stores in 49 countries, including over 11,000 in the United States, nearly 1,000 in Canada and more than 800 in Japan.

Starbucks sells drip brewed coffee, espresso-based hot drinks, other hot and cold drinks, coffee beans, salads, hot and cold sandwiches and panini, pastries, snacks, and items such as mugs and tumblers.

Through the Starbucks Entertainment division and Hear Music brand, the company also markets books, music, and film. Many of the company's products are seasonal or specific to the locality of the store. Starbucks-brand ice cream and coffee are also offered at grocery stores.

From Starbucks' founding in later forms in Seattle as a local coffee bean roaster and retailer, the company has expanded rapidly. In the 1990s, Starbucks was opening a new store every workday, a pace that continued into the 2000s. The first store outside the United States or Canada opened in the mid-'90s, and overseas stores now constitute almost one third of Starbucks' stores. The company planned to open a net of 900 new stores outside of the United States in 2009, but has announced 900 store closures in the United States since 2008.

Starbucks has been a target of protests on issues such as fair-trade policies, labor relations, environmental impact, political views, and anti-competitive practices. 
 
 
 
 
 

                        12

History

The first Starbucks was opened in Seattle, Washington, on March 30, 1971 by three partners: English teacher Jerry Baldwin, history teacher Zev Siegl, and writer Gordon Bowker. The three were inspired by entrepreneur Alfred Peet (whom they knew personally) to sell high-quality coffee beans and equipment. The name is taken from Moby-Dick; after Pequod was rejected by one of the co-founders, the company was named for the first mate on the Pequod, Starbuck.

From 1971–1976, the first Starbucks was at 2000 Western Avenue; it then was relocated to 1912 Pike Place, where it remains to this day. During their first year of operation, they purchased green coffee beans from Peet's, then began buying directly from growers.

Entrepreneur Howard Schultz joined the company in 1982 as Director of Retail Operations and Marketing, and after a trip to Milan, Italy advised that the company should sell coffee and espresso drinks as well as beans. The owners rejected this idea, believing that getting into the beverage business would distract the company from its primary focus. To them, coffee was something to be prepared in the home, but they did give away free samples of pre-made drinks. Certain that there was money to be made selling pre-made drinks, Schultz started the Il Giornale coffee bar chain in April 1986.

In 1984, the original owners of Starbucks, led by Baldwin, took the opportunity to purchase Peet's (Baldwin still works there). 
 
 
 
 
 
 
 

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Sale and expansion 

In 1987, they sold the Starbucks chain to Schultz's Il Giornale, which rebranded the Il Giornale outlets as Starbucks and quickly began to expand. Starbucks opened its first locations outside Seattle at Waterfront Station in Vancouver, British Columbia, and Chicago, Illinois, that same year. At the time of its initial public offering on the stock market in 1992, Starbucks had grown to 165 outlets. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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International expansion 

Currently Starbucks is present in more than 55 countries. 

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The first Starbucks location outside North America opened in Tokyo, Japan, in 1996. Starbucks entered the U.K. market in 1998 with the $83 million acquisition of the then 60-outlet, UK-based Seattle Coffee Company, re-branding all the stores as Starbucks.

In April 2003, Starbucks completed the purchase of Seattle's Best Coffee and Torrefazione Italia from AFC Enterprises, bringing the total number of Starbucks-operated locations worldwide to more than 6,400. On September 14, 2006, rival Diedrich Coffee announced that it would sell most of its company-owned retail stores to Starbucks. This sale includes the company-owned locations of the Oregon-based Coffee People chain. Starbucks converted the Diedrich Coffee and Coffee People locations to Starbucks, although the Portland airport Coffee People locations were excluded from the sale.

Many bookstores have Starbucks outlets within them, including Barnes & Noble in the United States, Chapters-Indigo in Canada, Livraria Saraiva and Fnac in Brazil and B2S in Thailand.

The Starbucks location in the former imperial palace in Beijing closed in July 2007. The coffee shop had been a source of ongoing controversy since its opening in 2000 with protesters objecting that the presence of the American chain in this location "was trampling on Chinese culture. Also in 2007, Starbucks cancelled plans to expand into India, but opened its first store in Russia, ten years after first registering a trademark there. In 2008, Starbucks continued its expansion, settling in Argentina, Bulgaria, the Czech Republic and Portugal. In Buenos Aires, the biggest Starbucks store in Latin America was opened. In April 2009, Starbucks entered Poland. New stores will be opened in Algeria. Starbucks has also opened its doors on 5 August 2009, in Utrecht, Netherlands. On October 21, 2009 it was announced that Starbucks will finally establish in Sweden, starting with a location at Arlanda airport outside Stockholm. On June 16, 2010 Starbucks opened its first store in Budapest, Hungary.

In May 2010, Southern Sun Hotels South Africa announced that they had signed an agreement with Starbucks that would enable them to brew Starbucks coffees in select Southern Sun and Tsonga Sun hotels in South Africa. The agreement was partially reached in order for Starbucks coffees to be served in the country in time for the commencement of the 2010 FIFA World Cup hosted by South Africa.       16

Starbucks is planning to open its third African location, after Egypt and South Africa, in Algeria. A partnership with Algerian food company Cevital will see Starbucks open its first Algerian store in Algiers. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

                        17

Corporate governance 

Orin C. Smith was President and CEO of Starbucks from 2001 to 2005.

Starbucks' chairman, Howard Schultz, has talked about making sure growth does not dilute the company's culture and the common goal of the company's leadership to act like a small company.

In January 2008, Chairman Howard Schultz resumed his roles as President and CEO after an eight year hiatus, replacing Jim Donald, who took the posts in 2005 but was asked to step down after sales slowed in 2007. Schultz aims to restore what he calls the "distinctive Starbucks experience" in the face of rapid expansion. Analysts believe that Schultz must determine how to contend with higher materials prices and enhanced competition from lower-price fast food chains, including McDonald's and Dunkin' Donuts. Starbucks announced it will discontinue its warm breakfast sandwich products, originally intended to launch nationwide in 2008, in order to refocus the brand on coffee, but the sandwiches were reformulated to deal with complaints and the product line stayed. On February 23, 2008, Starbucks closed its stores from 5:30-9:00 p.m. local time to train its baristas. 
 
 
 
 
 
 
 
 
 

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Recent changes 

In March 2008, Schultz made several announcements to Starbucks shareholders. Schultz introduced Starbucks' "state of the art espresso system", the Thermoplan AG manufactured Mastrena, which replaced their previous superauto, the Thermoplan Verismo 801 (known internationally as the Thermoplan Black & White). Starbucks also announced that the company hopes to enter the energy drink market. Pre-ground beans will no longer be used, so that the grinding of whole bean coffee will "bring aroma, romance and theater" to American stores. The company also announced the acquisition of The Coffee Equipment Company, the manufacturer of the Clover Brewing System. They are currently test marketing this "fresh-pressed" coffee system at six Starbucks locations; three in Seattle, and three in Boston.

Starbucks stopped using milk originating from rBGH-treated cows in 2007.

In early 2008, Starbucks started a community website, My Starbucks Idea, designed to collect suggestions and feedback from customers. Other users comment and vote on suggestions. Journalist Jack Schofield noted that "My Starbucks seems to be all sweetness and light at the moment, which I don't think is possible without quite a lot of censorship". The website is powered by the Salesforce software.

In May 2008, a loyalty program was introduced for registered users of the Starbucks Card (previously simply a gift card) offering perks such as free Wi-Fi Internet access, no charge for soy milk & flavored syrups, and free refills on brewed drip coffee. Free Wi-Fi Internet access varies in different regions. US & Canadian card holders can access 2 hours of Internet access through AT&T in the United States and through Bell Canada within Canada. In Germany customers can get 1 hour of free Wi-Fi with a voucher card, and in Switzerland and Austria customers can get 30 minutes the same way (through T-Mobile).In June 2009, the company announced that it will be overhauling its menu and selling salads and baked goods without high-fructose corn syrup or artificial ingredients. The move is expected to attract health- and cost-conscious consumers and will not affect prices. At least three stores in Seattle were "debranded" to remove the logo and brand name, and remodel the stores as local                                                               19

coffee houses "inspired by Starbucks."The first, 15th Avenue Coffee and Tea, opened in July on Capitol Hill after Starbucks employees visited local coffee houses to look around. It serves wine and beer, and plans to host live music and poetry readings. The practice has been criticized as "local-washing", similar to greenwashing.

In September 2009, Starbucks in the UK rolled out free Wi-Fi at most of its outlets, working with its Wi-Fi partner BT Openzone. Customers with a Starbucks Card will be able to log-on to the Wi-Fi in-store for free with their card details, thereby bringing the benefits of the loyalty program in-line with the United States.

Beginning in July 2010, Starbucks plans to offer free Wi-Fi in all of its US stores via AT&T and information through a partnership with Yahoo!. This is an effort to be more competitive against local chains, which have long offered free Wi-Fi, and against McDonald's, which begin offering free wireless internet access in 2010.

On June 30, 2010, Starbucks announced it would begin to offer unlimited and free Internet access via Wi-Fi to customers in all company-owned locations across Canada starting on July 1, 2010.

A store in Seattle known for its use of the corporation's new ideas will reopen in the fall of 2010 with modifications to the interior decorating and the addition of wine from Pacific Northwest vineyards. The espresso machines will be in the middle of the store to create what Starbucks calls a "coffee theater". 
 
 
 
 
 
 
 
 

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Activity indicators 

Number of the personnel in 2009 —  176 thousand persons. The network revenue for the fiscal year which has ended in 2007, has constituted $9,41 billion, net profit — $672,64 million 
 

Starbucks in Russia

Starbucks has repeatedly expressed a desire to enter the booming Russian market. But in 2004, Starbucks trademark registered by the Russian company Starbucks, which has no relation to the American corporation. Later, the Chamber of Patent Disputes deprived LLC Starbucks rights to the brand on the complaint of American network.

In September 2007, opened its first coffee shop chain in Russia - in the shopping center "Mega - Khimki. After this was discovered a number of stores in Moscow: Stary Arbat Street, an office complex at Tower Wharf, Sheremetyevo-2, etc. In October 2010, the capital of Russia operated 37 stores Starbucks. It is planned that in St. Petersburg first coffeehouse network starting at TRC "Summer", which is based on Pulkovo Highway. 
 
 
 

21

The conclusion 

At the moment a franchising is extended worldwide.

Also is in great demand.

It is used by such companies: Subway, MiniMarkets, Servo-Pro, Jani-King, Dunkin Donuts, H&R Block, Supercuts, Hampton Inns & Suites, 7-Eleven Inc., McDonald's. 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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Appendix 

 
 
 
 
 

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Literature 

http://ru.wikipedia.org/wiki/Starbucks

http://wikipedia.org/wiki/Starbucks 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

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