Starbucks Global Operations Strategy and Franchise Control

Introduction: Starbucks as a Global Brand

Starbucks is a global quick service provider — one of the largest in the world, and the largest with a coffee focus. According to the company's latest annual report, it operates just over 23,000 stores globally, around 53% of which are company-owned. The rest are franchised. The franchise business model is utilized in many of the company's major markets and has been a feature of some of its major international expansion efforts, particularly in Asia. Franchising, however, complicates some of the company's international operations, as Starbucks seeks to deliver a consistent brand experience across all stores anywhere in the world.

This paper examines the extent to which Starbucks centralizes aspects of its international operations, and the steps it takes to ensure a high level of consistency in its operations no matter where in the world a store is located — or whether that store is company- or franchise-owned.

As with most major global brands, much of how Starbucks competes rests on the differentiation that its brand offers. The Starbucks brand is one of the most valuable in the world (Interbrand 2015). The brand conveys a promise to consumers, and that promise holds significant value in the marketplace. It is a lifestyle promise that goes beyond coffee — one that each and every store must deliver, making operations an essential element of the brand promise (Leifer 2015).

Operations Strategy Formulation

Whether a store is owned by the company or by a franchisee, there are specific elements that it must possess. This is part of the strategy formulation, but so too is the idea that whatever ownership or management structure a store has, the company must have means by which consistency in the store experience can be achieved. Starbucks has always held the view that the Starbucks experience is a critical component of the brand, and that the brand has significant value to offer the consumer (Michelli 2009).

The base strategy is to offer a consistent, premium experience. Coffee is just one aspect of that experience — a comfortable setting and a high level of service are equally critical elements. Coffee is priced at a premium, and part of the justification for that pricing is that customers pay for the totality of the experience. Maintaining a high level of consistency around the world is another critical element of the overall operations strategy. Franchisees are expected to be indistinguishable from company-owned stores in terms of their execution of the Starbucks vision, and the company employs a number of different approaches to ensure this.

Operations Strategy Implementation

Having a vision to deliver a consistent experience anywhere in the world is one thing; executing on that vision is another. Several distinct elements shape this execution. First, it is understood that a higher degree of control exists with company-owned stores. Yet it is also understood that on many levels — especially with respect to human resources and supplier relationships — local expertise is important. As a result, most international operations involve a mix of franchisees, and new country launches are typically conducted via franchise partnerships. Starbucks seeks out partners with high levels of experience in their respective nations as a means of ensuring strong execution in these areas. This is the model the company used to enter Japan, and it enjoyed considerable success. More recently, Starbucks partnered with the Tata conglomerate to enter the Indian market (Malviya 2016), capitalizing on that company's operational expertise in India to ensure that intercultural issues were avoided.

Once the company gains sufficient operational expertise, it typically buys back franchises in those nations. Within the past few years, it has made major buybacks of franchises in both Japan and China (Galani 2014). Ultimately, such buyouts are about control, but they are also part of the company's strategy to ensure a high level of consistency — something that is easier to achieve through direct ownership once the company develops a reasonable level of competency at operating in a given country.

Another element of strategy implementation is the range of training programs offered. These programs allow employees at all levels, as well as franchisees, to fully understand the Starbucks Experience and how to create that experience in their stores. One of the key focal points of training for customer-facing staff is that the company sells an experience, not just a product; accordingly, staff must adhere to particular standards of customer service (West, no date). By articulating what this experience entails, Starbucks provides a blueprint for customer interactions that can be translated to any market. Since the objective is a standardized experience, there is little need for local customization.

One of the major challenges the company has faced is maintaining its ability to implement effectively during periods of high growth. Rapid growth stretches supply chains thin and makes training more difficult as the average tenure of employees declines. The company has at times had to slow the pace of growth in certain areas to ensure effective implementation of its strategic mission with respect to daily store-level operations (Gibbons 2011).

Conclusion

Operating a global franchise is difficult when standardization is the expectation. There are no shortcuts to ensuring that the Starbucks experience is the same in Dubai as it is in Denver. The company has developed strong relationships with suppliers and its largest franchisees, and has built a system that all partners must wholly buy into. Adherence to the system is the most important component of franchise success, given the central role that performance standards play in the Starbucks model. The Starbucks brand derives its value from a specific promise regarding the quality of both goods and service, and therefore strict standards for both flow from head office.

These standards are backed by the company's strong bargaining power, the legal weight of contractual obligations, and a series of measures designed to monitor and control performance. Starbucks has been effective at maintaining consistent global standards, largely because of the emphasis it places on ensuring that suppliers and systems are oriented toward meeting the company's exacting specifications.

Enderson, L 2016, 'How to be a Starbucks mystery shopper,' eHow. Available from [5 July 2016].

Galani, U 2014, 'No froth in Starbucks' buyout in Japan,' New York Times. Available from http://dealbook.nytimes.com/2014/09/24/no-froth-in-starbucks-buyout-in-japan/?_r=0 [5 July 2016].

Gibbons, P 2011, 'Notes from the field: Transforming the Starbucks experience,' Journal of Enterprise Transformation, vol. 1, no. 1, pp. 7–13.

Interbrand 2015, 'Rankings,' Interbrand. Available from [5 July 2016].

Jones, A 2014, 'Must-know: Starbucks' key value metrics — same store sales,' Market Realist. Available from http://marketrealist.com/2014/08/must-know-starbucks-key-value-metrics-store-sales/ [5 July 2016].

Leifer, K 2015, 'The best brand promise examples we've seen,' ICC Decision Services. Available from [5 July 2016].

Malviya, S 2016, 'Starbucks extends Tata partnership beyond India,' Economic Times. Available from http://economictimes.indiatimes.com/industry/cons-products/food/starbucks-extends-tata-partnership-beyond-india/articleshow/52933742.cms [5 July 2016].

Michelli, J 2009, 'The Starbucks experience: Leadership tips ebook,' Joseph Michelli. Available from http://www.josephmichelli.com/pdf/ebook_starbucks.pdf [5 July 2016].

Starbucks 2015, Form 10-K. Available from [5 July 2016].

West, K no date, 'The customer experience = Spotlight on Starbucks,' National Business Research Institute. Available from https://www.nbrii.com/blog/the-customer-experience-starbucks/ [5 July 2016].