Franchising has been part of the growth strategy for almost every restaurant chain in the world, including McDonald’s, Dunkin’ Donuts, Subway, and KFC.
When companies franchise, outside operators pay to independently build, open, and run chain restaurant locations. In return, the company gives operators, or franchisees, a cut of the profits.
Franchising allows chains to open more locations, faster and with fewer costs for the company. It’s a system that has allowed McDonald’s to open more than 36,000 locations and Subway to open more than 44,000 restaurants worldwide.
However, despite having more than 24,000 locations worldwide, Starbucks has refused to franchise its standalone stores.
“We don’t franchise our stores,” Starbucks CEO Howard Schultz said in a WNYC interview on Tuesday. “So much of what we’ve succeeded in is based on the values and culture of the company, and I never believed we could do that in the franchise system where the people weren’t working for the company.”
In his book 1997 book “Pour Your Heart Into It,” Schultz described in more detail why he’s opposed to franchising, admitting he wants to maintain a “fanatical” level of control over his stores.
“To me, franchisees are middlemen who would stand between us and our customer… If we had franchised [as some executives wanted to in the 1980s], Starbucks would have lost the common culture that made us strong. We teach baristas not only how to handle the coffee properly but also how to impart to customers out passion for our products. They understand the vision and value system of the company, which is seldom the case when someone else’s employees are serving Starbucks coffee.”
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“Many people assume Starbucks is a franchise operation because we are growing so quickly and are present in so many markets,” Schultz wrote in his book. “We receive hundreds of calls a month from people who want to open a Starbucks franchise… We turn them all down.”
There are a few loopholes in Starbucks’ anti-franchise stance.
Beginning in 1991, Starbucks began allowing Host Marriott to open and operate Starbucks locations in airports. This eventually led to another loophole: licensed stores in locations such as hospitals, colleges, and grocery stores. Today, roughly 5,100 of Starbucks’ 12,800 locations in the US are licensed.
As Starbucks has expanded internationally, the coffee giant has worked with other companies and individuals that have become licensed partners in the business.
Only about one in five Starbucks in Europe, the Middle East, and Africa are company-run. In Asia, Starbucks’ current top region of growth, a little less than half are company-operated.