The Starbucks Business Model

What can you learn from how Starbucks brews success?
Magazine Contributor
3 min read

This story appears in the February 2007 issue of Entrepreneur. Subscribe »

Books about Starbucks don't come in as many flavors as the company's beverages, but busy authors are closing the gap. With four titles either recently published or set to be published this spring, bookstores will carry at least eight books about the Seattle coffee chain. Each purports to reveal why Starbucks is one of the fastest-growing companies in recent years, tells you how to invest in the next Starbucks or turn your company into the next Starbucks, or simply marvels at the genius of Howard Schultz, the Starbucks chair whose own book, Pour Your Heart Into It: How Starbucks Built a Company One Cup at a Time, appeared in 1997.

What can you learn from the books? Starbucks' story is endlessly fascinating because of the unusual way the company has built a global chain and a global brand, explains Joseph Michelli, a Colorado Springs, Colorado, consultant and author of The Starbucks Experience: 5 Principles for Turning Ordinary Into Extraordinary. "Unlike McDonald's, which is a franchise, [Starbucks] retained ownership through corporate-owned locations," Michelli says. "And unlike traditional marketing where you'd use a lot of ad dollars, the brand has leveraged itself without advertising."

Brand building without huge ad spending and growth without the loss of control that franchising can bring are ideas that interest many entrepreneurs. A big dream is another one, and Michael T. Moe, CEO of ThinkEquity Partners in San Francisco and author of Finding the Next Starbucks: How to Identify and Invest in the Hot Stocks of Tomorrow, says Starbucks' early leaders were also distinguished by their exceptionally highflying entrepreneurial visions. "Aspirationally, it was always huge," he explains.

If there is one thing that everybody who studies Starbucks agrees on, it's that the company gets a large portion of its strength from the way it provides employees with a great place to work. "What Starbucks does magnificently well is treat employees not as pawns, but as partners," says John Moore, an Austin, Texas, marketing consultant, former Starbucks marketer and author of Tribal Knowledge: Business Wisdom Brewed From the Grounds of Starbucks. "They spend as much time and as many dollars trying to speak to employees as they do trying to speak to customers."

There are limits to the Starbucks lesson. The window of opportunity may no longer be open to start your own coffee bar and expect to grow it to the size of Starbucks. And not everything Starbucks touched has turned to gold. The stories about its failed ventures into magazine publishing and full-service dining are as instructive as its successes.

But the experts agree it's not too late to winnow some useful concepts from the experiences of Schultz and company, particularly when it comes to the value of the high-quality products, top-shelf employee relations and high-quality customer experiences that frame its mission. And if you read all the books and distill them into a single idea, it's that almost any effort made to create happy and motivated employees creates happy and loyal customers. Says Moore, "That's something all businesses can learn from."


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