This Starbucks, or the one next door?
FRISCO – Starbucks often been mocked in movies and cartoons for having two stores in close proximity. But in Frisco, those jokes are not far from the truth.
In fact, Starbucks’ business plan is to jam as many stores as possible in a market. In a few weeks, Frisco will be an example of the philosophy when it has two Starbucks just a short walk (and even shorter drive) from each other.
Starbucks’ other strategy is to define a market with a coffee shop culture and enter it.
The Frisco Safeway store on Summit Boulevard is opening its own Starbucks Dec. 23, said Safeway store manager Bob Fowler. The new cafe is under construction where the old customer service booth was, by the main front entrance.
Starbucks will not be running the Safeway store, said Amy Hodgdon, store manager at the Frisco Starbucks in the Crossroads shopping center.
“The company (Starbucks) doesn’t do franchises,” she said, adding that stores such as the one to open in Safeway are known as “licensed concepts.” That difference will be lost on the customer because Starbucks demands the same consistent quality of coffee and service wherever its products are sold.
“They use all of our same products and use all of our standards,” Hodgdon said. Other licensed concepts in the area include the Starbucks in Keystone, Beaver Creek and Downieville, she said.
According to the Starbucks annual report, 16 percent of the company’s profits come from licensed concepts.
Safeway recently opened Starbucks cafes in some of its stores in the Denver metro area, and corporate officials made the decision to add one to the Frisco Safeway store, Fowler said. It was not a local decision. He would neither confirm nor deny whether the new Safeway store in Silverthorne also will include a Starbucks.
“There’s room in there,” he said.
The Frisco Safeway will hire six additional employees to staff the Starbucks cafe, which will be open from 6 a.m. to 8 p.m. daily.
Fowler declined to comment on the competition the store will have with the Starbucks down the street. It’s unlikely Starbucks officials are worried the proximity will affect sales negatively at the Frisco store.
According to a recent story in the Washington Post, the corporate chain came upon the self-cannibalizing strategy by chance, when a small, successful shop in Seattle was about to be closed for remodeling. Starbucks opened a larger store 30 yards away, and both stores thrived. Starbucks since has used the strategy nationwide with success.
Nevertheless, local coffee shop owner Jim Rodkey is worried about the additional competition.
“Why do they need another one?” he asked, adding that Frisco already has one Starbucks, in addition to four independent coffee shops: Rodkey’s Rocky Mountain Coffee Roasters, Pika Bagel Bakery and Cafe, Abbey’s Coffee and Butterhorn Bakery.
Rodkey said the fact that the new shop will wear the Starbucks name is even worse.
“Every additional coffee shop poses a threat,” he said. “But especially one of the big chains that has all these advantages (like marketing and buying power). What they’re trying to do is nail in the coffin – open as many Starbucks as they can and drive the little guys out of business. There’s going to be two of them within a block. Why else would you do that?”
That the new Starbucks is not corporately owned by the coffee chain is no consolation to Rodkey. To the customer, Starbucks is Starbucks, Rodkey said. All the stores look the same.
Though he is confident the new store will have little effect on his regular, local customers, Rodkey worries it will take away the tourist customers, especially because Safeway is the first thing visitors see in Frisco when they get off the highway.
Jackie McClelland, manager of Pika Bagels, declined to comment on potential competition with the new Starbucks but said, “I’ll put my drink up against a Starbucks drink any day.”
Starbucks, a publicly traded company, grossed $2.6 billion in its 2001 fiscal year. Its net earnings were $181 million. The stock trades under the SBU symbol on the Nasdaq Exchange. Wednesday’s closing price was $21.15. The 52-week price range is $17.60 – $25.70.
In November, the company reported sales rose 10 percent over the same period in 2001.
Also, the company hit 6,082 stores in November by opening 102 new outlets worldwide. That included 4,700 in North America and 1,382 elsewhere.
Starbucks expects to expand to 10,000 stores in 60 countries by the end of 2005, according to published reports in the financial press.
Lu Snyder can be reached at (970) 668-3998, ext. 203, or email@example.com.
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