July 7, 2008

Starbucks: Bad Real Estate Decisions?

Good article in the NYT about a potential factor in the woes seen by Starbucks these days. Not only are people trading their Venti Lattes for home brewing, but those who are left aren't providing enough business for those stores that Starbucks has increasingly realized are not as productive as they need to be. In the Go-Go Venti No Whip days, it was easy to make a return on a marginal store, but when the business retracts just a few percent, those loyals have to be spread across more real estate that in the case of a downtown store, can be very expensive.

From the NYT:
"In 2004, the company announced it would double its pace of expansion, with a goal of reaching 15,000 stores in the United States. (It currently operates about 7,000 stores nationally.) That ambitious target was clearly a major culprit in Starbucks's misfortune: the company said this week that 70 percent of the stores marked for closing were opened after 2006."

Ouch. Who made those decisions? Well we'll see you on Monster.com later this year, right?

Read the whole article at NYT