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Starbucks Looks Toward Franchise Strategy to Caffeinate European Business

Starbucks Looks Toward Franchise Strategy to Caffeinate European Business
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Starbucks (NASDAQ: SBUX) is looking to franchise European cafes to perk up business, according to the Wall Street Journal.

Starbucks has avoided franchising in an attempt to better control the brand, opening its first franchise-owned store this past February in the United Kingdom. The company now has 45 franchise-owned stores in the U.K. and is looking to stretch this strategy in France. Starbucks sees this approach as a gateway to "make quick inroads in more remote areas" to aid its shaky European business.

The head of Starbuck's EMEA region, Kris Engskov, commented that working with franchisees "allowed us to go into many geographies that we hadn't considered before. It's given us a new opportunity in retail in the U.K. and we will continue to look across the continent to see if that makes sense for other countries."

Related: Is McDonald's Taking on Starbucks in Coffee Wars?

The Wall Street Journal noted that out of the 200 stores the company will open in Africa, Europe and the Middle East, almost 75 percent will be with licensees or franchisees. William Blair & Company analyst Sharon Zackfia noted that investors prefer to spend their capital on markets with a high rate of return. Zackfia added that the franchise model gains appeal for investors and companies in Europe's weak economy.

Kris Engskov further commented that this is a big opportunity and the company needs to be flexible in their approach to new markets.

Starbucks closed at $81.46 on Friday.

Posted-In: Sharon Zackfia Wall Street Journal William Blair & Company Wall Street JournalNews Global Media Best of Benzinga


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