NBA Hall-of-Famer Earvin "Magic" Johnson beat a lot of top competition on his way to winning five NBA championships. With that in mind, it may surprise you that despite staring down fellow greats like Larry Bird and Michael Jordan, Johnson doesn't consider either of them his toughest opponent. Johnson said that distinction belongs to the board for Starbucks (NASDAQ: SBUX).
Johnson's post-NBA career exploits as a businessman are well-known, but Rome wasn't built in a day, and he faced numerous challenges on the way to becoming a real estate and business mogul. One of his earliest deals was to open a Starbucks coffee store in South Los Angeles. At the time, there were very few, if any, Starbucks serving urban neighborhoods and Johnson wanted to change that. There was just one problem.
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Starbucks is a chain, but it's not a franchise, meaning the corporation owns and operates all its outlets. When Johnson approached Starbucks founder Howard Schultz about opening his location, Schultz told Johnson about the company's policy of owning all its locations. That meant Johnson would have to convince Starbucks' biggest stockholders to get on board with the idea.
The stakes were incredibly high, but for different reasons than you might imagine. Sure, Johnson stood to make a lot of money if he could get the deal done. However, his motives went beyond personal gain. Johnson wanted to open his Starbucks in South Los Angeles, which was still rebuilding from the Rodney King riots. Despite being born in Michigan, Johnson had adopted Los Angeles as his home, and the city saw him as a native son.
His popularity was incredibly high in South Los Angeles, and Johnson had already taken the lead in helping to rebuild the community. His first major endeavor, a partnership with movie theater chain AMC Entertainment Holdings (NYSE: AMC) to open a first-class movie theater in South LA, was already a smashing success. That gave him a measure of credibility, but Johnson still had a massive challenge in selling Starbucks' biggest stockholders on his idea.
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Like any group of investors, their motives were much more bottom-line oriented. Johnson's vision of revitalizing South Los Angeles was admirable, but it wasn't enough to get the green light. There was only one way that was going to happen: convince Starbucks shareholders that urban locations could be money makers. Then there was the secondary challenge of getting the board to approve his private ownership of the proposed Starbucks outlet.
"The hardest thing I thought I was gonna' do was play against Larry Bird and Michael Jordan," Johnson said to Bloomberg's "The Deal with Alex Rodriguez and Jason Kelly." "The hardest thing was to go before the [Starbucks] board and then go into a movie theater packed with good shareholders and try to convince them this is a great move for Starbucks." Fortunately for Johnson, his track record, vision, and charm won the day.
Johnson opened his first Starbucks on Crenshaw Boulevard, and much like his theaters, it was a success. He went on to open 125 Starbucks locations in urban areas throughout the country. After many years of successful stewardship, Johnson sold his 125 locations back to Starbucks in 2010. That deal helped Johnson "make his bones" as a businessman and heralded even greater success.
"I became the first person to ever own Starbucks outside of Starbucks," Johnson told "The Deal." "We built 125 in 40 different markets across America. They all did extremely well. And that really gave me, first of all, the stamp of approval. It gave me the track record that I needed of success so I can move on to something else."
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