Do you want to know how much money Starbucks franchise owners make yearly? If YES, here is one factor that determine the income & profit margin of Starbucks.
Starbucks, as one of the leading and most popular coffee providers in the world, has become a big part of their customer’s daily lives, and there’s no argument that having a Starbucks franchise will give a lot of rewarding benefits and outstanding success for an entrepreneur.
However, it is worthy to note that Starbucks doesn’t offer their stores for franchising. Instead they operate it as a licensing model or a food service, and if you’re interested in managing a Starbucks outlet, you have to enter into a licensing or food service agreement with the company, wherein they will provide you with a lot of important business aspects, such as equipment, training, layout, advertising, support, and inventory.
Starbucks Food Service Vs Starbucks Licensed Store
If you choose to go the Food Service route, it means that you can sell Starbucks merchandise and goods, but without the physical store. You can cater to schools, other businesses, military bases, universities, and others.
But as a Starbucks licensed store, you can customize the entire store, and they will provide you with the whole Starbucks menu, their executive food, and merchandise. They will also be available to support you in training and consultations, coffee packages, and all the equipment needed in the store.
Nonetheless, for the Starbucks licensing fee, you will clear require a substantial amount of money, which may range between 300,000 and 400,000 USD.
But to be sure about the exact amount and other charges of having a licensed store, it is better to ask Starbucks personally, so that you can discuss and know more about it, especially its cost and the profit that you will get once the business is running.
There are no Starbucks franchise owners and so the average income made by a franchisee with the company is not available. Starbucks rarely release sensitive information to the public, as it is against company policies.
Estimated Annual Revenue and Profit of a Licensed Starbucks Store Owner
However, if we do a little math we can work out the average income of Starbucks license stores. Starbucks is a public company so it will report overall revenue. According to their Q3 2019 earnings release, the company has 30,626 stores, of which 442 were opened that quarter.
Let’s just assume that 30,400 as an average number of open stores in the quarter. The company also reported $6.8 billion in revenue. Nonetheless, also note that Starbuck derives revenue from non-store sources: selling coffee at retail stores, corporate machines, licensing, etc. These are about $570 million, so store revenue is about $6.23 billion.
Using simple math, we can ascertain $204,000 in revenue per store – this is per quarter. So it would translate to $808,000 per store per year. Notably, in Asia pacific, the company operates 9,246 stores that generate $1.336 billion in revenue, or $144,000 per store per quarter.
Using this same math only on their Americas reported numbers, and $4.671 billion in revenue, divided by 17,700 stores, then its $264,000 in revenue per store per quarter. Nonetheless, there is only one factor that will determine or affect the possible income of any Starbucks store.
How Location Ultimately Determine How Much a Starbucks Store Owner Can Make Yearly
The location where a Starbucks store is set up tends to be very important to the income and profit of the store. A store in prime location will get more customers as compared to one in local locations. Starbucks stores can be generally found in airports, colleges or at supermarkets.
In order to set up a Starbucks store, you also need to have a store located in such kinds of locations. This is because, after proper amount of research, Starbucks found out that those locations are places where their product will have enough customers.
Estimated Profit Margin of a Starbucks Store
According to Starbucks tax fillings, the reported profit is roughly about $108,000 per store annually, but their profit margin may be actually much higher. Starbucks generates $650k – $750K total revenue depending on location.
Starbucks buys coffee direct from the growers around the world, distributes, roasts, and packages all within their global ecosystem. And with over 24,000 stores worldwide, they get the lowest cost on all goods. With almost no middle men that’s just one advantage.
Note that a good percentage of Starbucks profit is parked in tax friendly countries like Ireland, Panama and Switzerland. This money is not judged as taxable income and therefore never reported as profit because it is not paid out to the stockholders or executive boards.
Note that this actually establishes an “accounting distortion” letting the executive board to effectively juice their financial compensation packages without destroying reported profit margins, which could upset the stockholders, stock price and create negative press media.
Howbeit, this leaves the average profit margin for a Starbucks store closer to 25%. And the average true profit at $175,000 per store. Note that it translates into a hidden margin of $67,000 per store or $1.608B total! This is the way Starbucks can easily fund more health benefits, and perks while opening stores globally faster.