Company operated restaurants contribute more than 50% of Starbucks’ EBITDA, indicating that they are more profitable compared to franchise restaurants since the number of restaurants under both categories are nearly equal.
Capital Intensive Business Model, Affected By Raw Material Price Changes While restaurants such as Mc Donald’s and Dunkin’ Brands generate a significant portion of their revenues from franchisee royalties and fees, the profitability of Starbucks’ company-owned restaurants depends on optimization of resources and prices of raw materials.
Our forecast estimates that by 2023, the company will still have around a ratio for franchised and company owned restaurants.
Maintaining Company Culture, Greater Control Higher operating expenses for company-owned restaurants, higher capital spend, and the ease in expansion through a franchisee model has encouraged other restaurant companies to shift towards a fully franchised model.
The company wants its baristas to understand its culture, vision, and value statement, and believes that this is easier if more restaurants are company-owned.
While Starbucks has adopted the franchisee model for international expansion, and several of its domestic stores are also licensed, the company seems intent on maintaining a significant percentage of company-owned stores in order to maintain its culture.
We continue to identify technical compliance solutions that will provide all readers with our award-winning journalism.
Restaurant companies are employing different methods of expansion and efficient management.
As Mc Donald’s works on this transition, the company has been witnessing growth in operating profits.
However, a franchise-based model can lead to less control of day-to-day operations, and Starbucks’ management wants to maintain a certain level of control over its stores and therefore still favors company-owned restaurants.