Travel on Route 80 in PA

From I-81 Traveling South

I will try to add to what's already been written from a different perspective. I know nothing about Western PA/I-80 (I think I may have driven that stretch once in my life and do remember it as bleak...), but my guess is two things are true about a potential location there:

The economics for a company-owned store do not make sense - probably because buildout costs and finding the right labor in "remote" locations like the section you're talking about would be too high.

AND

There is no licensed partner who operates stores there for Starbucks to collaborate with.

Some more background here on the 2nd point. First of all, Starbucks has 3 "types" of stores when viewed from an ownership perspective:

1) Company-owned stores - the large majority of stores in North America; Starbucks takes all the expense, does all the work, and reaps all the profits (and in rare cases, losses).

2) Licensed stores - Starbucks licenses the brand and concept to a company who opens and operates the store, employs the labor, and makes many of the choices about day to day operations. Profit structure is totally different (much less profit to Starbucks, but also less upfront capex and far less financial risk). Note that this is *not* franchising; the licensed partner is always a company of significant size, and nearly always operates other branded food & beverage or cafe concept stores.

3) Joint Venture - Starbucks creates a separate company that is partly owned by it and partly owned by another company. These two companies open the store and run it together (Starbucks Japan, for instance, is a JV with a company called Sazaby, if memory serves; and Starbucks India is with Tata). Profit split varies depending on many things, but is generally richer than the licensed model, not as rich as company-owned.

Typically, the company wants to use company-owned stores in markets where it can reach large scale / high penetration on its own (e.g. US, China) because there is more profit to be made, so why give it away to other companies unnecessarily.

In markets that are larger but much more complex for some reason - for legal, labor, real estate or other reasons - the company will create a JV, as it has in Japan, South Korea, and some other countries.


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