Starbucks Coffee (Franchise Interview)

Two interviews were conducted on the 19th of July, 2013, one in the HQ of Starbucks Coffee, in Kuala Lumpur, where another was done in one of the Starbucks outlets located in Wangsa Maju, Setapak. Below shows the interview questions conducted for both franchiser and franchisee and answer.

Questions for franchiser:

What is the background of the company and its performance record?

Originally founded by Jerry Baldwin, an English teacher, Gordon Bowker, a writer and Zev Seigh, a history teacher, the first Starbucks Coffee was established on 30 March 1971, in Seattle, Washington. With its remarkable coffee and beverages, Starbucks has successfully spread its business through more than 17,000 locations in over 50 countries. There are a total of 129 stores established in Malaysia, including 41 stores in Kuala Lumpur, 40 in Selangor, 7 in Johor, 3 in Kedah, 3 in Melaka, 1 in Negeri Sembilan, 5 in Pahang, 12 in Penang, 3 in Perak, 1 in Putrajaya, 6 in Sabah and 5 in Sarawak, and the number is keep growing gradually.

What is the company's current financial status?

 (Private and confidential)

What are the names, address, and phone numbers of existing franchisees in my trade area?

Name: Alpha Angle Starbucks

Address: Lot G25A, Ground Floor, Jusco Alpha Angle, Jalan 3/27A, 53300 Kuala Lumpur.

Telephone: +603-4149 2842

Describe how you train and mentor your franchisees.

There are a series of programs provided to our franchisees in order to maintain business quality and operating experience:

1. Pre-opening training program (operation structure briefing).

2. One month training classes (beverage recipes and different coffee name).

3. Operation support

4. Annual training program

If at some point I decided to exit the franchise relationship, how does the exit process work?

 Not applicable since all the Starbucks is own by one person.

In what ways do you work with a franchise who is struggling?

Internal meeting will be held to in-depth discuss the current limitations and future potential of the franchise. Supports (loan and promotional events) will be provided if both franchiser and franchisee agreed to further proceed the operation of franchise.

Questions for franchisee:

1. How much does your franchise gross per year? How much does it net? Are the procedures followed to make royalty payments to the franchisee burdensome?

 Information could not be obtained due to company's confidentiality.

2. Are the financial projections of revenues, expenses, and profits that the franchiser provided me

accurate in your judgment?

 Yes, it does.

3. Does the franchiser give you enough assistance in operating your business?

Supportive training programs and operation support are provided which gave the franchisee enough assistance in business operation.

4. How many hours, on average, do you work a week?

Employees are required to work 6 days a week, 8 hours a day where a 30 minutes of time are given for lunch break.

5. How often do you get a vacation?

I would normally have my vacation once a year, during the weekdays when there is no special on-going promotion or activities.

6. Have you been caught off- guard by any unexpected costs or expectations?

So far there is yet to be any off-guard incident occurred.

7. Does your franchiser provide ongoing training and support to you?

Yes, a one-month training program and annual training program are provided.

8. If you had to do it all over again, would you purchase a franchise in this system? Why or why not?

Operating a franchise is interesting and challenging. If I had to do it all over again, I would still purchase a franchise in this system.

Yourself

1. Are you qualified to operate a franchise successfully? Do you have adequate drive, skills, experience, education, patience, and financial capacity? Are you prepared to work hard?

A number of considerations, namely skills and knowledge towards the particular business, experience and others, are important which need to be taken into account before and during the operation of a franchise. In my opinion, there are still a lot of things including skills, experience and knowledge that I need to obtain before handling a franchise. Thereby, I think that I am yet to be qualified to operate a franchise though I will work hard to prepare for it.

2. Are you willing to sacrifice some autonomy in operating a business to own a franchise?

Yes, I will.

3. Can you tolerate the financial risk? Would business failure wipe out financially?

Every entrepreneurship has its own financial risk. Hence, I can tolerate the risk meanwhile working hard in maintaining the business. 

4. Can you juggle multiple tasks simultaneously and prioritize various projects so that you can accomplish those that are most important?

As a person who is good in organizing and multi-tasking, I think that I can handle multiple tasks and prioritize projects that is comparably more important.

5. Are you genuinely interested in the product or service you will be selling? Do you enjoy this kind of business? Do you like to sell?

I believe that a business would only be successful if one owns the passion in the product or service of business. In fact, I am a regular Starbucks customer which would visit the outlet at least once a week. Despite the likeliness to sell, I am interested in the product of Starbucks and hence, I would enjoy much if I could operate the business. 

6. Do you enjoy working with and managing people? Are you a “team player”?

I do agree that I am a team player since I enjoy working as a team besides prefer to be the team leader in guiding and managing people.

7. Will the business generate enough profit to suit you? 

Although the current financial status of the franchise could not be obtained, I strongly believe that the business will generate sufficient profit to suit me due to the growing number of Starbucks Coffee outlets. 

8. Has the franchiser investigated your background thoroughly enough to decide if you are qualified to operate the franchise? 

 After a series of questions given by the franchiser, I do believe that he holds thorough background information to decide if I am qualified to operate a franchise.

9. What can this franchiser do for you that you cannot do for yourself? 

The 'special' beverage recipe from Starbucks Coffee is a specialty and heritage which I cannot do for myself. Besides, the thoughtful programs provided are useful in helping the operation of business which I think that I will not be able to provide by myself.

The Franchiser and the Franchisee

1. Is the potential Market for the product or service adequate to support your franchise? Will the prices you charge be in line with the market?

 In compared to other coffee companies such as San Francisco, Coffee Bean and others, the prices of beverages are in line with the market. Besides, there is a high potential market for the product (coffee) that supports my franchise.

2. Is the market's population growing, remaining static, or shrinking? Is the demand for your product or service growing, remaining static, or shrinking?

Nowadays, there is an increasing number of people who seek a higher standard of living. Hence, they would indulge themselves in living, fashion, food and beverage. The market's population is growing dramatically where the demand for Starbucks is undoubtedly increasing. 

3. Is the product or service safe and reputable?

Yes. Coffee and other beverage brewed are reputable in their remarkable taste and aroma. The coffee beans used are in high standard of quality which are safe and fresh.

4. Is the product or service a passing "fad", or is it a durable business idea?

For now, Starbucks seems to be a durable business due to the gradual growing number of people start buying coffee and other beverage at Starbucks. 

5. What will the competition, direct or indirect, be in your sales territory? Do any other franchisees operate in this general area?

Yes. As mentioned above, there are a number of competitors that operate the similar business, which are The Coffee Beans, San Francisco Coffee and Gloria Jeans.

6. Is the franchise international, national, regional, or local in scope? Does it involve full- or part-time involvement? 

Starbucks Coffee is an international chain which owns more than 19,763 stores in over 59 countries.

7. How many years has the franchiser been in operation? Does it have a sound reputation for honest dealings with franchisees?

The franchiser has been operating over 15 years since 1998. Not to mention the quality of products and services, Starbucks Coffee is a reputable trademark which is persuasive and credible for the franchisees.

8. How many franchise outlets now exist? How many will there be a year from now? How many outlets are company-owned?

As of 2nd January, 2011, there are a total of 17,009 stores worldwide, where 8,870 owned by the company, whereas 8,139 are licensed stores. 

9. How many franchises have failed? Why?

(Private and confidential)

10. How many franchisees have left the system within the past year? What were their reasons for leaving?

 Not applicable since all the Starbucks is own by one person.

11. What service and assistance will the franchiser provide? What kind of training program does the franchiser offer? How long does it last? What topics does it cover? Does the franchise offer ongoing assistance and training?

After the pre-opening training program, new employers are required to attend a one-month training course provided by the franchiser.

12. Will the franchise perform a location analysis to help you find a suitable site? If so, is there an extra charge for doing so?

Geographical advice for store opening will be given by the franchiser; charges are covered during the purchase of licensed.

13. Will the franchiser offer you exclusive distribution rights for the length of the agreement, or may it sell to other franchises in this area?

No.

14. What facilities and equipment are required for the franchise? Who pays for construction? Is there a lease agreement?

Required facilities and equipment include basic furniture (tables and chairs), brew machine, Wi-Fi router, cashing machine and others. All fees are paid by licensed owner.

15. What is the total cost of the franchise? What are the initial capital requirements? Will the franchiser provide financial assistance? Of what nature? What is the interest rate? Is the franchiser financially sound enough to fulfill all its promises?

 (Private and confidential)

16. How much is the franchise fee? Exactly what does it cover? Are there any confining fees? What additional fee are there?

Not applicable since Starbucks is outlets but not franchise.

17. Does the franchiser provide an estimate of expenses and income? Are they reasonable for your particular area? Are they sufficiently documented?

 (Private and confidential)

18. How risky is the franchise opportunity? Is the return on the investment consistent with the risk?

It depends on situations such as the location of the franchise, franchise management, employer-employee relationship and others.

19. Does the franchiser offer a written contract that covers all the details of the agreement? Have your attorney and your accountant studied its terms and approved it? Do you understand the implications of the contract?

 A lawyer would be hired in generating the contract besides explaining the contract details and terms and conditions.

20. What is the length of the franchise agreement? Under what circumstances can it be terminated? If you terminate the contract, what are the costs to you? What are the terms and costs of renewal?

 (Private and confidential)

21. Are you allowed to sell your franchise to a third party? Does the franchiser reserve the right to approve the buyer?

Franchisee is not allowed to sell the franchise to a third party where the franchiser reserve the rights to approve any buyer. 

22. Is there a national advertising program? How is it financed? What media are used? What help is provided for local advertising?

Instead of the use of local print and broadcast advertising, Starbucks Malaysia prefer digital advertising (online banner, mobile, etc.) which they believe that it is more effective in the convey message to consumers.

23. Once you open for business, exactly what support will the franchiser offer you?

Besides training programs, franchiser will supply ingredient such as coffee beans and other brewing equipment in order to maintain a good quality control.

24. How does the franchise handle complaints from ad disputes with franchisees? How well has the system worked?

 (Private and confidential)