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Sun 17th Jul 2022 - Starbucks puts UK division up for sale
Starbucks puts UK division up for sale: Starbucks is exploring a potential sale of its UK operations as it faces rising costs and competition from newer operators. The Sunday Times reported the world’s largest coffee chain has asked its adviser, Houlihan Lokey, to canvass interest in its UK business, which oversees more than 1,000 coffee shops and employs 4,000 people. Of these, about 300 stores are operated by Starbucks, with the remainder owned and run by franchisees who pay royalties to the parent company. Starbucks is facing increasing competition from rivals such as Pret A Manger, Tim Hortons and Costa along with thousands of independent operators. There are more than 25,000 coffee shops in the UK, which have sprung up on every high street and increasingly in drive-thrus and out-of-town retail parks. Founded in Seattle in 1971, Starbucks is responsible for turbocharging the coffee-shop wave that was born in the 1990s. It has more than 33,000 locations across the world, including licensed stores. Its UK arm, Starbucks Coffee Company UK, reported sales of £328m for the year to October 2021, an increase of 35% on the previous year when stores were forced to close due to covid. Pre-tax profits were £13.3m, compared with a loss of £40.9m in 2020. The company attracted criticism for paying just £5.4m in corporation tax, despite making gross profit of £95m. Administrative expenses of £78m resulted in lower pre-tax profits. Starbucks is among the chains that has been hammered by covid-related closures and changes in consumer habits. In its latest accounts, the company said that while sales had recovered strongly in suburban locations and retail parks, city centres had been slower to pick up as office workers continued to stay at home. It has suffered from challenges in its supply chain and shortages of lorry drivers, along with rising supplier costs and shipping delays. It is also among the chains struggling to find enough staff. Starbucks stores in the Middle East, across Europe and in the UK are largely run by franchisees. It has offloaded whole country operations to groups of buyers. This year the company completed a sale of its South Korea operations, where it has 1,600 stores, but continues to receive royalties of about 5% of sales. Starbucks said that while it had not initiated a “formal sales process” of its UK business, it continued to “evaluate strategic options” for its company-owned international operations. Last week, Starbucks founder Howard Shultz set out the need to reinvent the company because he believes it’s not designed for the future. Schultz unveiled his vision for the future of the business – including a focus on shared power, advancement and opportunity for its partners – in a letter to the company’s partners. Starbucks has come in for criticism in recent months following tensions with its US workers looking to unionise. Schultz, who returned to lead Starbucks for a third time earlier this year, will remain interim chief executive until early next year. Starbucks features in Propel’s UK Food and Beverage Franchisor Database, which is available exclusively to Propel Premium subscribers. The database is an exhaustive guide to the companies offering a food and beverage franchise in the UK. The third edition will be published on Friday (22 July) – providing insight on the offer, locations, cost, business background, contacts and other key details. It will be updated and sent out again every two months. Companies can now have an unlimited number of people receive access to Propel Premium for a year for £895 plus VAT – whether they are an operator or a supplier. The single subscription rate is £445 plus VAT for operators and £545 plus VAT for suppliers. Email jo.charity@propelinfo.com to upgrade your subscription.


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