Pour Your Heart Into It (38 page)

Vincent Eades, who joined us from Hallmark Cards, has a quick way of weeding out inappropriate partners. He simply asks them: “If a pot of coffee had been sitting on a burner for one hour and a customer came in, would you serve them a cup right away?” If the answer is yes, we show them the door. If they’re not willing to throw away half a pot and brew a fresh pot, they don’t understand Starbucks’ commitment to quality.

Another key determinant is how willing a potential partner is to train employees. Usually, the owner or manager is not the person who serves the coffee. While at the negotiating table, he may declare his appreciation for quality coffee, but is his company really willing to make the necessary investment of time and money to train his wait staff?

We start with one-year agreements and then extend the commitment to multiple years if the partnership seems successful. That arrangement gives us time to evaluate how well our strategic partners are living up to their promises, and it gives them time to see if the Starbucks connection enhances their business. So far, all our corporate partnerships are working.

The nail-biting moments with United highlighted for me the need to make risky decisions. Nothing truly great can ever be achieved without taking risks. For a brand-dependent company, it’s vitally important to champion and elevate the brand, but you can’t let that worthy goal prevent you from breaking new ground. When problems crop up, serious setbacks that might seem to threaten the image you have lovingly cultivated, you have to withhold judgment on the success of the venture until you’ve thrown all your resources into attempts to solve those difficulties.

Whatever you do, don’t play it safe. Don’t do things the way they’ve always been done. Don’t try to fit the system. If you do what’s expected of you, you’ll never accomplish more than others expect.

CHAPTER 20
You Can Grow Big And Stay Small

The fundamental task is to achieve
smallness within large organization.

—E. F. S
CHUMACHER ,
S
MALL
I
S
B
EAUTIFUL
:
E
CONOMICS AS IF
P
EOPLE
M
ATTERED
, 1973

H
OW TO
B
E
E
VERYWHERE WITHOUT
B
EING
F
ACELESS

Actress Janeane Garofalo recently joked about us on the
HBO Comedy Hour:
“They just opened a Starbucks—in my living room.”

We liked that line so much that we adapted it for an ad that pictured a bottle of Frappuccino and a woman standing in an empty field, with the caption: “A great place to open a Starbucks.”

Funny as those lines are, they do strike perilously close to the heart of Starbucks’ greatest vulnerability. We’re opening so many stores that people are starting to feel we’re approaching ubiquity. The danger is that the bigger the company gets, the less personal it feels, to both partners and customers. If our competitive advantage has always been the relationship of trust we have with our partners, how can we maintain that as we grow from a company of 25,000 people to one of 50,000?

There is no doubt in my mind that Starbucks can realize its financial goals. A more fragile issue is whether our values and guiding principles will remain intact as we continue to expand. I for one would consider it a failure if we reached the $2 billion–plus level at the expense of our unique connection with our people.

How do we grow big but maintain intimacy with our people? This is the toughest dilemma I face as the leader of Starbucks.

Achieving that ideal may ultimately be impossible, a contradiction in terms. But we’ve got to try. If we don’t, Starbucks will become just another soulless big chain. I’m determined never to allow that to happen.

C
AN A
B
USINESS
G
ROW
B
IG

WITHOUT
B
ECOMING
“B
IG
B
USINESS”?

In America, small businesses are generally admired, yet Big Business is hated and feared. Perhaps the reason lies in our strong leaning toward individualism. Yet the more small business succeeds, the bigger it becomes. Does that make it suddenly worthy of scorn?

If you asked people in a focus group, “Tell me what Big Business means,” you’d almost certainly get a series of negative statements. At one extreme they might mention the Exxon
Valdez
oil tanker crashing and ruining Alaska’s waters. You’d get “asbestos.” You’d get “Love Canal.” You’d get “people who lie.” You’d get Danny DeVito’s movie
Other People’s Money
. Big Business, the common thread would run, is capitalistic and therefore threatening.

And what’s small business? Ask the same focus group, and they may well give you a set of completely opposite reactions. Small business means hard-working people struggling to earn a living. Small-business owners are often well-intentioned and care about their customers. Some have left jobs in big corporations and want to live life a different way.

Finally, if you ask: “How many big businesses act like small ones?” most people would answer: “Not very many.” When we tell people that we’re trying to build a big business on a foundation of small-business values, many don’t believe it. Either they assume we’re incurable optimists or they begin looking for hidden agendas that would explain our
real
intentions.

One of Starbucks’ greatest challenges is to try to break the mind-set that big can’t be good. If we don’t, we’ll lose the very values that attracted people to us in the first place.

V
ALUES
D
ON’T
W
ITHER
AS
S
ALES
G
ROW

Ever since Starbucks started on its trajectory of fast growth, we’ve faced skeptics who criticized that strategy. Most of us were so pumped about achieving our vision, however, that we just discounted them. Our customers were telling us, with their frequent return visits and enthusiastic comments, that they approved of us. Today, that approval is stronger than ever. More than five million customers a week visit our stores, and theirs are the votes that count.

But increasingly, we’ve also been hearing other voices. As Starbucks grows faster every year, opening hundreds of stores and entering locales ever more distant from Seattle, the chance for misunderstanding looms ever larger. One site location, mishandled, can damage a reputation we took years to build.

In a handful of places, we’ve gotten pushback from activists who don’t want Starbucks in their town. A few times a local business owner, fearful that he can’t compete, has gotten his customers to protest and keep us out. In a few cases, critics have made unfair charges that are hard for us to respond to without appearing defensive. How can we convince people who have no experience of our stores and our coffee that we’re not “predatory” or “ruthless”?

It is painful to hear such words. Starbucks is not some faceless corporate entity. It’s me, and Dave Olsen, and Howard Behar, and other individuals who have defied conventional wisdom and built a company based on passion and values. We set out to win, no doubt about that, but our goal is to win with integrity, as a talented and highly principled player in the free enterprise system. We channel our competitive energy against rivals far larger than ourselves, like the big packaged foods companies, not against local mom-and-pop coffeehouses. Our mission is to expand the number of people who appreciate great coffee, to make it ever more widely available and enjoyed.

The criticisms leveled against us, I think, crystallize a deeper issue: the growing fear about the homogenization of neighborhoods and towns. Most of the opposition we’ve encountered has been in close-knit urban areas or small towns, where people are highly protective of their distinctive character. They worry that national chains will displace locally owned stores and that fast-food restaurants will elbow out the corner diner. A few groups have even prevented us from opening a store, by passing some ordinance or claiming insufficient parking.

Some communities don’t know what to make of Starbucks. We don’t fit neatly into existing categories of retail, restaurant, or fast-food. Starbucks is not a restaurant but a high-end specialty retailer that serves coffee beverages. But because most retail stores don’t serve food or drinks, we occasionally have to apply for a “change of use” permit because we provide seating, as restaurants do. Then there are people who expect a coffeehouse to be bohemian, with wood floors and fabric wall coverings and worn tables and mismatched chairs. When they see that Starbucks is clean and efficient with a complete line of coffee-related merchandise, they are baffled.

Clearly, there’s room for many different styles of coffee stores and coffeehouses in a given neighborhood. We’ve noticed that whenever several coffee businesses locate near one another, customers flock there. When people know that an area has neighborhood gathering places, they make plans to go there, and then decide which coffeehouse to visit. They may vary their choice of establishments, depending on their need or mood. In the end, all of us benefit.

The way I see it, we’ve enhanced the coffee category. Coffee consumption in America has improved since Starbucks arrived, both in quantity and in quality, in large part because of the awareness and choices that the specialty coffee industry has provided. Some of our competitors have openly admitted that they wait for Starbucks to enter a market and educate customers before they go in. One of our Seattle rivals announced a deliberate strategy of opening a store across the street from every Starbucks. Does that make me happy? No. But we concentrate on our customers, not the competition.

Landlords occasionally exacerbate the problems we face in new markets. Good sites are hard to find, especially in small towns where the retail corridor is only two or three blocks long. Our real estate people have to act quickly when a site becomes available. Property owners sometimes use Starbucks as a bargaining chip, informing another coffee company or another prospective tenant that we are interested in the space and then jacking up the rent. Then Starbucks gets blamed for the rent increase when we were never even involved in the negotiation.

In a few cases, we have been deliberately misled. A landlord might call Starbucks up and ask: “Are you interested in leasing our space?” They don’t mention that it’s already occupied by another café, perhaps a tenant with whom they have not had a good relationship, one they want to get rid of. We express interest, but before we have a chance to investigate, an outraged story in the local paper announces, “Starbucks is coming to town and is willing to pay higher rents because they want to kick somebody out of the market.” We don’t find out about the existing tenant until he starts a grassroots campaign against us. Once we’ve been painted as a heartless national chain, no one wants to hear our side of the story.

In two cases, when activists protested, we examined the situation closely and decided not to open a store in their community. We want people to feel delighted and excited that we’re in their neighborhood, not put upon. Our goal is to find communities that eagerly welcome us.

An article in
Newsweek
particularly angered me by comparing Starbucks to Wal-Mart. The charge is unfair and inaccurate. First, we don’t change the economics of a town. We don’t undercut prices charged by other stores; in most cases, our prices are higher, not lower. We don’t draw traffic out of town to warehouse locations; instead, we enhance downtown commercial districts and existing retail centers, increasing traffic for neighboring shops. In fact, Starbucks recently received the 1997 Stafford Award, an honor that Scenic America presents, in recognition of our “sensitive reuse of older spaces within cities” and our excellent design standards. Scenic America is the only national organization dedicated to preserving and enhancing the scenic character of America’s countryside and communities. Many complementary retailers, such as bakeries and bagel shops, locate their stores near ours as a matter of strategy.

Many cafés are small, local businesses, and some of them accuse Starbucks of having abandoned its principles simply because it has grown large. They complain that we deliberately open up across the street from them to lure away their customers. In fact, though, if they weren’t competing with Starbucks for locations, they would be competing with someone else. As tenants, we cannot control rental rates; rents are market-driven and set by landlords.