Starbucks Note #4 - Why Does Starbucks Not Franchise the Company?

Surprisingly, Starbucks is a 500 Fortune Company don't apply the model of franchise to make their bottom line fatter. A part of my reading is explaining this model based on the view of the CEO Howard Schultz.

"Why don't you just sell the company?" Someone outside Starbucks asked me rhetorically, suggesting that a larger organization could leverage things that we could not, given our size, and stop the bloodletting.

Unbeknowst to most of our partners, as ceo, pressure to dramatically slash costs came at me from all fronts as the chatter in the press and online insisted that Starbucks' best days were behind us. Investors wanted Starbucks to undo our company-owned and -operated store model and franchise the system, letting other people own and operate our stores and pay Starbucks royalties. On its face, it made economic sense. Franchising would have given us a war chest of cash and significantly increased our return on capital. But if Starbucks ceded ownership of stores to hundreds of individuals, it would be harder for us to maintain the fundamental trust our store partners had in the company, which, in turn, fueled the trust and connection they established with customers. Franchising worked well for other companies, but would, I believed, create a very different organization by diluting our unique culture."

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Will you trade the culture-preferred business model for the capital-preferred business model?