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.. for the wealthy class. However, as Best Coffee mainly targetsyounger generation and working professionals, who usually are not the major clientele oftraditional Chinese teahouse.Another type of teahouse is the bubble teahouse, frequented by the younger generation.It is greatly affected by the Taiwanese tea drinking habit of drinking bubble tea, a special tea withdifferent flavours and containing gelatine balls or bubbles. It became a common, fashionabledrinking style in the middle of the 1990s.In bubble teahouses, people not only drink bubble tea, but also eat Chinese delicaciessuch as snacks or Taiwanese noodles. Customers can either order take-out, or sit down withfriends to enjoy tea and food. This kind of bubble tea store is usually decorated in Taiwanese orHong Kong style, with a more relaxing and youthful appearance.
It might also have a simplekitchen. The prices charged to clients are usually moderate, in order to attract more students andthe younger generation.Therefore, customers visiting bubble teahouses are more likely to indulge in Taiwaneseor Hong Kong-style culture instead of typical westem-style culture. If they want to taste westernculture and atmosphere they have to visit a western-style coffee store, namely Starbucks or BestCoffee.The teahouse is a very popular social venue for Chinese people. It is part of the foodculture, with a history spanning many centuries. It is still an important part of people's social life.Since China promoted the open-door strategy to embrace more western culture and hfestyle, theteahouse's domination has been challenged by the foreign coffee house. Coffee houses havegained popularity in China especially in the big cities and seashore communities.Therefore, teahouses, especially bubble teahouses, are a threat to coffee in terms ofconsumers' familiarity with tea and the long history of tea culture
However, with thedevelopment of a policy of openness and embracement of western culture, specialty coffee chainstores have great potential to compete with teahouses in China.Given great power of substitutes, and the small position of coffee as part of total market,coffee is still positioned as a luxury trendy consumer product mainly targeting to young,professional white-collar level of people and entrepreneurs, who are western culture followers.They have stable disposal income and like to explore western culture.Table 2-1 : Comparison table among different teahouses and Best CoffeeregularteahouseTaiwanesestylebubbleteahouseB estCoffeeCategoryEconomicLuxuryEconomicModerateTar getClientPublicMiddlewealthyclassYoungergeneration Younggeneration,WorkingProfessional,AndBusinessmen AgeGroup25 +30 +I 5 -3018-45i q c r mediumServeMeal7usually High -PriceRange1mediumpastryKitchenusuallynousuallynoY essimplekitchenNoArea(squaremeters)1 oo+DrinkMenumainlyChineseteamainlyChineseteabubble teaItalianStyle,SpecialtyCoffeeSelfServeNoNoNoYes2 .4 Power of Suppliers2.4.1 Supplier PatternThe basic coffee supply for Best Coffee China includes coffee beans, cups and lids, dairyproducts, pastries, straws, napkins, sugar and many other customer service items with the BestCoffee logo. Hence, there are two major types of products that need to be purchased: fixed assetspurchased before the store opening, and operational items which are continuously purchased on adaily basis.For the first category, the fixed assets required such as coffee makers and store furniture,Best Coffee China basically purchases locally. However, Best Coffee China had to get BestCoffee's prior approval. For instance, Best Coffee China would send the list of different coffeemakers - made by foreign companies selling through distributors in China - including brands,model and origin of production to Best Coffee. Then Best Coffee would choose the mostqualified and suitable ones for Best Coffee China. For each new store, Best Coffee China wouldpick the most appropriate supplier based on its production scale and sales volume. There aremany international branded coffee makers competing in China.
Therefore Best Coffee China hassufficient options. As Best Coffee China only has less than ten coffee stores nationwide, itsbargaining power is still not strong. When it reaches its target of fifty stores by the end of 2004, itwill have better economy of scale, hence stronger purchasing power over suppliers.For the second category, operational products, Best Coffee China had to import the keycomponents from Best Coffee Canada. For instance: coffee beans, cups, lids, ingredients forspecial drinks, and gift items like coffee grinders and makers are purchased from Best CoffeeCanada. Another reason for Best Coffee Canada to sell raw materials to Best Coffee China is thatthe profit margin of selling coffee supplies is attractive.
Therefore Best Coffee will not easilyhand over this important function to Best Coffee China. Nevertheless, Best Coffee China andBest Coffee Canada have reached an agreement that, in the long run, Best Coffee China willrealize procurement localization step-by-step. As China is a global production base, companiescan find all kinds of suppliers who have high standards and qualifications locally and a verycompetitive price range. It is more reasonable and efficient to locally source suppliers, and evensell them back to the North American market. Until the Chinese operation starts to catch up withwestern standards, and when the Chinese management team starts to better understand coffeeculture and Best Coffee philosophy, Best Coffee will feel more comfortable and confident inoutsourcing its production orders on coffee supplies in China.At present, there is no national dairy or pastry supplier for Best Coffee China, and eachstore is using its own local brand name supplier. Best Coffee China plans to seek a qualifiedsupplier for different products with brand name nationwide, and draw up a partnership agreement.One of the most important operational challenges for Best Coffee China is negotiating a goodpartnership agreement with a supplier so it can decrease costs while maintaining the same quality.Therefore, at this moment, pastry suppliers in different cities in China have more bargainingpower than they should possess.In terms of currency exchange, there is not be any problem or risk for Best CoffeeCompany Canada because the Best Coffee Company (China) head office in Toronto paysCanadian dollars to Best Coffee Company Canada for the raw materials purchased in Canada.2.5 Industry Competitors2.5.1 Coffee and Specialty CoffeeAs the coffee industry faces mostly stagnant and somewhat declining numbers globally,the increased popularity of niche coffee drinks, combined with the new demographics of coffeedrinkers, offers more diverse product and marketing opportunities.
In addition to classic coffeeproducts (e.g. whole bean coffee, ground coffee and instant varieties), coffee manufacturers havelooked to expand offerings with other coffee alternatives such as cappuccino, latte, iced coffeeand chai tea. Liquid concentrate coffee is another innovation.According to Beverage Industry (October, 2001), whole bean coffee sales haveexperienced an overall growth of 4.7 percent. 'In terms of trends, the coffee menu continues toexpand,' says National Coffee Association Spokesman Gary Goldstein. 'That started more than adecade ago at the beginning of the gourmet coffee boom.' Goldstein says iced coffee emerged asa prepared drink in the summer of 1997 and has grown to create a popular trend in ready-to-drinkbeverage products.The specialty coffee category has been credited with luring younger consumers into thecoffee category and thus creating an increase in the size of the 'new drinkers' market (Jill Bruss,April, 2002). Although the gulf between Starbucks and smaller rival chains continues to widen,the specialty coffee segment presents a wide range of promising channels through whichcompanies can leverage and differentiate their brands.For instance, several prominent operators are brewing new prototypes and broadening theirproduct offerings by adding dessert-type coffee beverages. These include an emphasis on lunchitems or other avenues, such as drive-through windows, that Starbucks has mapped out as primegrounds for growth.
Meanwhile, similar to Starbucks, the smaller coffeehouse brand contendersare eyeing expansion into other distribution channels such as grocery stores and internationallicensing.In sum, coffee producers are actively seeking international expansion. In order topenetrate an under-developing market on the retailing level, the most effective method to expandis to develop the franchising business.2.5.2 Coffee in ChinaChina is one of the world's smallest coffee markets. Although it has one quarter of theworld's population, China accounts for only 1 percent of world coffee consumption(www.chinadia1y.c0m.cn, February 2003). Annual coffee production in China reaches a mere onethousand tonnes, compared with the 15 billion tonnes churned out by Brazil each year. Before theentrance of instant-coffee brands such as Nescafe and Maxwell House into China in 1995,consumption of coffee was virtually unknown (Business China, May 2002).However, this is slowly changing. Total coffee imports rose by seventy-five percent in2001, to some 9,500 tonnes. According to market research firm AC Nielsen, instant-coffee salesin China increased by forty-two percent in 2001 (Business China, May 2002).In China, it is not surprising that most coffee drinkers are based in cities.
Coffee isconsiderably pricier than other hot beverages, and retail sales in general are concentrated inChina's urban centres. Since 1995, retail sales of hot drinks (mainly coffee) have grown seventyeightpercent in the cities. Despite the marked disparity, hot drinks (mainly coffee) sales exhibitstrong growth in China. This is due to the increasing disposable incomes, the introduction of newproducts and brands, and the migration of sales into food-service outlets including teahouses,coffee shops and fast-food restaurants (Business China, May 2002).The foreign companies that now dominate China's coffee market may be furtherencouraged by the fact that retail sales of coffee are predicted to grow more than twenty-fivepercent in the next five years. Coffee accounts for just 1.6 percent of all hot-drink (including tea)sales in China (Business China, May 2002).2.5.3 Franchising in the WorldFranchising is a method of doing business.
It is a method of marketing a product andlorservice which has been adopted and used in a wide variety of industries and businesses. In somesense, it is a strategy for market entry. The word 'franchise' literally means to be free. In thissense, franchising offers people the freedom to own, manage and direct their own business(www.franchise.org). However in reality, franchising is hardly free.
By paying a certain amountof money as the franch~singfe e, franchisees can have the authority and privilege to operate undercertain business models and be able to share the goodwill of certain brands.As with any freedom, there are responsibilities. In franchising, these responsibilities haveto do with the franchisee's commitments and obligations -usually spelled out in a franchisesystem. The franchise system, sometimes called the franchisor, is the one who owns the right tothe name or trademark of the business. The franchisee is the one who purchases the right to usethe trademark and system of business.According to the International Franchise Association (www.franchise.org), there are twodifferent types of franchise arrangements:o Product distribution arrangements in which the dealer is, to some degree, but notentirely, identified with the manufacturer/supplier;o Business format franchises in which there is complete identification of the dealerwith the buyer.Best Coffee Company Canada and Best Coffee (China) fall into the second type offranchising model.The business format for franchising offers the franchisee not only a trademark and logobut a complete system of doing business. Indeed, the word 'system' is the key concept tofranchising.
A franchisee receives assistance with site selection of the business, personneltraining, business set-up, advertising, and product supply. For these services the franchisee paysan up-front franchise fee and an on-going royalty, which enables the franchisor to providetraining, research and development, and support for the entire business. In a nutshell, thefranchisee purchases someone else's expertise, experience and method of doing business.Meanwhile, the franchisee agrees and promises to follow the system to ensure proper operation.In its infancy merely two decades ago, international franchising has become a major forcein the world economy today. Franchising is gaining popularity throughout the world, and isemerging as an effective way to conduct and grow successful businesses. Yet the globalmarketplace is far from saturated.
In fact, the growth potential for franchising worldwide isexponential.The growth of franchising has been well-documented in strong market economies,including the United States and Western Europe. In the U.S., franchising generates $1 trillionworth of business In growth sales and represents 50 percent of retail trade (Swartz,November/December 2000). More recently, success stories are emerging from less obviouscomers of the world, including Eastern Europe, the Middle East, and South Africa.Going global, however, still requires extensive research. While franchising has provenbeneficial for countless companies in various countries, it is not foolproof. Each country hasdifferent customs, cultures, languages and laws, making cross-border expansion a challenging andunique optlon.
Companies considering new territories must first determine if their products andservices are acceptable in the new country. Second, they must identify a well-known partner thatis socially and economically appropriate. Finally, they must have the ability to transferknowledge and to provide support and necessary systems to franchisees.Companies from near and far are flocking to Asia's ripe market and receiving a warmhandshake from natives ready to do business. Although Japan and Australia have taken advantageof franchising for quite some time, many Asian countries are just beginning to discover thatfranchising is an attractive way to grow their economies.Asia's mom-and-pop stores are fading fast as franchisors set up shop. Asia is attractive toforeign franchisors for many reasons. First of all, Asia is bursting with consumers. More than halfof the world's population lives in the region. A soaring middle class and robust economic growthrates are also attractive to foreign investors.
China alone comprises nearly one-quarter of theworld's population and is considered the most under-retailed country in the world (Swartz,NovemberIDecember 2000).Furthermore, many nations are roll~ngo ut the red carpet for foreign investors. Severalgovernments, including those of Malaysia and Singapore, encourage franchising and foreigninvestment by introducing franchise-friendly laws, establishing organizations, and developingprograms to support the effort. In Indonesia, foreign investment approvals have skyrocketednearly 300 percent since government restrictions were lifted in 1994 (Swartz, MarchIApril 1997).The number of high-level franchise conferences and exhibitions that have been held or are beingplanned throughout the region is another strong indication of Asia's growing interest infranchising.2.5.4 Franchising Development in ChinaAbout ChinaSince 1978, when Chinese leader Deng Xiaoping began to introduce market-orientedreforms and decentralized economic planning, output has more than quadrupled and China nowhas the world's second largest gross domestic product. Indications are that this growth willcontinue.The coastal areas and cities support standards of living two to three times higher than thecountryside. This leads to a dramatic increase in the urban population.
Currently, forty cities havepopulations in excess of one million. Furthermore, a strong middle class has arisen that is capableof purchasing non-essential goods.According to the Economist Intelligence Unit (May 2002), retail sales of consumer goodswere expected to grow a year-on-year five percent in 2002 in U.S. dollar terms, beforeaccelerating steadily over the next five years. Reflecting rapid growth in household income, thevalue of consumer spending on food, beverages and tobacco was expected to rise, from US$214.5billion in 2002 to US$295.5 billion in 2006 - or 37 percent over four years.China's Major CitiesIn China, the word 'franchise' did not exist until eight or nine years ago. Many foreigncompanies that have started franchises elsewhere have been waiting for years for China to havethe trinity of requirements needed to set up successful franchises: higher incomes, a moredeveloped market and appropriate legislation. According to the China Commercial InformationCentre (CCIC), the sales volume of chain store and franchising corporations in 1999 exceededRMB 100 billion (US$12 billion), up 70 percent from 1997.
But this is still a rather paltry sum.Franchises accounted for only 1 percent of the country's retail sales in 1999 (Business China,April 2000).Franchisers are being too cautious. Since late 1997, China has had a franchising law,albeit a rather loosely worded one. There is now consumer demand for the types of productsoffered by franchises. And there is a pool of entrepreneurs that wants the opportunity to invest infranchise outlets.The Chinese government is working hard to establish favourable regulations forfranchisors. Investors should not underestimate the challenges presented by the Chinese market.By the same token, they should not be discouraged.Franchising is clearly making progress in China.
Beijing hosted its first internationalfranchise exhibition in 1998. There are now several annual international franchising exhibitionsheld in three major cities, Beijing, Shanghai and Guangzhou. In 2001, an annual franchiseconvention run by the China Chain Store and Franchise Association (CCFA) and the ChinaInternational Franchise Association (CIFA) attracted more than 1,000 people from around China.Nor is there a lack of money to buy franchises (Young, 2002).In 2003, there were more than three important franchising exhibitions in the province ofGuangdong, which attracted over thirty franchisors from all over the world. Over fifty thousandpotential franchisees attended this event. It was estimated that the output value of franchising willaccount for more than thirty-five percent of the country's gross domestic product, and the numberof people employed in this field will soon reach two hundred million (Swartz, NovIDec 2000).The conditions for franchising are improving in China as more and more companies aretaking the leap.
The very visible success of Starbucks, KFC or McDonalds franchises haveattracted hundreds of willing Chinese entrepreneurs. According to William Wright, SeniorAttorney at the law firm Lehman, Lee and Xu, an advisor to franchise chains in China, almostevery well-known fast-food chain from the U.S. is either already in China, or is in the processsetting up a venture (Young, 2002). It is not only the fast-food industries that have set upfranchises, but also photo film companies such as Kodak and Fuji, which operate thousands ofbranded outlets across China through a form of franchising agreement.However, traditional franchise corporations that have set up shop in China have mostlystuck to joint-venture structures while testing the viability of their products and building theirbrands. Therefore, at the early stage of franchising development in China, resources wereconsumed by the requirements of establishing joint ventures and supervising daily operationaldetails instead of being focused on expanding the business through franchising.Reluctance is also felt from the investor side.
Establishing a franchise is not a get-richquickscheme. Funding a franchise outlet requires a considerable outlay of time and energy andpromises a relatively low rate of return. There are also the basic conceptual difficulties. Manypotential investors in China are unfamiliar with the concept of franchising and are not willing toinvest in something abstract.The KFC Company and the Subway Company are using two different franchisingstrategies to penetrate the Chinese market, each of which has its own advantages.KFC CaseAmerican fast-food chain KFC has found a way to get around the conceptual problem.The company builds the restaurants itself and works to get them operational. Only then does itsell the working outlet to a franchisee. Because Chinese people like to look at what they arebuying, it becomes a comfort to them, and reduces their sense of risk.
The franchisor can tellfranchisees how the business is going.KFC signs an inflexible ten-year contract with the franchisee. It helps to train staff andprocure supplies as well as offer the support of its restaurant service centre. The franchisee paysfive percent of revenue for marketing and six percent for operations training, plus annualroyalties. Obviously, buying an operational store is considerably more expensive than simplybuying the rights to the brand. In 2000, the average price of a KFC franchise in China was RMB8 million (US$970,000). This eliminates the presence of small-time entrepreneurs for whomfranchising in China was generally targeted, and limits the speed at which new outlets can beopened (Business China, April 2000).
According to KFC, franchising is still in its educationalphase. The company hopes to show potential franchisees how KFC functions, and if all goes asplanned, word will spread about the benefits of franchising. Meanwhile, China remains KFC'slargest corporate-owned market outside the U.S. Until 2000, only five percent out of more thanthree hundred outlets in China were franchises.Subway CaseOn the other hand, a major sandwich chain has taken a more conventional approach tofranchising in China. All of Subway's stores in China are franchises.
The American companyclaims to be the only corporation doing genuine franchising in China.Subway charges investors an initial fee of RMB 82,800 (US$10,000). Franchisees thenset up the stores, buy equipment and supplies from Subway, and hire and train staff - all donewith Subway's guidance, in order to ensure the consistency of the outlook and the operationsystem. The franchisees pay 3.5 percent of revenues to an advertising fund and 8 percent inroyalties. Subway establishes twenty-year contracts, but allows franchisees to sell theirrestaurants if they lose interest in running the outlets. The company has expanded slowly sinceentering China in 1995.
In 2000, it only opened five stores in Beijing and one in Tianjin.2.5.5 Considerations for Franchising in ChinaChina's vast population and low labour and land costs are certainly attractive to potentialforeign investors. However, there are a number of issues one should be prepared for, such asinconsistent government policies, inadequate protection of trademarks and intellectual property,old fashioned Chinese management style, lack of training, high wastage, and numerous hiddencosts (Chow, MayIJune 1994).Some examples of the above problems are as follows. The franchising law in China isstill under revision, which can easily cause confusion to foreign franchising companies. Sincefranchising is such a new business model in China, it has taken the central government's legaldepartment a long time to complete the laws on franchising to ensure the best practices in China.Secondly, the violation of intellectual property has been a big problem for foreigninvestors in the past decade. Though the situation has improved, enforcement of intellectual rightsneeds to be strengthened.Thirdly, as a legacy of the old-style planned economy system, Chinese management arenot accustomed to focusing on improving efficiency, providing high quality service, enhancingeffectiveness and increasing profits.
All of the above are key issues for the success of anyfranchising company.Fourthly, poor human resources management is a big obstacle for any traditional Chinesecompany to expand aggressively. Qualified management recruiting, training and ongoing skillsdevelopment is essential for growth.Another issue to bear in mind is the complicated taxation system. In 1994, China had atax reform, which aimed to rationalize the distribution of tax revenues between central and localauthorities. Under the reform plan the old system was changed into a two-tier tax system at thecentral and local levels to clearly define their respective tax-collecting powers. The type of taxesincluded tariffs, consumption tax, value-added tax, personal and corporate income taxes, businesstax, and tax on turnover at railways, banks, and insurance departments (Chow, MayIJune 1994).While local entrepreneurs were quick to spot franchising opportunities, most of them stillfailed to understand the nuts and bolts of running a franchise. Franchisees need to be humbleenough to listen and learn.
In China, the entrepreneurs who can put together the money for afranchise are often used to having their own way. They are naturally determined and creative.However, individual innovation by franchisees can be the death of a brand (Young, 2002).Therefore, consistency is everything (Young, 2002).Franchising is always an attractive way to expand business and increase brand awareness.But franchisors should be very careful as they have to prepare a comprehensive contract that bothsides must agree to and follow strictly. This agreement could include numerous details such asprocedures on how to cook the food, how the cashiers should behave and how to clean thewashrooms (Young 2002).More Chinese businesses are starting to understand the importance of brand value andsome of the biggest Chinese brand owners are active in lobbying the government for strongertrademark protection (Young 2002). For instance, the domestic company Malan Noodles has builta US$40 million a year fast-food business from sales of one of China's most ubiquitousfoodstuffs by branding, quality service and food.2.5.6 Coffee Houses in ChinaThere are typically three types of coffee stores in China. They are: Taiwanese-stylewestern coffee shops mixed with Chinese eating habits, specialty coffee shops with uniquepersonalized features (e.g. Internet coffee houses, E-business coffee houses, book and coffeehouses) and the typical North American-style coffee houses (e.g.
Starbucks and Best Coffee).Best Coffee is positioned as the only competitor to Starbucks in China by promoting theimage of an up-scale Italian espresso-based specialty coffee store. Best Coffee differentiates itselffrom other local or foreign brands by not confusing the clients with a wide variety of foodsupplies, such as Chinese-style steaks, bubble tea, or Chinese fast food. Instead, it provides highquality coffee beans occupies convenient locations and offers first-class customer service. InChina, drinking coffee is becoming fashionable, yet it's not a regular part of daily life. Therefore,it will take a couple of years to educate Chinese customers on drinking coffee over tea in theirdaily lives.Table 2-2 shows the major differences on store operation among three major types ofcoffee stores in China. Best Coffee, the typical North American-style coffee store, has a flexiblerequirement on store size which is usually smaller than the typical Taiwanese coffee store.Meanwhile, Best Coffee's theme is coffee, not food; therefore, it provides a lighter menu withless choices, hence no need for a kitchen. Whereas Taiwanese coffee stores act more like arestaurant or cafk for meals or food. In other words, coffee and atmosphere are not the focus oftheir business.In Table 2-3 some major differences between Best Coffee and five other majorfranchising brands in China are compared. Compared with other franchising brands, Best Coffeerequires the lowest franchising fee and initial investment of only RMB 180,000 (approximatelyCDN$32,730) and RMB 800,000 (approximately CDN$145,455).
Also, Best Coffee does notrequire any guarantee fee like other brands. However, there is a big difference between BestCoffee China's operation and its Canadian operation. Best Coffee China operates a flat feeroyalty system, using a similar monthly royalty system as other brands. Best Coffee Canadafirmly operates a royalty system by percentage of monthly gross sales, which greatly stimulatesfranchisees' motivation for improving sales and ensuring a higher profit margin as sales grow forBest Coffee. The major reason why Best Coffee China has to implement a different royaltysystem is because of the greater pressure from its indirect competitors and from the unsatisfyingfranchising development progress. Because Best Coffee China does not have sufficientmanagement resources and operational support, it is easier to operate the flat fee royalty system.However, in the long run, a flat fee royalty system will be a hurdle for further development andimproved sales.Here is a comparison list for three types of coffee stores in China.Table 2-2: Comparison table among three types of coffee shops in ChinaNameTaiwanese(HongKong)Style Coffee ShopSpecialCoffee ShopNorth-AmericanCoffee Shop(e.g.
Starbucks, andBest Coffee)KitchenYesDependsArea--139 or186squaremetersFrom14 to139squaremetersVarious,FromI1 to186SquaremetersServeMealsYesSometimespastriesSel fserveNoYes.DrinkMenuMainlyTaiwanorHongkongstyleco ffee.localqualitycoffee.highqualityItalianstylespe cialtycoffee,tea andsomejuices.--FoodMenuregularmealssnackspastries Table 2-3: Comparison table between Best Coffee and other franchising brands in ChinaProductcategoryNorthAmericanCoffeeCoffee,Bake ry,CafeBubble tea,snacks, lightmealsCoffee,cafe, mealsFast-foodchainRetailingBrandNameBestCoffeeJap aneseKohikanCoffeeRBTBubbleTea houseShangdaoCoffeeBlue andWhiteFreshFruitPlaceFranchiseeFee (RMB)200,0001150squaremeters100,000 forthree years50,000 to800,000EquipmentDeposit:50,000InitialInvestment( RMB)600,000 -MonthlyRoyalty~ e(eRM B)4,000 - 6,000Flat fee or6percent ofgross sales(royalty)2percent ofgross sales(ads)450011 50squaremeters50001 120squaremetersand above3000lmonth2percent to5percent ofmonthly grosssales5percent ofmonthly grosssalesOthersNo quarantee-fee, no designFee, nomanaqementfeeGuarantee fee:100,0001150square metersDesiqn fee:50,000Supervisionfee:100,000115040,000 tol5O,OOOdesiqn fee:1 0,000-50,000Guarantee fee:8,000Cash flow:10,000Logistics fee:3percent ofeach month'ssales2.5.7 Starbucks in ChinaStarbucks is the major competitor to Best Coffee in China. It has a similar product line,decoration style and atmosphere, and operational model as Best Coffee. Therefore, StarbucksChina needs to be studied closely.Since it opened its first location at Seattle's Pike Place Market in 197 1, StarbucksCorporation, the largest specialty coffee store chain in the world now operates more than 7,500retail locations in North America, Latin America, Europe, the Middle East and the Pacific Rim(www.starbucks.com). In 2004, Starbucks plans to add 1,300 stores worldwide, including a boostof 950 stores to its U.S. base of about 5,475.
Some outlets are found under the roofs of otherretailers, such as retail bookstore chain Barnes and Noble Inc. Having already expanded to 34countries, Starbucks expects to eventually operate 10,000 outlets in North America and 15,000abroad (Gary 2004).Starbucks is committed to offering high quality coffee and the 'Starbucks Experience'while conducting its business in ways that produce social, environmental and economic b.
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