Starbucks’ strategy: Aggressive unit growth

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Starbuck’s aggressive unit growth

In the last part of this series, we learned how Starbucks will be diversifying to grow its sales. Unit growth is another key driver that Starbucks is aggressively pursuing to grow the company’s sales. Starbucks (SBUX) has about 21,366 restaurants globally, and in the fourth quarter of 2014, the company opened 503 net new restaurants around the world. In the last 12 months alone, Starbucks has added 1,599 net new restaurants, or 8% growth in units.

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Tim Hortons (THI) added 44 units in the same quarter and 240 total restaurants for 5% year-on-year unit growth. McDonald’s (MCD) added 941 net new restaurants, or 2.6% growth in units, over the same period, and Wendy’s (WEN) closed seven restaurants over the year. Exchange-traded fund (or ETF) Consumer Discretionary Select Sector Standard & Poors depositary receipt (or SPDR) (XLY) holds several restaurant stocks, including McDonald’s (MCD) and Yum! Brands (YUM).

Number of Units 2014-11-30

Unit growth by segment

Over the past 12 months, the highest unit growth in the third quarter was in Starbucks’ China and Asia Pacific segment, with a total of 742 restaurants, followed by the Americas segment with a total of 698 units. The company opened 171 net new restaurants in the Europe, Middle East, and Africa (or EMEA) region. The company closed 12 restaurants in the remaining segments.

Growing units outside the United States

Other restaurant chains are also following similar initiatives to grow units outside the home market, the United States, to add revenue growth to their companies. The U.S. market has already reached peak in terms of revenue growth for many of these fast-food restaurants, and negative or low single-digit same-store sales further confirm this trend.

The United States is also experiencing a demographic shift, with more and more restaurants targeting Millennials who are choosing organic and fresh options over traditional food items served at fast-food restaurants. Read Why Chipotle Mexican Grill (CMG) continues to do well to learn more. Let’s next look at Starbucks’ revenues.

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