The Best Coffee

[MacMillan of Rathdown]

I realise this but I was comparing their success and failure - not how the companies are actually run. I think the fact that Costa is a franchise has benefited it simply because it makes investors worry about opening stores too close to one-another.

Costa franchises grant the franchisee a defined territory-- no other Costa franchise within a specific distance, which means you don't have franchise holders competing against each other for the same customer. But your store could end up competing with a non-Costa Coffee shop right across the street.

Another thing to consider is that Costa makes money whether the franchise is successful or not. They are paid a franchise fee up front, and if the franchise holder goes belly up, they are in the enviable position of re-selling the business. That being the case we don't have any clear idea as to how many Costa Coffee franchises are in the tank.

The Starbuck's position seems to be that "marginal stores", those with less than high levels of profitability, are being closed. It's their philosophy that a Starbucks customer is a "Starbucks" customer and that they will drive an extra couple of blocks for their Starbuck's fix. So far this seems to be true, with many Starbucks stores reporting an increase in sales as near-by, less profitable, stores are closed.

Both companies are profitable-- Starbucks by eliminating the overheads of running marginal stores, and Costa Coffee by continually expanding its franchise network.

In the long run, however, it really comes down to the taste preference of the customer as to who makes the best cuppa joe.