City made mistake with Starbucks - mayor
By: Cory Hare
| Posted: Wednesday, Jul 13, 2011 06:00 am
City council made a mistake by rushing a decision to open a city-owned Starbucks location at Servus Credit Union Place, said Mayor Nolan Crouse.
Last week city council voted in favour of putting $280,000 from city reserves towards a Starbucks licence, equipment and renovations to the kiosk outside the aquatic centre at Servus Place.
Council discussed the issue publicly for the first time last Monday but held private talks twice in the last few months.
“What we should have done is begun the public debate at that time. That’s a mistake,” Crouse said Tuesday in an interview.
There was pressure from administration to make a decision and council didn’t see through it and demand a postponement, Crouse said.
“What came forward was a rushed decision,” he said.
City manager Bill Holtby made a similar admission Monday night.
“Council could have postponed this decision and given an opportunity for further feedback,” Holtby said. “Administratively, we could have recommended that to council and in retrospect that may have been the right thing to do.”
The arrangement will see the city own the location and operate it according to Starbucks’ standards. The city will hire two full-time employees as well as casual staff.
Projections suggest the location will generate net revenue of $90,000 a year, which will be applied to the facility’s annual deficit — typically in the $700,000 range.
Booster Juice owner Ray Davidson estimates the Starbucks could cost him 20 per cent of his revenue, which would devalue his business by $300,000, he said.
When he bought the Servus Place location last year he did a risk assessment of a Starbucks moving in because it offers a line of cold drinks that competes with his smoothies. He determined it would never happen because Starbucks requires its licensees to have $5 million in assets.
He isn’t happy to see his landlord becoming his competition nor is he happy with the swiftness or the secrecy of the decision.
“I didn’t even get a chance to put forward my concerns. That’s insanity,” he said.
Agreements were drafted and ready pending council approval last Monday. Holtby signed the documents the next day, when they were also signed by the owners of Skybox Express, which currently leases the kiosk. By Wednesday evening, the contract was at Starbucks head office in Seattle, Holtby told council.
The city has a construction contract in place to improve the space, he said, adding it would cost about $1 million to back out of the deals that are in place.
Coun. Malcolm Parker asked to look at the paperwork, which he expects to do this week. He isn’t sure if the city can back out.
“I would hope so,” he said, “but I don’t know whether there is or not until I read the terms of the agreement.”
The controversy has caught the city off guard, said Chris Jardine, general manager of community and protective services.
“We didn’t anticipate that there was going to be some that felt like we were making a mistake,” he said.
The facility has received many suggestions that a premium coffee would improve the experience and is getting positive feedback about the decision from users, Jardine said.
The city wants to have the location open by October, in time to take advantage of the facility’s peak season, he said.