Starbucks brews up small profit
Controversial concession predicting growth in 2013
By: Peter Boer
| Posted: Thursday, Mar 21, 2013 06:00 am
The Starbucks at Servus Credit Union Place made a profit in 2012, just not as large a profit as the city had originally predicted.
A council information request shows that in 2012, the controversial Starbucks concession made a profit of $37,280 on the basis of revenues of $513,672 and expenses of $476,392. That amounts to 6.7 per cent of the facility’s total revenue.
When it purchased the Starbucks license in July of 2011, the city predicted profits of $90,000 annually that would help offset the ongoing operating deficits at Servus Credit Union Place.
“I would say for any new operation it takes two to five years to identify your traffic patterns and sales volumes, said Diane Enger, facility director for Servus Place. “In any first year you’re are making adjustments.”
In total, Starbucks recorded 104,000 transactions in 2012 with an average value of $4.94.
But none of the profit from this year will be going to offset losses at Servus Place. Enger confirmed the $37,280 will be going to pay down the capital expenditures for setting up the Starbucks, and into a reserve account for lifecycle maintenance.
“Starbucks was important. It contributed to the users’ experience,” said Enger. “It potentially drove traffic to the facility as well.”
Reaching that $37,280 did not come without some sacrifice. According to the information request, the city cut back on staffing, reduced the frequency of supply deliveries, cut down on operating hours over the summer and changed dairy suppliers to save on milk costs. They also started returning empty jugs to the bottle depot.
“We go through a lot of milk jugs,” Enger said.
Mayor Nolan Crouse, long an advocate of the city’s decision to purchase the Starbucks, said he was pleased with the first-year results.
“I guess you could argue 2012 was a start-up year. You would think it would take a foothold and become stronger,” Crouse said.
The decision to set up a municipally operated Starbucks has not come without controversy. Local businesses and groups such as the chamber of commerce criticized the decision as they felt the city was in direct competition with business. It was also revealed the city had renegotiated the lease with Skybox Grill to secure the space for its Starbucks, a process that reduced Skybox’s lease payments as a result.
In March of 2012, the Canadian Taxpayers Federation nominated the city for one of its Teddy Awards – a dubious recognition to highlight government waste – because of the Starbucks decision.
Crouse said every other city-operated concession in St. Albert loses money, so it’s nice that one concession actually makes a profit.
“If we had put a (regular) concession in Servus Place and it would have lost money, which it could have and probably would have. Then we’d have that criticism to deal with,” Crouse said.
Enger said the Starbucks has already seen sales growth of 15 per cent in January and February of 2013, compared to the first two months of 2012. Starbucks is still predicting profits of $95,000 for 2013, $35,000 of which will be banked or used to pay down its capital costs. The remainder will go towards Servus Place’s bottom line.
“We are projecting to see some continued growth over the next two years,” Enger said.