Money The Rise and Fall
posted by October 22 at 9:45 AMon
This neat little article convincingly corresponds the recent expansion and contraction of Starbucks with the real estate boom and bust that triggered the current economic crisis:
This recent crisis has its roots in the unhappy coupling of a frenzied nationwide real-estate market centered in California, Las Vegas, and Florida, and a nationwide credit mania centered in New York. If you could pick one brand name that personified these twin bubbles, it was Starbucks. The Seattle-based coffee chain followed new housing developments into the suburbs and exurbs, where its outlets became pit stops for real-estate brokers and their clients. It also carpet-bombed the business districts of large cities, especially the financial centers, with nearly 200 in Manhattan alone. Starbucks’ frothy treats provided the fuel for the boom, the caffeine that enabled deal jockeys to stay up all hours putting together offering papers for CDOs, and helped mortgage brokers work overtime processing dubious loan documents. Starbucks strategically located many of its outlets on the ground floors of big investment banks. (The one around the corner from the former Bear Stearns headquarters has already closed.)
Like American financial capitalism, Starbucks, fueled by the capital markets, took a great idea too far (quality coffee for Starbucks, securitization for Wall Street) and diluted the experience unnecessarily (subprime food such as egg-and-sausage sandwiches for Starbucks, subprime loans for Wall Street). Like so many sadder-but-wiser Miami condo developers, Starbucks operated on a “build it and they will come” philosophy. Like many of the humiliated Wall Street firms, the coffee company let algorithms and number-crunching get the better of sound judgment: If the waiting time at one Starbucks was over a certain number of minutes, Starbucks reasoned that an opposite corner could sustain a new outlet. Like the housing market, Starbucks peaked in the spring of 2006 and has since fallen precipitously.