Starbucks grew from 11 to 50 stores between 1987 and 1990 while losing money, betting that treating employees exceptionally well would create better customers. The company rejected franchising to protect its culture, choosing slower company-owned growth instead.
[FOREIGN LANGUAGE] In August of '87, we had 11 stores and 100 employees, and a dream to create a national retail company around the coffee experience, good coffee in America. But there was another dream I had, and that was to build a different type of company. A company that potentially could achieve the delicate balance between profitability and the fiscal responsibility of building shareholder value, but the balance of also having a heart, benevolence, and integrating a social conscience in everything the company would do. And hopefully one day— remember, this was '87— the company would be known as much for its values, its culture, its guiding principles, as it would the quality of its coffee. Fast forward from '87 to '89 and 1990, the company was beginning to get some traction. We had about 50 stores. We still were not making money. And I think we all realized at the time that we were not in the coffee business serving people, but we were in the people business serving coffee. That if we wanted to exceed the expectations of the customer, we had to first exceed the expectations of our people. We made a very important strategic decision early on that franchising could not maintain the culture and values of the company, that all it would be would be an access to cheap capital. And so we continued on track of opening and building a company-owned system.
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