Starbucks 2006 Annual Report Download - page 9

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establishing relationships with prominent third parties that share the Company’s values and commitment to quality.
These relationships take various forms, including licensing arrangements, foodservice accounts and other initiatives
related to the Company’s core businesses. In certain situations, Starbucks has an equity ownership interest in licensee
operations. During fiscal 2006, specialty revenues (which include royalties and fees from licensees, as well as product sales
derived from Specialty Operations) accounted for 15% of total net revenues.
Licensing — Retail stores
In its licensed retail store operations, the Company leverages the expertise of its local partners and shares Starbucks
operating and store development experience. Licensee partners are typically master concessionaires, which can provide
improved access to desirable retail space, or prominent retailers with in-depth market knowledge and access. As part of
these arrangements, Starbucks receives license fees and royalties and sells coffee, tea, compact discs and related products
for resale in licensed locations. Employees working in licensed retail locations are required to follow Starbucks detailed
store operating procedures and attend training classes similar to those given to employees in Company-operated stores.
During fiscal 2006, 733 new Starbucks licensed retail stores were opened in the United States and, as of October 1, 2006,
the Company’s licensees operated 3,168 stores. During fiscal 2006, 426 new International licensed stores were opened. At
October 1, 2006, the Company’s International operating segment had a total of 2,170 licensed retail stores. Product sales
to and royalty and license fee revenues from U.S. and International licensed retail stores accounted for 45% of specialty
revenues in fiscal 2006.
At fiscal year end 2006, Starbucks total licensed retail stores by region and specific location were as follows:
Asia Pacific Europe/Middle East/Africa Americas
Japan 650 Spain 55 United States 3,168
China 223 Turkey 51 Canada 178
Taiwan 175 Greece 50 Mexico 101
South Korea 174 Saudi Arabia 46 Peru 9
Philippines 98 United Arab Emirates 44 The Bahamas 5
Malaysia 71 Kuwait 36
New Zealand 45 Switzerland 27
Indonesia 45 France 26
Austria 11
Lebanon 11
Bahrain 8
Qatar 8
Cyprus 7
UK 6
Jordan 5
Oman 4
Ireland 1
Total 1,481 Total 396 Total 3,461
Licensing — Grocery and warehouse club
In grocery and warehouse club stores throughout the United States, the Company sells a selection of Starbucks»whole
bean and ground coffees, as well as Seattle’s Best Coffee and Torrefazione Italia branded coffees and a selection of
premium Tazo»teas through a licensing relationship with Kraft Foods Inc. (“Kraft”). Kraft manages all distribution,
marketing, advertising and promotion of these products. In International markets, Starbucks also has licensing
arrangements with other grocery and warehouse club stores. By the end of fiscal 2006, the Company’s coffees and
teas were available in approximately 31,900 grocery and warehouse club stores, with 30,000 in the United States and
1,900 in International markets. Revenues from this category comprised 24% of specialty revenues in fiscal 2006.
STARBUCKS CORPORATION, FORM 10-K 5