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The Seattle Times reports on the opening of Starbucks’ new Reserve store, on the ground floor of its headquarters there, saying that the company anticipates that this will be just the first of a planned 1,000 locations.

Starbucks says that the new format is part of an “expansion toward a higher-end, fuller-service part of the food and beverage market,” and includes its new Princi bakery concept.

While somewhat similar to its Roastery concept, which creates a so-called “theater of coffee,” Starbucks’ Reserve concept “hews closer to the company’s concept of a ‘third place’ to gather and linger. With the addition of a full bar, Starbucks hopes it can finally persuade customers to linger on into the afternoon and evening, when cravings shift from caffeine to booze.”

Starbucks chairman Howard Schultz says that falling rents around the country, even in prime locations, will allow the company to expand the Reserve concept to 1,000 locations. “Trust me, rents are coming down!” he wrote in a recent internal memo. “This is not going to be a cyclical change in our occupancy expenses, but a permanent lowering of the cost of our real estate.”
KC's View:
I think this is an interesting project conceptually, but I have two concerns.

One is the notion that real estate prices are not cyclical. Really? This surprises me - I thought pretty much everything was cyclical, but especially things like real estate prices.

The other thing is the apparent premise that the economy is only going to go up, up, up. Again, everything is cyclical. The economy has to go down at some point, and what happens with these stores if we go into another recession and suddenly people are cutting back on discretionary spending … and the Reserve concept seems entirely built on discretionary spending. This has happened before to Starbucks, in 2008, and sometimes it seems as if they did not learn that lesson.