Advice from Starbucks Founder Howard Schultz

Howard Schultz is well known as the founder of one of the most successful independent businesses ever created—Starbucks. But do you know he’s also a franchisor? Schultz bought coffee franchise Seattle’s Best years ago and has more recently invested in the trendy yogurt franchise Pinkberry.

I recently heard Schultz speak at the Ernst & Young Strategic Growth Forum and he shared some great advice and insight that all business owners can benefit from.  Schultz returned to the helm of Starbucks after it hit a rough patch because he says, like Michael Dell and Steve Jobs did before him, he needed to come back to “reinvent and rescue” his company. Shultz uses a word not often associated with business—“love”—when he talks about Starbucks. Starbucks, he says, needed “love and nurturing.”

One of the reason Starbucks was suffering was increasing competition from the likes of franchise juggernaut McDonald’s. But he believes that competing with McDonald’s made Starbucks “better.”

Schultz undertook a “listening tour” with his customers to find out “what was locally relevant.”  And he went back to his roots. There’s a good lesson here for all franchisors. Schultz says, “I didn’t want to be seen as a large company, but as a company that, while large, is doing great work in my local community. I remembered what it was like to have one store, to fight for survival when I couldn’t make payroll, when I had to ask vendors to wait to get paid.”

But the nostalgia ends there. “The old way of doing things needs to be challenged,” he advises. Some questioned his acquisition of the Seattle’s Best franchise and thought he was “cannibalizing” Starbucks. But he views Seattle’s Best as a way to segment the coffee market, claiming its “lighter brew” and different store design attracts an entirely different demographic of coffee drinker.

Schultz believes in taking care of his people. Starbucks famously offers health benefits to its employees, even the part-timers. In fact, he believes, “The only way to exceed the expectations of your customers is to exceed the expectations of your people.” And the key is “creating value” for your customers, which is why Starbucks recently introduced its reward card.

Sometime success can actually create a roadblock to a company’s continued growth. We all, no matter the size of our businesses, need to remember where we started.  As Schultz says, “The entrepreneurial spirit is back at Starbucks.”

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Rieva Lesonsky is CEO of GrowBiz Media, a content and consulting company that helps entrepreneurs start and grow their businesses. Follow Rieva on Twitter @Rieva. Visit SmallBizDaily.com to read more of Rieva's insights on small business and to buy her newest book, Startup 101: Quick Tips for Starting a Business.