Starbucks: America's scapegoat

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If you read the papers fairly regularly, you probably know that Starbucks is closing 600 of its stores. There are a lot of reasons for this, as The New York Times recently explained, including high gas prices, high food costs, and a generally lousy economy, which, if the stock market today is any indicator, isn't going to be improving any time soon.

All of this equals fewer people drinking coffee.

But The New York Times also pointed out that Starbucks had a plan to grow exponentially. In 2004, it announced that it would double its speed of expansion and reach 15,000 stores in the United States, twice its current 7,000 stores.

Well, as the Times reports, Starbucks got a little lazy when making decisions on where to locate its stores -- locating one store across the street from another, for example, so that profits were spreading thinner rather than growing fatter. It also didn't help that grocery stores and bookstores now sell Starbucks at their own mini bistros, sometimes just within blocks of a Starbucks coffeehouse.

But without discounting any of the above, I have another theory. I don't think it's just the shaky economy or lousy real estate. I can't help but think that people are finally simply following the advice financial gurus are always giving them. They're cutting out their daily $4 cuppa coffee.

Seemingly every magazine article, newspaper story or blog post about saving money, includes the fact that you should really give up your expensive daily gourmet coffee habit. It's become a cliche, and still it's often high on the list of budget busting techniques.

One personal finance author, David Bach, who has written books like Start Late, Finish Rich and The Automatic Millionaire, coined a name for the practice: the latte factor.

As his web site says, the latte factor is "based on the simple idea that all you need to do to finish rich is to look at the small things you spend your money on every day and see whether you could redirect that spending to yourself. Putting aside as little as a few dollars a day for your future rather than spending it on little purchases such as lattes, fancy coffees, bottled water, fast food, cigarettes, magazines and so on, can really make a difference between accumulating wealth and living paycheck to paycheck."

(As a magazine writer, I have to object to one of those purchases he suggests not spending your money on.)

But it's not just Bach, of course. There's a great new book out called Spend 'til the End by Laurence J. Kotlikoff and Scott Burns, and sure enough, they mention Starbucks in their book three times and really hit at the coffee chain on page 205 when they say, "Do you know how much your daily $3.79 Starbucks fix is costing you per week, per month, per year, per lifetime? Do you know how much of your lifetime living standard you are sacrificing to spend a quarter hour each day pretending to speak a Romance language? A lifetime Starbucks addiction isn't cheap. It costs the same as a 3 Series BMW, which won't keep you up at night."

The Complete Idiot's Guide to Personal Finance in Your 20s and 30s by Sarah Young Fisher and Susan Shelly, tackles the Starbucks dilemma on page 112.

In his book The 250 Personal Finance Questions Everyone Should Ask, author Peter J. Sandler brings up Starbucks as early as page 7.

I'm not sure what Starbucks can do to reverse its recent spate of bad luck. It's hard medicine to swallow, finally realizing that your product is essentially the scapegoat for America's miserable saving habits.

Though if I can offer CEO Howard Schultz any reassurance, it's that not everyone is turning away from Starbucks. As I'm sure he knows. The chain still has plenty of die-hard fans. There are still customers out there like my wife who says that she will give up her Frappuccino habit only when somebody someday pries it out of her cold, dead hands.

Geoff Williams is a business journalist and the author of C.C. Pyle's Amazing Foot Race: The True Story of the 1928 Coast-to-Coast Run Across America (Rodale).He blogs to pay for his wife's Starbucks addiction.

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