Starbucks to buy 40 stores from Canada licensees

Wed May 21, 2008 1:59pm EDT
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By Lisa Baertlein

LOS ANGELES (Reuters) - Starbucks Corp SBUX.O subsidiary Starbucks Coffee Canada Inc said on Wednesday it has struck a deal to buy about 40 stores and other assets from two licensees in Quebec and Atlantic Canada.

Starbucks said it would convert the licensees' stores to company-operated outlets and buy full development and operation rights for future retail stores in the provinces now controlled by the licensees.

The deal with Coffee Vision Inc and Coffee Vision Atlantic Inc is set to close on August 25. Starbucks did not disclose terms.

Under the agreement, more than 740 of the licensees' employees are expected to become employees of Starbucks Coffee Canada.

While other restaurant companies have been selling stores to franchisees, Starbucks has stuck with its strategy of owning stores outright.

Selling company-owned restaurants reduces company sales, but improves profit margins because the sellers collect fees from franchisees, while offloading the expense of operating restaurants.

Starbucks is investing in international growth as it grapples with slowing domestic sales.

Company executives said in April that, over the next three years, its major company-operated markets outside the United States would be Canada, the United Kingdom and China.   Continued...

<p>A Starbucks branch is shown in downtown Los Angeles, April 24, 2008. REUTERS/Lucy Nicholson</p>