2. SCENARIO
Tully’s, unlike Starbucks, does not have a strong European presence. The
corporate office has been approached by Café Italia, which wants to open
up franchise stores in Italy. What are the pros and cons of forming a
partnership with this company to open up franchise stores, versus your
current plan, in which company owned stores would not be opened in Italy
until sometime in 2014?
WHY ENTER ITALIAN MARKET?
• Italy has one of the highest per capita coffee
consumption rates in Europe.
• Potential to become first dominant U.S. coffeehouse
in Italy.
3. PROS OF FRANCHISING
• More exposure with less expense.
• Franchisee would assume more risk, and if successful,
Tully’s could purchase stores later.
• Partner is more knowledgeable about market, avoiding
research costs for Tully’s
• Quicker to market than 2014
4. CONS OF FRANCHISING: CONFLICTS
• Less control, quality or otherwise
• A coffeehouse failing in Italy could hurt reputation in
U.S.
• Tully’s reputation trusted to franchise
• High cost in ensuring franchises are abiding Tully’s
policy
• Price conflicts- typical coffeehouse in Italy charges
$0.90 for espresso and $1.90 for a cup of cappuccino
5. CHALLENGES TO EITHER PLAN:
ITALIAN COFFEE CULTURE
• Italians favor dark roast
• Most of Tully’s flavored coffees would be considered
children’s drinks in Italy
• 70% of coffee in Italy consumed at home, with
remaining in particular Italian coffee bars with patron
loyalty
• Italians do not carry coffee around outdoors with
plastic/paper cups.
