Howard Schultz: 'Business Leaders Cannot Be Bystanders'


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Photo by Adam Bielawski

Starbucks (SBUX), the house that Schultz built, is a success story that has inspired many. It is also a Top 10 holding in the Restaurant Finance Monitor Stock Index (http://www.restfinance.com/Restaurant-Finance-Monitor-Stock-INDXX/) and deserves comment.

Starbucks has led both technologically and culturally through its 175,000 “green aprons.” However on June 26, its founder, Howard Schultz, will move on to bigger, and hopefully better things. This is a tall order considering Starbucks today serves 75 million people every month. One possibility is that Schultz will run for president. “Schultz for President” in my opinion, is a risk that customers and U.S. citizens of the United States would appreciate. After all, at 64, Schultz is plenty young and few hands-on entrepreneurs of his stature seek to have as much social impact. Even his critics would say Schultz has earned the right to simply enjoy his success rather than make such a bold move, especially now that the brand is struggling.

Okay, now that everyone knows where I stand on Schultz, let’s dig down and see what this potential presidential candidate might offer:

Raising capital is most certainly not going to be an issue for Schultz, but this is not because he should be expected to fund his own campaign. He personally has a fortune estimated to be worth $3 billion. President Trump reportedly spent $66 million of his own money in a $122 million campaign. I’d expect that Schultz has built an unparalleled network of inspired entrepreneurs, executives and wealthy supporters to contribute. Although not necessary, and probably not legal, one has to wonder whether Starbucks customers would be willing to kick in an extra $.50 a coffee towards his campaign.

Schultz pioneered the use of automation, artificial intelligence and technology especially when it benefitted the delivery of a positive customer experience and made good business sense. A Schultz campaign I’d expect, would embrace technology and social media with a positive tone, similar to the company’s strategy. There’s no question, President Trump’s use of technology and social media was important to his election success. Trump relied on personality, reputation and Twitter. Schultz would be expected to do the same.

Schultz has not been specific on the issues he intends to emphasize, however, during a CNBC interview on the day of his resignation announcement, he made clear the following.

  • He’s concerned about the U.S. debt load and it should be noted that Starbucks grew without meaningfully leverage. “We are going to pay for this $21 trillion in terms of the next generation and it’s unfair,” said Schultz.
  • He believes the vast majority of Americans want good immigration policy and better policies around gun control. “We need border security. There is a lot of non-truths. As an example, two-thirds of the undocumented people we are talking about are not people that have crossed a border. They’re here because their visa has expired,” Shultz said. 
  • Schultz believes the corporate tax cuts were generous. Rather than most of the benefits going to the company, Starbucks decided to return 50% of the benefit to the workers.
  • On trade: “We’re in a trade battle I do not understand. Our problem is not China. Our problem is that we need to pay $400 billion in interest on $21 trillion in debt,” said Schultz. 
  • “We need to fix the problem that 45% of the people in America don’t have $400 saved for a rainy day,” said Schultz.

Whether Howard Schultz runs in the Democratic primary or as an independent is a question. Running as a Democrat may require less upfront money, but it might force him to compromise his message. As an independent candidate, he could push his agenda with less distraction and actually illustrate his technological savvy. He has the capability to broadly reach voters and many probably would find his social agenda appealing. However, there always remains a certain elitism of the customers of Starbucks who can afford a $4-$7 per cup of coffee.  How does that translate in all of America?

As for the Restaurant Finance Monitor’s Stock Index, public scrutiny is difficult and businesses are challenging to run as public companies. Schultz isn’t the only CEO that’s moving on, as there has been a great deal of turnover. Few CEOs, with the exception of Cheryl Bachelder (Popeyes) and Patrick Doyle (Domino’s), have retired at the high point of their company’s franchise power. Ron Schaich, the founder and chairman of Panera Bread, was able to take his company private, notably because he wanted the company to plan for the long term.

Each of these entrepreneurial CEOs had qualifications, like Schultz, that qualifies them to be president. They include:

  • Long term vision appealing to the needs and desires of a large numbers of people.
  • The ability to unite a culture around a common mission to achieve key metrics that drive growth.
  • A sense of urgency that is measured in terms of eclipsing minimum customer expectations.
  • Growth is about global expansion and the implementation of delivering to different demographic constituencies.

If you are an entrepreneur or restaurant person, I hope you’ll find Howard Shultz’s possible run for president inspiring. I am not sure how Schultz will ultimately fare when and if he runs, but if he does run, his decision to give back to society is a sacrifice we all should support.

 

This article was written by Dan Weiskopf, creator of the Restaurant Finance Monitor Stock Index. For more information about the index, contact Dan Weiskopf at dweiskopf@accessetfsolutions.com.

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