When you think Costa paid £22m last year alone to the tax man then I think Starbucks gesture is pathetic when you think they have been "avoiding" paying ANY tax in this country for years.

Keep on boycotting them

How do they compare in terms of sales? I am pretty sure Costa has 2x more shops accross the country so I would say twice as much profit. Do you have any numbers to compare both companies?

If they're only making 10% profit selling three quid cups of coffee, they're a bunch of clueless fools. I'd bet their profit margin is nearer 50% than 10%.

Jon

You're brighter than that Jon. The profit margin on the cup might be high compared to its unit cost, but that profit has to pay for the entire company's overheads.

You must also remember that the Starbucks in your high street will be a franchise. The franchisee will be paying Starbucks UK royalty fees to use branding, recipes etc.. So the franchise will be paying their local tax bills – PAYE, VAT etc..

Nevertheless. A well managed food retailer has a 50% profit margin on food and more than that on drinks. I refuse to believe Starbucks are massively different to that, because it's not that different a business.

Let's just do some 'back of a fag packet' maths shall we...

A Starbucks is open say 12 hours a day. Say on average it sells a cup of coffee every five minutes through that day - busy in the morning, possibly not so busy at 6PM. At a profit of 30p per cup once all bills are taken care of (10% profit margin on a 3 quid cuppa). 12 cups per hour - 3.60 per hour profit. 12 hours per day, total profit per day of £43.20. Say you're really diligent and stay open seven days a week (and ignoring the fact you can't sell for as long on a Sunday), your total weekly profit is £302.40 per week which is your earnings as a franchise holder.

That's barely more than minimum wage. The person cleaning the tables is probably making more per month than the person running the franchise. And that's from working a 7 day week. I see now why there are so many Starbucks popping up, it's a licence to print money!.

Bollocks they only make 10%.

10% isn't a terrible return on invested capital these days. I know plenty of wealthy people who make far less than that. Admittedly most of them are farmers, which seems to skew their business brains somewhat.

It's got nothing to do with that though. This is not someone putting money into a pension scheme. this is retail. If you make 10% profit margin at retail on the high street you'll go out of business sooner rather than later. And I don't see a lot of Starbucks franchises going bust.

Jon

There's plenty of businesses retail or otherwise who would take your arm off for 10% profit. I think we shall have to agree to disagree!

Tom is completely right. You are confusing unit and gross margins.
A retailer in a commodotised market (like coffee franchising) who can command much over 10% gross profit is far from common.
Unit margins are entirely irrelevant in any conversation about a tax that is levied against profits.

The majority of Starbucks are actually owned by the company. There are franchises, but the numbers are small.

Which is exactly what Coffee Republic did so your 50% net margins are nonsense.

They're a bunch of very clever chappies in the accountants.

They only make 10% because there is approx a 50% premium paid to Starbucks Holland (for roasting the beans) and Starbucks Switzerland (for the purchasing of the beans)

Such a shame they aren't more reasonable with the inter-company prices