The Business Model of Starbucks Explained: The Reason 86% Black Jackson, MS Doesn't Have a Starbucks

So the whole #RaceTogether initiative of Starbucks (Nasdaq: SBUX) has quickly ended before the real fun could start. 

An effort by a huge corporation to extend the lecturing and racial monologuing of white guilt was abandoned within a week of it launching. [Starbucks baristas stop writing "Race Together" on cups: Starbucks baristas stop writing "Race Together" on cups; company says phase out part of plan, Yahoo! Finance, 3-22-15]:

First comes displacement of the black people via white pioneers (gentrifiers) then comes the Starbucks to make money off of the new residents of the community -- whereas the old residents repelled franchises from expanding there...

Starbucks baristas will no longer write "Race Together" on customers' cups starting Sunday, ending as planned a visible component of the company's diversity and racial inequality campaign, according to a memo. 

The coffee chain's initiative will continue more broadly without the handwritten messages, Starbucks spokesman Jim Olson said. 

The cups were always "just the catalyst" for a larger conversation and Starbucks will still hold forum discussions, co-produce special sections in USA TODAY and put more stores in minority communities as part of the Race Together initiative, the memo from CEO Howard Schultz said.

Too bad. Not being one to patronage Starbucks, the thought of receiving a handwritten message from a barista to talk race wasn't enough to convince to stop at the local Seattle-based franchise in my area (and there are way, way too many). 

But the good stewards of the Starbucks ship seem disinclined to acquiesce to the pressures of Black-Run America (BRA), with plans to "put more stores in minority communities."

How... white of them to try and brighten the smiles of minority-areas by putting a Starbucks next to the Dollar Store, check cashing/title pawn store, and liquor store. Ending the horrendous plight of heavily black areas affected by not only being a food desert, but also being a Starbucks desert, is a powerful, socially-conscious move by CEO Schultz and those other custodians of the famous brand. 

But this move by Starbucks to empower minority communities with embarrassingly overpriced coffee seems to be a complete departure from sane corporate decisions guiding expansion applauded by Spencer Rascoff and Stan Humphries in The New Rule of Real Estate. 

Rascoff is the CEO of Zillow.com, perhaps the most interesting site on the whole Internet; Humphries is the chief economist. 

Chapter Four of their new book happens to be titled The Starbucks Effect: How Lattes Perk Up Home Prices. Why not take a quick look at some of the choice passages?: 

Now that you know about gentrification, you may be wondering what fuels it. The answer is, the same that fuels the rest us: coffee.  

But not just any old cup o' joe.  

Starbucks, the iconic coffee roaster and retailer, has grown into a $15 billion company with more than  19,000 location in more than 60 countries. Starbucks' mission is "to inspire and nurture the human spirit - one person, one cup and one neighborhood at a time." But as it turns out, Starbucks correlates with something else, too: rising home values. 

Here's what we can tell you: Starbucks equates with Ventisized home-value appreciation. Moreover, Starbucks seems to be fueling - not following - these higher home values.  

And the reason why is that Starbucks' real estate choices are, in their words, "as much an art as a science." When deciding where to hang their next shingle, they marry right-brain ingenuity with hard-headed, led-brain analysis - exactly as should.  

Let's look at the historical home value appreciation of areas that now are located within a quarter mile of a Starbucks. A home that his now near a Starbucks would have sold, on average, for $137,000. A home that is not near a Starbucks, would have sold, on average, for $102,000. 

Fast-forward seventeen years to 2014. That average American home has now appreciated 65 percent, to $168,000. But the Starbucks adjacent property has far outpaced that, appreciating 96 percent to $269,000. 

PICKING LOCATIONS: AN ART AND A SCIENCE 

Armed with this data, we headed down Seattle's First Avenue to Starbucks HQ. There, we had the please of chatting with Arthur Rubinfeld, who oversees Starbucks' location-selection process, and his extremely talented team. We asked them, is the Starbucks Effect the product of careful, data-driven decisions on their part? And their answer was, more or less, yes.  

The Starbucks team explained that while they have twenty or so analytics experts around the world poring over maps and geographic information systems data - assessing factors like an area's traffic patterns and businesses - the company also empower dozens of regional teams to come to their own conclusions about location, store design, and a host of other issues.  

Yet, even with their reams of data and locally driven decision-making, our Starbucks friend noted that there was no single silver bullet. "The beauty of Starbucks is our understanding of real-estate site locationing, Arthur told us. "It's an art and a science." (p. 49-54)

Oh, the "silver bullet" isn't hard to figure out. 

Located only a few miles from Atlanta, Clayton County, Georgia was 100 percent white in 1970; today, the county is nearing 80 percent black and devoid of one Starbucks. 

Hilariously, 74 percent black Birmingham has three Starbucks locations in the city (one has closed, according the Starbucks web site); all are within four blocks of each other within the University of Alabama-Birmingham campus... an institution keeping the city alive, barely. 

We've already established 86 percent black Jackson, Mississippi doesn't have a Starbucks; nor does  4.9 percent white Camden, New Jersey have a Starbucks?

Note to Zillow: Starbucks isn't driving the increase of property value; the displacement of the black population - the primary factor holding down a neighborhood's potential - via gentrification attracts businesses more interested in being in the black than surrounded by blacks. 

Starbucks just happens to be one of those corporations basing its expansion model off of this simple business practice: the importance of understanding the Visible Black Hand of Economics. 

Were it not, 86 percent black Jackson, Mississippi would be a city with a Starbucks on every corner.