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[23 comments]

Starbucks Asks Customers to Chip In to 'Create Jobs for USA'

October 4, 2011

Back in August when Starbucks CEO Howard Schultz made his plea for others in business to turn their backs on politics (at least giving money to politicians) and focus on creating jobs, many dismissed it as a sort of quixotic fantasy. At the time, Mr. Schultz criticized representatives in Washington for pushing "partisan agendas before the people's agenda." He also said, "In these uncertain times, it's important that we ask what we at Starbucks can do. We have a responsibility as well as an opportunity not to be bystanders, but to act in ways that can ease the collective anxiety inside and outside the company."

Now, Starbucks has announced a new initiative that appears to support Mr. Schultz's agenda. The company said that beginning on November 1, it will team up with the Opportunity Finance Network (OFN) on an initiative called "Create Jobs for the USA" to collect donations at its stores that will be used to fund lending to small businesses across the country.

People who go to Starbucks and donate $5 or more will receive a red, white and blue wristband with the message "Indivisible" on it.

"Small businesses are the backbone of America, employing more than half of all private sector workers — but this critical jobs engine has stalled. We've got to thaw the channels of credit so that community businesses can start hiring again," said Mr. Schultz in a press release. "Create Jobs for USA empowers Americans to help other Americans create and sustain jobs, with Starbucks and OFN as a catalyst and the Indivisible wristband as a symbol of our country's unity."

OFN represents 180 Community Development Financial Institutions (CDFIs) across the U.S. that have been set up to provide financing in places where traditional lenders are hard to come by. The Starbucks Foundation is donated $5 million in seed money to the Create Jobs for USA Fund at OFN.

According to the Starbucks' release, "Lenders will issue $30 in financing, on average, for each $5 donation. ... Based on conservative forecasting models developed by OFN with input from independent economists, one new job will be created or retained for approximately every $21,000 in loans." CDFIs in the program have a 98 percent repayment rate based on historical averages.

Mark Zandi, chief economist at Moody's, said, "Create Jobs for USA is exactly the kind of innovative and entrepreneurial solution that America needs to get its economy back on the right track. CDFIs are well known to be highly effective at creating local jobs in communities that need them the most, especially when it comes to helping community businesses that are having difficulty securing credit during the current economic climate."

FINANCIALS:     [NASDAQ:SBUX]

Discussion Questions:

Discussion Questions: What do you think about Starbucks and the "Create Jobs" initiative? Will other businesses get on board with similar ventures?

While we value unfettered opinion, we urge you to show respect and courtesy for people or companies about whom you comment. Keep in mind that this is a public, professional business discussion. RetailWire reserves the right to edit or refuse the publication of remarks that we deem unsuitable. We may also correct for unintended spelling and grammatical errors.

Instant Poll:

How much will Howard Schultz's 'jobs' campaign help or hurt Starbucks' business?

Comments:

Good for Howard!

At least he is trying something. Whether it works or not remains to be seen but one thing is certain -- taking positive action beats carping from the sidelines any day!

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Ryan Mathews, Founder, ceo, Black Monk Consulting

Of course, as in the case with any cause, the money might or might not be well spent, and the cause is only as strong as the direction and leadership within. However, as causes go, I like this one for Starbucks. It's patriotic, non political, and it has a nice aroma.

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David Biernbaum, Senior Marketing and Business Development Consultant, David Biernbaum Associates LLC

I love the idea. The question is, if I want to open a coffee bar offering high quality and unique drinks with free Wi-Fi and power, will I still get a loan?

I also have to wonder if $5 is a little too steep, considering I just paid $5 for a cup of coffee.

I agree with Schultz that there are problems in Washington and it would seem the political agenda has become more important than American people. I find it hard to believe that Starbucks does not involve itself financially in federal politics in some way, shape or form. I could be (and hope that I am) wrong.

Doron Levy, President, TheMortgageMachine.ca

I am not a Starbucks customer because, frankly, I don't care for their coffee.

But I like this program enough that I'll stop in for a tea and donate my $5 bucks. And I'll do it more than just once because I too have a community-based small business idea I'd like to get funding for. Donating will demonstrate my inspiration and hope for funding of more great small business concepts in the USA -- maybe not mine, but somebody's.

Some will fail, yes, but all small biz entrepreneurs will grow and learn from the experience, fostering values our country needs most -- EFFORT, SPIRIT, RESILIENCE AND COMMUNITY.

Way to step up and do something versus just pontificate, Mr. Schultz.

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Anne Howe, Senior Vice President, Shopper Solutions, part of Acosta Mosaic Group

I applaud Mr. Schultz in this effort. While I have a difficult time seeing how much this will help, I do see it as a first step in recruiting other businesses with high traffic to join up. If we continue to wait for the administration and Congress to take action and stop fighting, it will never happen. Great effort, Mr. Schultz.

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Ed Rosenbaum, CEO, The Customer Service Rainmaker, Rainmaker Solutions

This is how you spell "LEADERSHIP".

Set the politics aside and look solely at the message that says "we're about more than just making money." As I sip my morning Grande Bold from Starbucks, it makes me feel all warm and fuzzy inside.

Now, let's anxiously await other retailers following this type of great initiative to drive loyalty -- or will they just take another markdown instead?

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Kevin Graff, President, Graff Retail

This is definitely a win-win for all. Starbucks is creating good will to retain and gain customers. Moreover, Starbucks is showing other businesses that there are ways to give back to the community, and what better way than to find ways to create more jobs? Since our government is handling it so poorly, it's proactive and way better than making political donations to any party.

'STACKSMD'

I agree with Anne. Not a fan of Starbucks coffee and frankly hate standing in line behind someone who as to use 10 adjectives to describe the drink they want. However, am a fan of anyone who is willing to help small businesses, especially if they are willing to actually help fund them.

Starbucks has demonstrated that it will support this effort with its money and work to collect more for the cause from those willing to donate. On my next trip through O'Hare, I will stop by the Starbucks and donate.

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Steve Montgomery, President, b2b Solutions, LLC

This is nice, but I'm not sure why I would go to a nationally-owned franchise when I can just go to a locally owned coffee shop that will keep the money from my purchase in my community.

National chains pushing small businesses is just absurd. People shouldn't go to a national chain to support small business; instead they should take their dollars directly to their local retailers. This is just a feel-good, smoke and mirrors tactic from a company that has long favored style over substance.

Jesse Rooney, Sales Support Coordinator, Acosta Sales and Marketing

Good public relations, and the right message in encouraging job creation in the U.S.

However, I'm doubtful that this is a fund-raising blowout at the store level. Consumers have several other issues that they have in mind that rate a higher priority than making this cash contribution.

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Roger Saunders, Managing Director, Prosper Business Development

Coincidentally, I was just listening to Schultz being interviewed on NPR. He certainly does not have the mindset of a typical CEO.

This is a fantastic idea and hopefully one that goes viral among companies throughout this country. For Starbucks, it is a message of who they are.

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Gene Detroyer, Professor, Independent

I love this idea, and hope many others join the effort. It's been "politics over people" for a long time in Washington. Now, what we need is another campaign to elect all new representatives who pledge to serve only one term, represent the people (not the party) and vote to eliminate their pensions, elite health insurance, and lobbying money. (Fat chance, eh?)

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Warren Thayer, Editor & Managing Partner, Frozen & Refrigerated Buyer

Awesome! Seeing an executive doing something besides debating issues or criticizing initiatives is refreshing and a definitive display of leadership. Hooray for taking a first step.

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Camille P. Schuster, Ph.D., President, Global Collaborations, Inc.

Having 40 years experience in a small business, I doubt that this Starbucks effort will be of much use. At the same time, I do have a deep appreciation for the ability to raise some capital. However, long ago I learned that, for a business owner, there are two distinct kinds of money: good money and bad money. Bad money is the kind you get from people who want it back (with interest). Good money is the kind you get for value delivered, and it is YOURS to do with as you damn well please.

The fact is that bad money is a heavy burden on a small business, when usually the real problem is that you don't have any realistic approach to good money, which is what business is really about.

We're in trouble today as a country because people were printing money without any creation of value, shoveling it out to people who shouldn't have gotten it, and now the whole country is suffering from the idiocy of bad money.

None of this is to say you should never borrow -- I couldn't have built buildings and bought expensive equipment, sometimes, without it. At least buildings always provided their own security against debt -- until government destroyed the link between value and ability to repay.

Things are tough, but I was told years ago, "Someone is always thriving, just make sure it is you!" Keeping your eye on the good money and the future is good advice. This too will pass.

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Herb Sorensen, Ph.D., Scientific Advisor TNS Global Retail & Shopper, Adjunct Senior Fellow, Ehrenberg-Bass Institute

What a cynical question, George. And what a pity others saw it in a similar light. (I'm looking at you, David, Doron and Jesse.)

Whether the initiative helps Starbucks or not shouldn't really be the issue. As a non-Starbucks customer, it might just get me through the door once or twice. Like Anne, I'd probably stick to tea but would be willing to contribute to using the critical mass and name recognition of Starbucks to help small businesses. Like Jesse, I do normally prefer to support small businesses directly, but in this case, I think the extra leverage of a big brand can be used to spread its benefits further.

As for the potential for inspiring other businesses to participate and helping small businesses to grow, I would say the former is moderate and the latter could/should be massive (if the former get on board, that is). Finding a way for individuals to make a positive contribution, beyond just having external forces spending their money for them, could be a great morale booster as well. Which is something most of us need round about now short of taking up Warren's suggestion and running for Congress ourselves, which is a discussion for another day.

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Bernice Hurst, Contributing Editor, RetailWire

I wasn't fond of Mr. Schultz' comments back in August (and the censor wasn't fond of mine, either) and though I don't find this action offensive, I have trouble getting behind it. The reason is simple: Starbucks is neither a bank nor a PAC and I think mixing business and politics -- or even politics thinly veiled as patriotism -- is a bad idea that will ultimately have a downside. It always does.

'notcom'

WOW, it is great ... only IF the money truly get distributed correctly. That seems to be the "big rub" in most gift-giving efforts. I am not familiar with OFM -- getting money back into the community and into the passionate entrepreneurs' hands if a KEY. Great, Howard. I am one of your biggest fans.

P.S. - I will look into as an initiative for our company.

Phyllis Heppenstall, Founder COB, Peekay, Inc.

I think this is a great concept, and if well executed has a chance to do some real good.

But I have some nagging questions.

Financial institutions are risk-averse right now, even as they sit on a boat-load of cash. That cash isn't making them much money just sitting there, but they claim that loan demand is low, and those that are looking for money frequently aren't qualified.

So, what exactly is OFN going to invest in? I recognize that the target is communities and neighborhoods that have been under-served by traditional financing, and that the historical repayment rates are solid. But historical data is largely irrelevant to the current economic environment. Will the Starbucks Foundation accept risk levels that traditional lenders currently won't? And so, how exactly will individual contributions be invested?

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Ted Hurlbut, Principal, Hurlbut & Associates

I understand and applaud his meaning, but my issue is one of consumer perception.

Americans may easily conclude working folks have given enough in the form of bailouts. I wonder how willing Marge the secretary is to finance a business loan as she spends her last $2 on a cup of Joe on her way into the office?

Consumers are making all manner of adjustments to make ends meet. Note the peanut price increase is only partially due to weather; many families have shifted from meat to peanut butter as a less expensive, more versatile and shelf-stable form of protein. We question if this person is ready to do work they expect Wall Street to handle.

On the surface, it looks like an easy way of exploiting a news item while appearing to advocate for workers, so in that regard, other businesses may either follow suit or be on board with Starbucks. It's a win-win for them.

But it strikes me as almost hypocritical to ask the same workers to finance their recovery who in many cases have had pension and healthcare benefits cut, haven't had real wage growth for years, or in the worst case, have been outsourced. We could be wrong, but those camping out on Wall Street are not going to go for this and they're not alone.

I'd look for another way to be the "people's" coffee shop.

Jinida Doba, Associate, Dorsey & Company

Guess it bears repeating based on some of the comments here. The 180 Community Development Financial Institutions in the program have a 98 percent repayment rate based on past loans.

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George Anderson, Editor-in-Chief/Associate Publisher, RetailWire LLC

I like this idea, but what would really make this shine is if there is some transparency to the process. If I put in my $5, where does it go? Who does it help? I have no control over that and do not really expect to. At the same time, if I can see where the money is going, it helps me see that Starbucks has bypassed the politics and truly embraced the passion of helping America.

To be proactive, if they were to put this on their site, I would see that and then go donate. I would be absolutely happy to help.

Paul Flanigan, General Manager, Experiate

Bravo to Mr. Schultz for setting an example for other retailers to possibly follow in step. Starbucks makes a strong statement in their backing of small businesses in this time of need.

My one hesitation in supporting this effort is that dollar amount. To Doron Levy's point, I just paid $5 for a cup of coffee, now I'm being asked for $10? Perhaps a less flexible monetary request may brew better in the minds of Starbucks consumers.

Still, a very nice step in the right direction.

Hayes Minor, Director, Strategic Planning, MARS Advertising

At least he is trying to do something. Now big business which is recording record profits needs to start hiring to get this economy working again.

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Zel Bianco, President, founder and CEO, Interactive Edge

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