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Would a Howard Schultz presidential run hurt Starbucks?

Politics don't affect restaurant sales in general, but this could be different, says RB’s The Bottom Line.
Photograph courtesy of Starbucks

The Bottom Line

Earlier this year, Howard Schultz stepped down from his roles with the company he founded, Starbucks, and speculation has raged ever since that he would run for president in 2020, likely as a Democrat. That speculation has only increased lately.

Being a finance writer for a business-to-business publication, my thought immediately went to this: How would a Schultz run affect Starbucks’ sales?

It’s not an easy question. I put it to my Twitter followers this week, and they didn’t really agree with one another, either, though more than half thought that it would either help Starbucks or have no effect whatsoever.

Yet we are also in uncharted territory here. The restaurant industry does have people who have ended up in political office. Doug Ducey, the former Cold Stone Creamery CEO, is the governor of Arizona.

But we’ve never really had a major name brand founder run for president. That leaves us with little evidence that would tell us what would happen with Starbucks were Schultz to run for president.

In general, politics have little ultimate bearing on a restaurant chain’s sales. At the end of the day, most people don’t question whether the founder of a restaurant chain is a Republican or Democrat, as long as the person up front does their job and gives them a good burger or cup of coffee.

And, for all of those that might care enough to not eat at a certain chain, there are others who feel the opposite.

Chick-fil-A, long considered a conservative company given its Christian heritage, its determination to remain closed on Sundays and a controversy over gay marriage, is one of the strongest-performing restaurant chains in the U.S. That might be due in part to its penchant for locating in places where its values resonate with the community. But it has done well in that liberal bastion that is New York City.

And earlier this year, a planned boycott of In-N-Out over political donations fell flat.

Of course, there is the story of Taylor Gourmet, which blamed falling sales on public reaction to its founder’s appearance at a White House small business event led by President Donald Trump. But Taylor Gourmet didn’t have the history that an In-N-Out or Chick-fil-A or a Starbucks has, and it has other issues.

Also, any impact would be felt only if Schultz were to be the nominee. And by all indications, there are plenty of people who could run in 2020, meaning Schultz will have plenty of competition.

Still, analysts have worried about the potential impact of a Schultz run on Starbucks. And it’s difficult for me to say that a presidential run wouldn’t impact the company in some fashion, especially if he ends up winning the nomination.

The country is intensely divided. A certain segment of the population could well reject Starbucks if Schultz were to be the Democratic candidate. To be sure, that would likely attract the opposite effect in areas where he’s more popular and the dual impacts would offset one another.

For evidence we go to the Taylor Gourmet situation. The bankrupt, 19-unit chain indicated in reports that sales plunged shortly after the White House visit. Assuming that’s true, it’s an indication of where Taylor is located, in the heart of the traditionally Democratic District of Columbia.  

It’s possible that Starbucks units in more conservative areas would see lower sales during a Schultz candidacy, and locations in more liberal communities would see a boost. And Starbucks, unlike Chick-fil-A, Taylor Gourmet and In-N-Out, is much more geographically spread out. It has a lot of locations in the South and Southeast.

Theoretically, the people that would likely change their habits would be those who are less loyal. But those are precisely the people Starbucks is having a problem keeping these days as the chain’s same-store sales have flattened.

The best defense Starbucks has is its coffee. It is the most habitually consumed product in the restaurant space. It’s good enough to have made Starbucks the country’s second-largest restaurant chain while convincing consumers to pay $2 a cup for it. It’s probably good enough for consumers to ignore the campaign while they get it.

Still, this is uncertain territory. A presidential run is completely different from a White House visit or a failed boycott.

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