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Pastimes : Starbucks SBUX

SBUX 88.87

+0.8%

3:59 PM EST

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To: Sturgeon who wrote (95)	9/3/1996 11:36:00 PM
From: GloriaE	of 148

Rod, I would like to make two observations. A friend of mine ran a franchised restaurant. He told me his profit margin was 20% and ROE 40%. However, he ran the restaurant himself. If he hired a manager, his margin and ROE would come down to 10% and 20%, resptively, still much better than SBUX. So, here is one investor who would not take out a SBUX franchise. Second, SBUX seems to be having a lot of problems keeping up with the rapid expansion. The west coast warehouse is often out of stock, so stores are not getting the supplies they ordered. As number of stores increased the amount of training employees received are dropping to nothing. Employee dissatisfaction is growing. The company has difficulty processing paychecks even. Errors in pay go for months without remedial action. I am now convinced that SBUX is a good candidate for shorting. The question is when. I would appreciate seeing a post from you when you think the time is right. I have enjoyed our discussion. Thanks. Gloria

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