Earvin “Magic” Johnson is a busy camper. In between opening up a movie theater in a different city almost every other week, Johnson has found some spare time to enter into a 50-50 joint venture with the Starbucks Coffee Co.
The partnership developed out of a meeting about a year ago between Kenneth Lombard, president of Johnson Development Corp. (JDC), and Arthur Rubinfeld, senior vice president of store development for Starbucks. Eager to venture into urban areas, Rubinfeld discussed how their companies might work together to help Starbucks penetrate the urban market. Johnson says JDC, which he founded in 1994, provided them with a “magical” vehicle to do just that.
“We established Johnson Development to identify opportunities to revitalize communities and pursue business development in underserved neighborhoods,” says Johnson, JDC’s chairman and CEO. “Starbucks’ level of commitment and interest in this effort should serve as a role model, and we’re thrilled to be working with them.”
Based in Seattle, Starbucks has 1,500 retail locations nationwide and earned $967 million last year. While JDC won’t reveal how much is being invested in the deal, Wall Street Strategies, a New York investing and consulting group that monitors outlets like Starbucks, says the restaurants generate an average of $320,000 annually, depending on location. Charles Payne, president of WSS, says the deal could be lucrative for both Johnson and Starbucks as the company has been receiving good industry feedback. “They’re on their way to becoming the next Ben & Jerry’s.” According to the Specialty Coffee Association of America in Long Beach, California, specialty coffee beverage retailers have become the fastest-growing distribution channel in the coffee industry in the last five years.
The Johnson deal will pave the way for at least 15 stores to be opened annually. The first is scheduled for this spring in the Ladera Center strip mall owned by JDC and several partners in Ladera Heights, a multiracial, middle class suburb of Los Angeles. Both partners will split the operating and building costs, while Starbucks will manage the operation. This site is not considered an inner-city location, but Starbucks says due to its racial mix it’s the best place to start an enterprise.
While other sites haven’t been selected yet, Starbucks says it’s possible some locations may open in various Magic Johnson Theaters across the country, which would include Los Angeles, Atlanta and Houston.