Starbucks: Coffee Chain… or Financial Machine?

Starbucks isn’t just a coffee chain.

It’s a system.

A global brand.
A habit machine.
And in many ways… a financial engine hiding inside an app.

But in Australia?

The story hasn’t been so simple.

In this episode of Good Bad Business, we break down Starbucks using our MOAT framework, Margin, Operation, Advantage, and TAM, to understand what’s really driving the business.

We unpack:

•  Why Starbucks failed the first time in Australia, and what changed 
•  How the app, loyalty system, and stored value create repeat behaviour 
•  The real margins behind high-volume coffee 
•  And whether a single store can realistically generate $1M in year one 

This isn’t about coffee.

It’s about habit, systems, and execution.

Because the moat isn’t the latte.

It’s the frequency.

And we don’t want you to get into a pickle.

If you’re thinking about buying a business,
 listen first.

If there’s a business you want us to break down,
 send it in.

And if you got value from this, share it with someone before they sign something they shouldn’t.

Because we don’t want you to get into a pickle.

Transcript

SPEAKER_02 0:02

Another cracking new episode, Fabs. Indeed. I'm excited about this one. Very excited. Yeah, this one's a hot topic. So Starbucks. Starbucks, wow. And I didn't think we'd I didn't think we'd do this one. But you know, I wanted to really understand the business behind the business. Because I think it was on our first episode where we're talking about, you know, McDonald's and the different types of business models where you know McDonald's is a real estate company and and Starbucks is ultimately a company-owned um business model where they lease out the locations. And I had a couple of my friends going, what did you what did you actually mean by that? So I thought, all right, let's let's break it down. Yeah. So let's get into it, shall we? Let's get into it. So let's talk Starbucks. And you know, Starbucks is not just a coffee shop. It's a front, Fabs, it's a front. So what is it? Well, it's actually for dramatic effects. It's a bank. Look in Australia, it's it is obviously a coffee shop, and that's what we know it is. Starbucks isn't a bank, but guess what? It actually behaves like a bank. It holds customers' money in an app. And before a drink is even made, globally, that stored value pile up is close to wait for it, over two billion US dollars. So here today, we want to try and answer one question. Is Starbuck Australia a hype brand? Or is it finally having its moment? Or is it a scalable quick service restaurant machine with a tiny little financial engine hidden inside an app? Is the moat the drinks, the stores, or the bank float?

SPEAKER_00 1:54

So let's pull it apart, Fabs. Let's do it. Welcome to Good Bad Business from a Pickle, the team that removes caveats from directors' homes. Each week we analyze an everyday business so you don't get into a pickle. We break it down using our moat framework that's margin operation advantage and total addressable market. Then we answer the real questions. Can a store do one million in its first year? Is this a good business, a bad business, or are you gonna get into a pickle owning one? And for all intents and purposes, this is to be taken as general advice, and we highly recommend you seek independent financial advice. Let's get into it.

SPEAKER_02 2:34

So let's do a quick rewind. Let's talk about the origins. It was back in 1971 in Seattle, one small store, about a thousand square feet, one employee at the start. And now let's fast forward to Australia. Starbuck lands here in the year 2000, the Olympic year. Fantastic. What a great time that was. But here's the problem: Australia already knew coffee. Okay, they're trying to sell us coffee. It's Australia. Yeah, Australians and Americans have big beef in the right thing. We invented coffee. Even MacIsay that invented it in Melbourne. We're the Commonwealth of coffee connoisseurs, you know. It's like they're trying to sell us coffee. It's like trying to sell pasta to the Italians. What are they talking about? But Starbucks did grow aggressively and it expanded very, very aggressively. Then back in 2008, they hit close to 61, and out of 84 stores, 685 jobs were gone. But that moment created the label Starbucks failed in Australia. We already said why they tried to sell us coffee. But then Act 2 comes. In 2014, the Withers Group acquires the Australian license. And that's an important detail because this isn't mass franchising to mums and dad. It's licensed professionally and operated by the group model. Fast forward again, the first surplus store in 2023, then reported a loss again during expansion. So is that a leadership message? Or is it expand first and profit later? It's really the long game. And if I remember correctly, the Withers group owned 7-Eleven. Does it? Yeah, and the the Withers group just actually sold 7-Eleven in Australia to the Japanese conglomerate, which actually owns the global license. Oh wow. But anyway, back when they actually bought the license, they certainly know a thing or two about retail, which is probably one of the reasons why Starbucks is doing as well as what it is at the moment in Australia. But it's predominantly the drive-thru stores that do exceptionally well. But we'll we'll touch on that in a brief moment.

SPEAKER_00 4:44

Yep. So let's go into the business snapshot of what it really is. So Starbucks Australia is a beverage QSR, coffee, cold drinks, frapuccinos, food add-ons, merchandise channels in store, and there's a mobile order and pay. Order ahead, you skip the queue, delivery via Uber Eats. But here's the nuance: delivery orders do not earn stars, and you can't pay using store value on delivery. So, you know, if anyone knows anything about Starbucks initially, you'd usually go to CBD and see all the uni students, all the foreign students, the tourists really lining up there. And it was only exactly, as you said, in the last few years where it really expanded and scaled. So now I'm seeing even lineups as far as Mount Druid. Mount Druid is one of the busiest Starbucks, and it's wild. You know, you went from Drossroom. There you go. And most people only go for really the Frappuccinos and the milkshakes. That's the main reason. They don't go for a standard coffee, right? So that tells you something. The app channel carries the better economics. Operator model, structured retail management, store managers, shift supervisors, formal training programs. This is system retail, not owner-operated hustle. So very similar to what you kind of touched upon with the McDonald's now.

SPEAKER_02 5:54

One of the things in the US, they've actually stopped the uni students from sitting there all day. Oh wow. And they've actually stopped the access to the toilets and things like that. Interesting. Because like someone like myself, like when you and I are in the city, like when we're running around, like we're seeing lenders, we're seeing wholesale debt facilities, where we're seeing all of our clients, and we're running around like chooks without their heads. I don't think you and I have ever walked into a Starbucks because we know that if we're trying to do some work, you're fighting with the uni students to be able to get a table just so we can open up a laptop. Yep. So people like us in the business community will actually avoid a Starbucks. Correct. I mean, you know, we can go to any hotel in the city, buy yourself a copy, open up your laptop, and do some work, and it's a more comfortable environment. Yep. And I get the user toilet. Yeah. What's next? Starbucks Australia, it clearly states that it's not a deposit facility. You cannot get cash out of your balance, but customers have already preloaded money. Because if you get one of these cards, you're gonna put money on it. That compounds pretty quickly. And it's up to nearly $500 per account. So functionally, that prepaid store value that actually creates the flow. Globally, Starbuck reports over $1.8 billion in stored value liabilities. Okay, think of that one. That is a customer money that they're sitting on on their balance sheet before drinks were even made. So that's a pretty healthy balance sheet. Because you're holding all this money from the customers out of the app. So that's what we're saying before. Like it's not a bank, but it acts like one. But there is breakage. Unredeemed balances, they actually become income over time. If you load money and hold the float, it drives repeat visits, recognizes that revenue later on. And you know, the app isn't the feature, it's actually the infrastructure of the whole bloody business.

SPEAKER_01 7:57

Yep.

SPEAKER_02 7:58

Because customers are loading up that app with funds. They're sitting on those funds on their balance sheet. So this is where you know it's an interesting business model. Yeah. You know, we talk about real estate companies, we talk about you know different models. These guys are acting like a bank.

SPEAKER_00 8:15

That's right. I think they might need a bit of a bank license or maybe a credit license eventually. I mean, the amount of uh prepaid store credits they're probably loading.

SPEAKER_02 8:23

So Starbucks in Australia, look, it is polarizing because you know it has failed in the past, but you know, people have short memories. People do love it, I believe. I know I'm not one of those people because I can never get a seat when I am in a city, and it doesn't matter what state you're in. Yeah, it's the same thing.

SPEAKER_00 8:40

No, it's the same thing.

SPEAKER_02 8:41

Yeah, friendly stuff, you know, customisation, the matcha drinks, you know, which are which are really popular. Uh to me, I'm not going to drink a green drink. Yeah, definitely not. Looks like it's off. Yeah, it's green. Definitely not, yeah. Why am I drinking a green hair?

SPEAKER_00 8:55

Like, and has it gone off? No, no, it's in a pickle, that's right.

SPEAKER_02 8:59

Yeah, it's a new pickle flavour. Okay, let's pick to that office and give them and we'll we'll create a branding license. We'll allow them to do a pickle pickle coffee. It's green. It's consistent. I like it, I like it for how you think. Yeah, yeah. Consistency. Now, look, when people actually hate it, it's wheat coffee, it's overpriced, it's too sweet, dirty tables, you know, because the uni students have left all their shit on the table, haven't cleaned up after them. The app doesn't work. But look, let's zoom out. This is a product market split. Starbucks win on theatre and they they win on the sweet, the cold drinks. It loses with the traditional espresso expectations, which is obviously a big one, especially for the older crowd. I know as I sort of get on, as I get older, I just want a small little espresso. Like, can we just speed the process up? You know, where how do I get that? I want one of these sweet fancy drinks. And the app, look, there's very low ratings from what we can see. Login failures, that there's scanner issues. And if the break, if the app, I'll rephrase that, if the app actually breaks, it breaks down their whole flywheel. And as we've alluded to, that balance sheet of customer funds is extremely important. Yeah, so what I don't understand, their app should be the best app globally because they're relying on customers uploading or loading, I should say, funds onto the app.

SPEAKER_01 10:22

Yep.

SPEAKER_02 10:23

And for this thing to break down, I mean, that's essentially from what we can see here, that's your whole business model.

SPEAKER_00 10:27

Yeah, uh, definitely. And and and you know, it's funny because I used to work next to a uh Starbucks in the city, and I remember I would see one uni student sitting there for like seven hours. That pisses me off. And he would just sit in the same table and you notice there'll be no business people. If you go to any other coffee store and you know better than not to get a bit, you know, get a bit grotesque and personal, but you try having one of those thick shakes or those Frapuccinos and go do a full day of business of running around the city and watch how long you last before you have to run to the tour.

SPEAKER_02 10:56

Oh mate. You have a you have a you have a fiesta and you need a you need a siesta, like after one of those bad boys. I already go kick one of the homeless guys off a park bench and my mate, I need your park bench, I've got to lie down after this frappuccino, man.

SPEAKER_00 11:12

And that's exactly why we we don't drink it. So let's go right into the moat. So M for margins. So coffee style businesses often show 33 to 43% cost of sales. Labor can sit in the mid 20 to 30% range, and occupancy is anywhere between six to twelve percent.

SPEAKER_02 11:29

That's high, man. If your labor's at 30%, yeah, and your cost of sales is 33%. Yeah. I can I can already see that there's a problem. A mathematician, or sometimes we'd like to say a mathematician, to be able to work out that bad boy.

SPEAKER_00 11:45

And that's what happens, right? As you said before, if the app kind of fails and you're relying on the store, then your margins instantly tighten up. Yeah. And then with the occupancy to be 6-12%, I mean, in a strong store, contribution margins look excellent. In a stress store, they collapse fast. Once again, fragility, margin killers for Starbucks Australia, delivery dilution, app friction, as we said before, price backlash, especially when you compare it to the very sensitivity Australians generally have with their coffee. They want really top-of-the-range coffee. Once again, a common dispute they have with the Americans in the online space. And what has to be true? There's high beverage mix, tight labor control, reliable repeat traffic through the app. What's your score on it?

SPEAKER_02 12:26

I look every time I've got a Starbucks coffee, and I'm pretty simple. I I I drink a long black. How can you stuff that up? Yeah. Like it's it's water and coffee. And it's always cold. Always. It's just always cold. Always. I've stopped I've stopped going. Yeah. For that reason alone. They just if you can't get a long black, then there's really no point. The margins, I'm just not I'm not satisfied with the margins. Like your cost of sales between 33 to 43%. And your labour costs, I mean, think of the rent plus your labour in the city locations. Yeah. That's why your drive-throughs do really well. 100%. Is because you can pump through as many cars as as you want and you're not restricted on space. Correct. You know, these stores are restricted on space. One, you can't get a seat because they're uni students, and two, you're paying for all that rent where you can't turn tables over. I mean, the whole success out of a restaurant or a cafe is bums on seats. You know, you've got to be able to move those bums off those seats as fast as possible to get new customers on. That's right. So for me, margin the margins are high with coffee. You know, add a bit of water and some coffee. Yeah. It's huge margins because you're buying a new bowl and it doesn't go off. So your margins are actually very, very high. So for margin, I'm actually going to give it a high score because the margins are high in a coffee business. I'm going to give it a six out of ten for margin.

SPEAKER_00 13:55

Yeah. I would be inclined to be similar to you, but because I have a bit of a grudge against Starbucks frappuccinos and don't eat their coffee, I'll give it a five out of ten because you're right. And also not to mention their device. Their coffee making machine is state of the art. Oh, state of the art. It's very efficient. But yeah, I'll give that a five out of ten.

SPEAKER_02 14:11

I'm going to touch on a couple of things just before we go on to the next section, if that's okay, Fabs. Yeah, 100%. Because my usual tangent. The businesses that we work with we always tend to focus on the LTV to CAC ratio. Okay, so what is that? Lifetime value is LTV, and CAC is the cost of acquisition of the customer. I don't know why I know this, but I I happen to know this. When let's talk about the CAC because it's probably easier to understand. So if you spent $10,000 on advertising and labor has cost you $10,000, is $20,000. If you have 20 customers, it's a thousand bucks a customer. That's your CAC. The cost of acquisition for Starbucks is actually quite quite low because you know they're they're obviously reliant upon locations and they've got good locations and whatnot. The thing is that the lifetime value of a customer is around $15,000 per customer because it's consistency of a daily habit. So over an eight-year period, they can actually earn around $15,000 off that one customer. And so when you start to compound that with the app and that one customer loading that card up, it becomes quite scalable, which is why they've been able to scale globally. But there's other limitations that they have, which is obviously what we've broken down. It's similar to our business, which is something that we talk about on a b on a daily basis. What is the lifetime value of the client? Now, if we're restructuring a client, it's typically going to be, you know, within our wholesale funds and that commercial loan, that debt recycling home loan is going to be around sort of three years. But then after we've been able to restructure the client and put the client in a better position, we're then able to potentially get all non-bank. That's now a 15, 30-year term. So our lifetime value of the client is I'm not going to go through the numbers live on a podcast, but it's actually quite quite high because we started with one product, but what we've done is that it's not just a three-year term, we've actually converted it to a 30-year term. That's right. So something that we focus on on a business on a daily basis is the lifetime value of the client. That's right. Now, for everybody that's out there that's listening to this, know your LTV. Very crucial. So I just wanted to really push that just a little bit harder because this podcast is about education. What is the lifetime value of your client? Starbucks is around $15,000 per customer. Yep. That makes sense and well said. Oh, thank you, mate. Every so often, you know, there's some knowledge that comes out with some wisdom. Operation. Yeah. Well, let's break it down. Look, operational, it's obviously strong. They've scaled it globally. Their operations are the best in class. Um, so we're not going to take that away from them. They do have defined roles, structured training. It is a manager-led model, and that works for them really, really well because you know the manager has taken responsibility of each individual store. So I think that's an important point. Lower owner dependency, high manager dependency, which is something that you know we've discussed on other podcasts. I think it was the first one with sort of spanued, you know, you couldn't leave that trailer. That's right. You ain't leaving that bad boy. Yeah. It's reliant on the manager every day of the week. And the reason why a Starbucks, if you buy a Starbucks, you can walk away from that because the operations are down pat, it's manager led. You can open up as many stores as you want. So I think that's really, really important. Drive-thru, it actually adds pressure from a lot of the stores because it sort of clogs up the flywheel, so to speak. And when I say flywheel, it's probably the model, you know, there'd be more cars coming in versus customers. Yep. Because, you know, again, I could we keep picking on the uni students, but you know, the uni students are only going to buy once and they're going to sit there all day where the drive-thru is a pumping through like there's no tomorrow. And if there is a lot of customers coming in through the front of the store, it clogs up.

SPEAKER_00 18:11

Yep.

SPEAKER_02 18:12

And that's one of the reasons why in the US they've actually stopped, you know, a lot of that sort of sit for long periods of time. Because you've got to keep the float, right? Yep. It's bums on sort, you've got to turn them over. Wages and compliance in Australia is obviously a serious to most businesses. So for me, look, a systemization score, it's going to be a big one for me. I mean, their systems are down pat. It's not, it's not owner-led, it's manager-led. So for me, I'm going to score this pretty high. I'm going to give that a really a seven out of ten because it can be a little bit better. They can get their storefront and obviously the dining area a lot better. So for me, it's a seven out of ten, mate.

SPEAKER_00 18:47

Yeah, I'd actually agree with you with seven out of ten. Yeah, exactly, based on what you said. It's not an owner-led business. It can kind of operate on its own, very similar to the way Maccas is, just very efficient. And from what I know, I think McDonald's and Starbucks have invested in a very similar kind of price coffee machine. I think it's in the vicinity of like 15 to 20,000, but it gets everything on point with the temperature. And you punch you punch in a button, man.

SPEAKER_02 19:09

Like you just punch a button, this thing spits itself out.

SPEAKER_00 19:12

Yeah, yeah, yeah. I've heard some people even say it's like the Tesla of coffee machines. Exactly. You don't need some fancy barista.

SPEAKER_02 19:17

And but that's but that's why they're able to scale. Yep. Right. Because you you press a button. Yep. Maccas talk about it all the time, where it's you know, this barista made coffee. It's a 15-year-old kid pressing a button. What are you talking about? It's fine-tuned everything. Fine-tuning, yeah. So again, they can scale this because it's a simple system. Yep, yep.

SPEAKER_00 19:34

You know, focus on what you do really, really well and scale it out. 100%. And let me just add one caveat. We don't mean to bash on the unistudents. I myself was a unistruder once upon award student. And I know myself, speaking on my own perspective, I was being very frugal of everything. So I was also a unistrun, I just can't remember that far back. So all right, let's get into it. The advantage. So brand scale is real, seasonal drops, visual drinks, digital ordering, strong advantage. But sweet drinks can be copied. Local cafes compete hard. Price power exists, but only in segments. So look, in my perspective, in terms of advantage, I would say they do have the advantage of brand awareness as well as the operational and efficiency. But I would say where they are much weaker on it is we live in Australia. Everyone is passionate about coffee and everyone is ready to give their feedback about it. Yeah, we are coffee snobs. And as you said, a lot of us, especially in the corporate space where we're the best clientele, we're the ones having five to six coffees a day. We are the ones that want efficient ones. Everyone that I meet in finance wants an espresso, a piccolo, a double shot, you know, a very efficient. A piccolo? Yeah, is that the is that the piccolo? Exactly. You know, it's a little bit bitter because you're the hit, but gives you the hit that you've got to do. So look, I would say in terms of advantage, I'm gonna be a bit harsher. I'm gonna give it a four out of ten, namely because it does have some advantage, but I would say when it comes to comparing it to local cafes, I personally have picked local coffee stores over it.

SPEAKER_02 20:58

100% it's the product itself, anyone can copy it. And so, what really differentiates Starbucks from your local coffee house? Yeah, and the local coffee house can obviously adapt the best way that they can for local taste. Yep. Starbucks can't do that because it needs to go through the corporate machine, and that's where people like us or Aussies in general are gonna go for the local coffee house every day of the week because there's a certain blend that they want or there's a blend that they like. Um, so really advantage, they don't really have an advantage because you know you can order a coffee these days via via Uber from your local coffee store. That's right. And if you're not advantageous with the particular product, and if it's if it's primarily sweet, or you're gonna cater to the younger market and not the older market, so they've actually segregated themselves from a larger org. By not being diverse. There's too many sweet drinks. Yep. Agreed. And that's where it sort of falls apart for me. So there's no advantage. Low score for me, two out of ten. Two out of ten.

SPEAKER_00 22:12

Yep.

SPEAKER_02 22:13

Tam, total addressable market. Look, this is obviously a big one. There's around 70 stores reported. There's ambition for 100 plus. The total addressable market is meaningful, but it's not infamous. Australia is punished over expansion. And they did that once. Like they overexpanded and they shot themselves in the foot. You've got Maccas doing coffee and it's just as good. I mean, your Gloria Jeans have now got drive-thrus. Uh there's a lot of competition, but see the drive-thru is the key. The Gloria Jeans, the ones that are doing drive-throughs at the moment, they're actually shifting that model to predominantly drive-thru now.

SPEAKER_01 22:51

There you go.

SPEAKER_02 22:52

And so that's where you've got to get that right. The same thing with Maccas. I mean, the majority revenue for a Maccas is the drive-thru. Drive-thru without it. It's always has been. And we've again we've spoken about on previous podcasts. You go into all KFC, they've got a separate section just for Uber. Yeah, that's right. And Starbucks in the US, if I remember correctly, it's all AI now. There's not even a staff on the drive-thru window. It's all AI. And then why and why wouldn't you? All QSR restaurants are going to do exactly the same thing. Yeah, that's right. I mean, you know, it's pretty easy to be able to download your menu, put it onto a large language model. It's all inference training. It's pretty straightforward. And you don't have to train a large language model, it's purely inference. All of the information is online, so you can convert that into a chat bot relatively easy. Why do you need an actual human behind the drive-thru window? So I don't know, Tam, it's a total addressable market. So that's a score. The the TAM itself, it's obviously a big market. I mean, Australia is obviously growing, but it's very competitive. They've got to be able to position themselves as a premium espresso that's better than your local coffee store because Aussies are going to go to their favorites. Yep. And so therefore the ceiling is lower. So for me, look, Australia's a big market, but you've got to be able to adjust your product to be able to justify the TAM. And I don't think they're quite there. But if I'm to score the TAM, the market's big. So I'm going to score that quite high. I'm going to give that a seven out of 10. But if I'm to look at the business model, which we're not doing obviously with the TAM, it would have been a lower score. So I'm going to I'm going to stick to the TAM and give it a seven out of 10.

SPEAKER_00 24:35

Yeah, yeah. I'd be inclined to agree. I might take it like one point down because it was similar to what we discussed with the barbecue galore, strong total address of market, but they haven't really customized according to what that market wants. So if they had customized it more towards an espresso and standard coffee, they'd probably do a lot better because one thing that a lot of local cafes lack is that efficiency, right? So yeah, I'll give it a six out of ten, but you're right, it does. There is a strong demand for coffee, a strong total address of market. You just got to get it right. Yeah.

SPEAKER_02 25:04

You know, they failed in Italy. Really? Yeah, yeah. Yeah, they they opened a Starbucks in Italy, right? They tried to sell coffee to the Italians.

SPEAKER_00 25:12

Yeah, well, they were in deep orders there. Wow.

SPEAKER_02 25:15

They thought they could take them on.

SPEAKER_00 25:16

Oh mate, that that's another level of arrogance. I look at the colour.

SPEAKER_02 25:22

But it just goes to show that you've got Starbucks Global. They've gone, you know what? Yeah. Let's let's sell let's sell coffee to the Italians. Yeah. Let's sell ice to an Eskimo, you idiots. Let's open a kebab store in Iran. Exactly. Let's sell chicken to the colonel. Yeah, exactly.

SPEAKER_00 25:43

Idiots. Alright, so what's the moat scoreboard? So we gave the margin collectively between us was 11 out of 20. Operation was 14 out of 20, advantage six out of 20, and total adjustable market 13 out of 20, which gives us a total moat score of 44 out of 80, which is just a pass of 55%. So, you know, well done, Starbucks. Just you know, refine your coffee expertise a bit more. So let's look into the million dollar in the first year test. So the average ticket in order to earn 1.18 mil in the first year of operating your store, you'd have to have an average ticket of $11 per transaction with around 300 transactions per day, um, factoring 360 trading days per year, which is that gives us the 1.18 mil that's I mean their average ticket is is 11 bucks a day. So yep, so that's the average ticket, and that's obviously with the Frappuccinos and the milkshake. So there you go. So cows are expensive. Yep, exactly right. And yeah, so with a conservative case, closer to two stores would be the safer measure. Yeah. What's your thoughts on that?

SPEAKER_02 27:00

Yeah, look, I I I believe the two stores, I mean, if it's not uh owner-led, then you can quite easily open a second or a third store. The problem with that strategy is that you're cannibalizing your brand by opening up too many stores in the same location, which is why they shot themselves in the foot in the in the first place. But look, demand isn't the hard part, it's execution. And you know, when staff peaks, the app reliability, it its price, it's perception, the that flywheel of that bank analogy that we're talking about before, it has to spin because for Starbucks to grow, that flywheel needs to spin. And that's one of the reasons why, you know, globally their share price has started to affect shareholders, and that in itself, you know, without that flywheel, without that execution, it does affect shareholders, it affects shareholder value, so they've got to get that right. Final verdict look, Starbucks Australia isn't a bank, but it is running afloat. It's not a failed brand anymore, it's a structured QSR machine with a digital engine that actually is attached. So is it scalable? Of course it is. I mean, they're they're opening up more stores like there's no tomorrow. Is it automatically profitable? No, it does evolve a bit of work, and like we've alluded to you know throughout this episode, they've got to get things right, they've got to think more about the customer, they've got to be a little bit more diverse in regards to the products that they offer. But you know, the moat isn't the latte, it's actually the habit. And habit depends on trust because if we go back to what we said earlier on, their their LTV for their client is actually quite high. So consistency is the key. But if those clients start to drop off, it affects the float.

SPEAKER_00 28:50

Yeah, that's right, well said. And effectively the app isn't a side feature, it is the business model. And if the digital layer cracks, then the financial layer cracks, hence, once again, indicating a sign of fragility.

SPEAKER_02 29:05

So the close, let's wrap this up. If you think that this is just about coffee, it's not. It's about the float, it's about frequency, it's about operational discipline. And if there is another business that you want us to break down, please by all means send it in because we don't want you to get into a pickle signing off. Thank you very much.

SPEAKER_00 29:27

Thank you very much, sir. It was a pleasure.