Starbucks aims for job creation with new program
Starbucks CEO Howard Schultz speaks at an event in New York City.
Tess Vigeland: And now on this Thanksgiving we turn to the question of job creation. It is the number one economic issue in this country -- yet no one seems to have figured out how to get companies to hire more people. Howard Schultz has brewed up an idea that he hopes can help. The Starbucks founder and CEO launched an effort this month called "Create Jobs for USA." It's a microlending program aimed at helping small businesses bring on more employees. The money will come, in part, from Starbucks customers, who this week started to see $5 donation cards sitting near the coffee giant's cash registers.
Howard Schultz, welcome to the program.
Howard Schultz: Thank you very much for having me.
Vigeland: So you brought gourmet coffee to the masses. Now you want to be a banker. Square that circle for me.
Schultz: Well, I don't want to be a banker. What I'm trying to do, more than anything else, is use Starbucks' scale for good. When I look at the landscape of 9 percent unemployment -- almost double that in the Hispanic and African-American community -- I believe that we can at Starbucks leverage the equity of our brand in a way that's quite unique. We will collect millions of dollars and we will get it in the hands of the Opportunity Finance Network, which has a national organization of community-based loan organizations that will provide access to credit to small businesses, start-up businesses that will be a catalyst for job creation at a time in American when, unfortunately, banks are not lending.
Vigeland: Explain for us how that dollar donated by one of your customers will end up helping create a job in a small business?
Schultz: Well, I think there is evidence amongst small businesses that they're having problems getting access to credit that they've gotten before. And so when we examine what we could do, we uncover the Opportunity Finance Network, which among their network is these organizations that are community-based, many in underserved communities across the country. We will provide millions of dollars to these organizations and they will vet the companies that are trying to get access to credit, provide them with a low-interest loan (anywhere from $10,000 to $500,000) and 100 percent of all the donations will go to the cause. Starbucks will provide $5 million as a starter from our own foundation and we'll absorb the cost of anything to do on the administration level.
Vigeland: So this is not a grant, it's an actual loan. So when the business pays back that loan, where does that money go? It goes back into the fund?
Schultz: Exactly. And you know, Starbucks has been involved for in microloans and microfinancing in emerging countries and what we've found is that 98 percent of those loans are paid back. And in fact, the Opportunity Finance Network has given us their own statistics. Almost the exact same scenario, 97-98 percent of those loans that they've been lending has actually been paid back.
Vigeland: According to the information that you've released, for every $3,000 donated through the program, a job will be created or maintained. Can you help us understand the math there? Because $3,000 doesn't sound like a lot to keep someone in a job.
Schultz: Yes, for every dollar that we raise, the Opportunity Finance Network or the OFN is able to raise more equity and borrow against it. So there's a multiplier of seven times. We also learned that the number that equates to a job is $20,000. So the $3,000 that you quoted times seven gives us the job that will be created and is sustainable.
Vigeland: What's your ultimate hope for this effort? You know, microlending has a bit of a mixed track record.
Vigeland: Certainly a lot of success, but also some questions raised about it. What are you hoping to see at the very end?
Schultz: Well, first off, we're setting up within Starbucks a small group of people that will be engaged in this process from the very beginning to ensure the fact that the concerns that you raised do not come to fruition. But in addition to that, we hope that we can create a message and a signal to other businesses and other corporations that we can't wait for Washington. We need to do our part. And also, I think after the first year, we'll be announcing partnerships, whose companies have assets and complementary skills that will bring more reach, more awareness and more money to this cause.
Vigeland: How confident are you that your public, your customers are going to step up to the plate here? I mean, there isn't a great track record for efforts like this, where you kind of put out a jar, basically, and say, "Can you help out your fellow man?"
Schultz: I have optimism that this is a different moment in time, where Americans are gonna help Americans. There's millions of people who come through Starbucks every day, and I believe we've created the kind of proposition that they will trust and support.
Vigeland: And in closing, any chance I could convince you to make the pumpkin spice latte a year-round treat?
Schultz: Oh, that's funny. I'll consider that.
Vigeland: Howard Schultz, thank you.
Schultz: Thank you.
Vigeland: And to that question of whether people will actually donate? We stopped by a Starbucks here in L.A. and asked a few customers.
Woman 1: It was pretty inexpensive, given what you pay for a coffee. So, I'm not sure how effective it'll be, but I'm hoping that it will be effective.
Man 1: And I would wanna know more about how the program worked.
Woman 2: It's not a significant amount of money for most people, and it's for a good cause.
Woman 3: I think anything we can do to stimulate the economy is a good idea. If they ask me I might consider it.
Vigeland: Apparently many of us have considered it. Starbucks reports it raised a million dollars in donations in just the first two weeks of the program.