The average cup of coffee at Starbucks is $2.75 nationally.
Starbucks spends about $1 per cup of coffee.
56% of that is labor
44% are food costs & packaging
Starbucks made 26.5 billion dollars in 2019.
The profit on that was 3.6 billion.
So even though the labor/food/packaging leaves Starbucks with a 64% profit margin, the actual profit the company makes is a 13.6% margin.
Comparing that with 2019 numbers to avoid factoring in COVID changes.
McDonalds
21.4 billion in revenue for 2019
6 billion in profit
28% margin
Yum Brands “owner of KFC, Taco Bell & Pizza Hut”
5.6 billion in 2019
1.3 billion in profit
23.2% margin
Both those companies are very different than Starbucks, because both are heavily in franchises and Starbucks owns almost all the stores.
That said, making a comparison to Dunkin.
Dunkin franchises post fee to Dunkin average a 20% profit margin.
Something again comparable to Starbucks, but they have a lower cost per cup at $1.80 and they still have about half the sales being donuts, which are more labor intensive over coffee, which are about 80% for Dunkin.
Dunkin Donuts & Starbucks hold almost the same margin, even though Starbucks is more expensive in price and the products have less labor.
Simple reason is real estate costs, where Starbucks average $60 per square foot on rent and have rental/ownership costs on their real estate which are about 1.5-2x the average for fast food.
Which is the core idea to the business, that it’s less about coffee and more about finding a respectful place to meetup for 30 minutes and talk.
So is the coffee a ripoff?
Probably.
I don’t drink caffeine, so can’t actually tell if it’s better or worse, but most reviews find it’s basically the same as every other place.
What people are paying for is better locations and marketing on a brand where two people can meetup, talk and feel better about themselves, versus going to McDonalds or Dunkin.