Bean Counter. (cover story)

DONALD, James; CHIEF executive officers; STARBUCKS Corp.; CORPORATE growth; CHAIN restaurants; COFFEE shops; SCHULTZ, Howard, 1953-; MANAGEMENT; RESTAURANTS; STRATEGIC planning; BUSINESS planning; SUPERMARKETS; GROCERY industry; EMPLOYEES

The article profiles James Donald, who takes over as chief executive of Starbucks. In the stagnant, no-margin supermarket business where he spent much of his career, Donald, 50, built a reputation as someone who could both start a business from scratch and pull off a turnaround. Ever since Starbucks founder Howard Schultz took his chain public in 1992, many people have argued that there is a limit to the number of customers willing to pay four dollars for a fancy cup of coffee. Yet in 13 years the chain has exploded from 165 outlets to 9,000. Schultz hired Donald to run Starbucks' North American operations in 2002, with the understanding that the job would be a tryout for the chief executive position. In the first quarter, store operating costs as a percent of revenue jumped from the previous year. One culprit: health care packages offered to every worker who puts in 20 hours a week. Another: more employees. The chain is constantly adding reasons for customers to linger longer at the stores or to drop by in the evening or afternoon. In addition to food, the chain has sold 500,000 copies of a Ray Charles compilation, helping the CD top the charts.