Peterborough Starbucks franchise receives £3.6m investment

August 27, 2018

Following an initial £5.6m growth capital investment in 2015, Connection Capital has invested a further £3.6m into Starbucks UK franchised business 23.5 Degrees Ltd to fund its ambitious expansion plans.

Since Connection Capital’s original investment, the company has acquired and opened 40 stores, including twelve “drive-through” stores, and has just celebrated the opening of its 53rd store, in Peterborough.

23.5 Degrees opened its first store in Hampshire in 2013. Since then it has grown from 20 employees to 700 and has served an estimated 5.6 million customers.

It will use Connection Capital’s investment alongside new bank finance facilities from HSBC to accelerate its roll-out strategy, targeting 150 stores within the next four years. It is well on track: two more sites are already planned to open by the end of August, with a further 23 scheduled to open within 12 months.

23.5 Degrees currently has a large pipeline of drive-through stores – a sector of the market which has significant growth potential and is relatively immature compared to the US.

It is targeting potential sites on main arterial routes, close to major retail destinations or on large industrial estates. However, it will also consider retail park and ‘drive-to’ destinations, as well as high street units in prominent, busy locations.

The expansion comes as the UK coffee shop market is expected to continue to grow strongly. According to consultants Allegra Strategies, the market will exceed 31,400 outlets by 2022 with a turnover of £13bn – up from just over 24,000 outlets and a turnover of £9.6bn in 2017.

Pascal Wittet, the Partner at Connection Capital leading the investment, said: “23.5 Degrees has grown rapidly in just a few years, creating hundreds of jobs and investing millions of pounds into the UK economy along the way. We’re proud to have been part of that. With this new funding, Mark and his team will have the next piece of the jigsaw to build on their success and deliver their ambitious expansion plans.”

Mark Hepburn, Managing Director of 23.5 Degrees says: “Reaching our 50th Starbucks store in just five years was a major milestone and Connection Capital has played a big part in that success. But we’re not stopping there. The UK coffee market is continuing to grow and with our expertise and Connection Capital’s backing, we hope to extend our store count considerably in the coming years.”

Helen Doran, Director Licensed Operations, Starbucks UK, previously commented: “Over the past five years we have seen 23.5 Degrees open 50 Starbucks stores that we can all be proud of. We are committed to growing our partnership together by opening stores with close links to the local community and creating spaces that are warm and welcoming for all to enjoy.”

Source: Business Leader