Earvin "Magic" Johnson says two things enabled him to successfully run more than 100 Starbucks franchises in urban areas: a deep knowledge of his customer and also of his community. 

Johnson spoke Wednesday in San Jose, California, at QuickBooks Connect, Intuit's annual small-business conference, which drew a crowd of about 3,500 attendees.

The retired Los Angeles Lakers point guard is CEO of Magic Johnson Enterprises, an organization that focuses on bringing products and services to ethnically diverse and underserved urban communities. 

On its website, MJE claims that what Johnson did with the Starbucks franchise in the 2000s became "literally the blueprint for Corporate America's engagement and success with urban consumers."

It all began when Johnson was driving around his adopted hometown of Los Angeles. "I saw a lot of Latinos and African Americans lined up at Starbucks," Johnson said. "So I jumped in that line and I started drinking that coffee, and I said no wonder everybody's in this line. The coffee was great." 

Johnson wanted to bring the suburban coffee shops to urban areas, but he knew he had some convincing to do. He invited Starbucks CEO Howard Shultz to the community where Johnson was already running a movie theater in partnership with Sony.

He wanted to demonstrate the spending power of minorities. And he was in luck. A Whitney Houston film was debuting that day, and 5,000 people were lined up around the block to see it, Johnson said. After watching the movie together, Shultz agreed to make a deal with Johnson. 

"The headlines in the paper when we did the deal said no way minorities would pay $3 for a cup of coffee," Johnson recalled. "Well, we'll pay $3 for a cup of coffee. We don't quite know what scones are," he joked.

So Johnson added some special touches to his franchises.

"I had to take the scones out of [my] Starbucks and put in things that resonate with the urban consumer--sweet potato pie, pound cake, Sock-It-To-Me-Cake," he said.

The shops thrived. Johnson's were more profitable per capita than all other Starbucks franchises, he said. In 2010, Johnson divested his Starbucks shares along with his Los Angeles Lakers shares. The two sales combined were worth more than $100 million.

"A lot of people worry about, 'How am I going to market my business?'" Johnson said. "If you know your customer, if you know what they want, and then you can deliver that to them, they become your loyal customers and your brand ambassadors for life." 

Published on: Oct 22, 2014