23.5 Degrees

The Company

23.5 Degrees was the world’s first Starbucks franchisee, launching its first store in 2012 in response to Starbucks’ strategic decision to build its UK business through franchising. At the time of investment there were 13 stores in the group with Connection Capital’s funding used to acquire a further 16 stores.

Investment rationale

It was clear to us that 23.5 Degrees had a high-quality management team, with a strong franchise track record and specific Starbucks experience. The growth strategy was clearly defined, through an organic roll-out model with impressive ROI metrics, and was underpinned by a strong pipeline of new sites.

The UK coffee market had consistently shown at least 10% year on year growth in the 14 year period prior to Connection Capital’s investment, with significant market headroom remaining, more than capable of accommodating management’s expansion strategy.

Progress since investment

Between the initial investment and exit, revenue at 23.5 Degrees increased over six-fold; stores increased from 13 to 114; and employees increased from 100 to over 2,000.

Connection Capital supported the company’s development in multiple areas such as:

• Enhancing its management team, through the hiring of a new CFO, COO and Chairman
• Providing investment and appraisal of systems, operations and processes, which are now capable of scaling alongside the business
• Improving governance

The exit

In October 2024 we sold 23.5 Degrees to Starbucks generating a 9x gross return on initial investment.