More Starbucks closures, but is that such a bad thing?
So STARBUCKS just announced ANOTHER ROUND OF CAFE CLOSURES. And it is not a small number. 434 locations have been hastily shuttered — translating to 2.4% of its total of 18,300 units across the U.S. and Canada (or 1.2% when accounting for the 217 that it has opened this year). These include some high-profile ones, like the Starbucks Reserve Roastery on Pike St just east of Downtown Seattle. Ones closed were either not making money or deemed incapable of offering “the physical environment our customers and partners [employees] expect.”
This is just the latest move by CEO Brian Niccol, the wunderkind recruited last year from Chipotle Mexican Grill, where he was credited with spearheading a rather dramatic turnaround following that chain’s widespread E. coli outbreaks in 2015. (Remember those?) Niccol started at Starbucks in September 2024 but has yet to reverse the same-store sales declines that started earlier that year.
I have generally agreed with much of what Niccol has been trying to do. This particular announcement and the accompanying layoffs have been poorly handled, while closing a flagship (like Pike St) for lack of profitability seems to miss the point of a flagship. However, Niccol has committed himself and his leadership to the goal of returning Starbucks to its much-ballyhooed “third place” role as a warm and welcoming community coffeehouse where customers are invited to linger, with softened lighting, restored seating and electrical outlets, additional baristas, greater engagement with customers and various other enhancements.
All of this seems like a much-needed correction to the transactional experience that had come to define its cafes in the era of digital ordering/pickup – which might have made sense from a bottom-line perspective but was doing long-term damage to the brand. What remains to be seen, however, is first, whether this can be accomplished at scale, across a footprint of nearly 18,000 locations, and second, whether investors will lose patience with the effort (and its higher labor costs) before that happens.
Looking at it more holistically, however, the closure of a Starbucks, while often rabidly reported by journalists, is really not a disaster. Sure, it is the loss of a brand name, but in many of the cities and Downtowns where I work, these spaces are rather quickly backfilled by smaller local coffeehouse chain-lets which, to be honest, represent better fits for the psychographic that typically predominates in such submarkets. (I wrote about this phenomenon in this post). Property owners might not be happy — they are likely having to sign leases with less creditworthy tenants at lower rents — but the districts themselves are arguably more diversified and interesting as a result.
I myself am not a huge fan of Starbucks’ roasts but I am also not one of those (snobby) friends “who don’t let friends drink Starbucks” — after all, Starbucks virtually invented the category that enables artisanal rivals to charge $7 for a latte today. And the green mermaid did not get to 18,000 locations without offering a product that lots and lots of people want. But in order for capitalism to work its magic, for competition to spur innovation, smaller upstarts need to be able to access markets too. At some point, the march of the leader has to slow, so that they can have the space to emerge. If that’s what we’re seeing right now, I would say it’s a good thing.