Starbucks has announced significant changes to its store operations, revealing plans to close underperforming locations across North America. This decision comes as part of a broader restructuring effort led by CEO Brian Niccol, aimed at addressing the company's declining sales, which have seen six consecutive quarters of downturn in the US market. The restructuring initiative is projected to cost approximately $1 billion, marking a crucial step in revitalizing the brand.
On Thursday, the well-known coffee chain disclosed that it expects its overall store count in the United States and Canada to decrease by about 1 percent by the end of the 2025 fiscal year. This reduction is expected to encompass several hundred stores, including the iconic Seattle roastery. The closures are anticipated to affect around 900 workers, following an earlier decision to cut 1,100 corporate roles earlier this year. Notably, Niccol's compensation package, valued at $95.8 million last year, has drawn attention due to its stark contrast with the average barista's earnings, creating the largest CEO-to-worker pay gap among S&P 500 companies.
Among the locations slated for closure is Starbucks’s flagship unionized store in Seattle, which features an in-house roastery. The closure has raised concerns among union representatives, particularly Starbucks Workers United, which represents over 12,000 baristas. Negotiations between the union and Starbucks have stalled since they began last April. In December, union members staged a strike in multiple cities during the busy holiday season to advocate for better working conditions. Baristas at the Seattle store had previously voted to unionize in 2022, and protests occurred recently over unresolved contract disputes.
Additionally, a unionized store located on Ridge Avenue in Chicago was also confirmed for closure. Baristas from various locations in the Chicago area had already planned a picket before the closure announcement. Diego Franco, a barista from a nearby store, emphasized the importance of workers in driving customer traffic, stating, “We’re here to remind the company that it’s the workers who actually bring the people into the stores.”
Starbucks has asserted that the union status of the stores did not influence its decision to close them. In a response to the closures, Starbucks Workers United expressed their belief in the necessity of union representation for baristas, committing to advocate for affected employees to be reassigned to different locations.
In his first year as CEO, Niccol has prioritized investments in Starbucks’s physical stores to enhance customer experiences and reduce service times. These efforts come in response to a notable shift in consumer behavior, with customers becoming more selective and facing increasing competition in the coffee market. Niccol indicated that the company has identified certain coffeehouses as unable to meet the expected physical environment or financial performance, leading to their closure.
The company projects that by the end of the fiscal year, it will operate nearly 18,300 Starbucks locations across the US and Canada, a decrease from the 18,734 locations reported in a regulatory filing earlier in July. Niccol, who previously led a successful turnaround at Chipotle Mexican Grill, has gained investor confidence through these aggressive restructuring measures.
Starbucks has indicated that the job cuts will primarily impact its support teams, with plans to close numerous open positions as well. As of September 29, 2024, the company had approximately 10,000 employees in non-coffeehouse roles within the US. Niccol acknowledged the significant effects of these decisions on both partners and customers, reinforcing the company’s commitment to enhancing staffing and integrating technology for improved order sequencing and overall customer experience.
Earlier this year, Starbucks had already announced a reduction of 1,100 corporate roles and a modest 2 percent salary increase for all salaried employees in North America, reflecting the ongoing effort to adapt to the changing landscape of the coffee industry.
