New York
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Starbucks spent years making an attempt to turn out to be an inescapable storefront on the streets of New York, Los Angeles and different massive cities in America. Now that’s coming to an finish.
Its enlargement as soon as appeared limitless. It was even a joke. In 1998, an Onion headline learn “New Starbucks Opens In Rest Room Of Existing Starbucks.” A couple of years later, comic Lewis Black riffed that he’d gone to the “end of the universe” in Houston, the place he noticed one Starbucks instantly throughout the street from one other.
But Starbucks is now struggling, and its technique of saturating city areas to draw espresso drinkers on their manner to work in the morning has backfired amid competitors, the rise of distant work and rising prices.
So CEO Brian Niccol, employed final yr from Chipotle to revive Starbucks, not desires its shops to be proper subsequent to one another. Starbucks is closing roughly 400 shops nationwide which can be concentrated in massive metro areas as a part of its $1 billion restructuring plan.
Starbucks closed 42 places in New York, or 12% of its whole in town. It lately misplaced its prime spot as the biggest chain in Manhattan to Dunkin’, in accordance to Center for an Urban Future, a New York City assume tank that tracks chain openings and closings.
Starbucks additionally reportedly closed greater than 20 places in Los Angeles this yr; 15 in Chicago; seven in San Francisco; six in Minneapolis; 5 in Baltimore; and dozens extra in different cities.
Niccol is making an attempt to reposition Starbucks once more as a “third place” between dwelling and work.
The chain reviewed its greater than 18,000 shops in the United States and Canada, and “closed locations that were underperforming or unable to meet our brand standards,” a Starbucks spokesperson stated in an e mail. The firm plans to open shops and rework others in 2026, together with in main metros like New York and Los Angeles, “featuring refreshed designs and elevated experiences that reflect the Starbucks brand.”
In some ways, Starbucks pioneered the enterprise mannequin that’s now accountable for its struggles.
Before Starbucks, folks couldn’t fathom paying greater than two bucks for a cup of espresso, not to mention have any idea of a latte.
But now Starbucks is closing city places in half as a result of it’s been swamped by competitors from area of interest espresso retailers, smaller chains reminiscent of Gregory’s and Joe’s Coffee, and a wave of smoothie, bubble tea and different beverage retailers.
“Urban America has seen a dramatic increase in competitive coffee shop openings that eat away at the store’s volume,” stated Arthur Rubinfeld, the mastermind of Starbucks’ actual property and design methods alongside CEO Howard Schultz through the Nineties and once more from 2008 to 2016. Rubinfeld now runs Airvision, a consultancy for client manufacturers.
Starbucks’ gross sales have stagnated in latest years, and closing a lagging cafe may juice gross sales at one other one close by that’s “larger, more accommodating and close enough for the loyal customer,” Rubinfeld stated.
Starbucks, which began in a hip a part of Seattle, is now in its 50s and sees extra room to develop and revenue in the suburbs, analysts say. It’s increasing drive-through shops in suburbia, the place labor, lease and different working prices are decrease than the costliest cities in the nation.
Remote work and homelessness
Other pressures have additionally led Starbucks to shutter cafes in cities.
New York City, Chicago, Los Angeles and San Francisco misplaced inhabitants after the pandemic in 2020, decreasing their market sizes, though these cities have began to reverse losses since 2023.
And distant work has dealt a everlasting blow to Starbucks in many central enterprise districts that relied on big numbers of workplace employees commuting every day, with the corporate closing places in the bottom flooring of a number of downtown workplace buildings in Los Angeles in consequence, stated Catherine Yeh, the director of market analytics at CoStar Group.
And the corporate has additionally grown weary of being the general public restroom supplier of alternative for a lot of American cities.
“The mental health crisis in the country is severe,” former CEO Schultz stated in 2022. “There is an issue of safety in our stores, in terms of people coming in who use our stores as a public restroom.”
Starbucks ended its coverage this yr that allow anybody hang around at its shops or use the lavatory with out making a purchase order, and it posted indicators outdoors shops banning panhandling, consuming alcohol and vaping.
The closures are a part of Niccol’s makes an attempt to revitalize Starbucks following years of slumping gross sales, technique missteps and a revolving door of chief executives.
The chain is making an attempt to win again prospects trying to sit down for a cup of espresso by renovating 1,000 stores — 10% of its company-owned US places — with chairs, couches, tables and energy retailers over the subsequent yr.
But the turnaround underneath Niccol is taking longer than some buyers hoped. Shares of Starbucks (SBUX) have dropped round 6% this yr.
Remodels might assist Starbucks’ turnaround, however enhancing operations in shops is an even bigger hurdle for the corporate, stated Sharon Zackfia, an analyst at William Blair.
Starbucks is serving custom-made drinks on the identical place to two totally different units of shoppers — individuals who want to seize their espresso and go and others who want to sit down and linger — and it’s struggling to fulfill these competing calls for.
“It’s not an easy thing to fix,” Zackfia stated. “It’s been a tougher slog than many expected.”