Starbucks to revamp stores to speed service, boost morale

Sep 12, 2022, 10:33 PM | Updated: Sep 13, 2022, 3:00 pm
Interim CEO Howard Schultz, left, and incoming CEO Laxman Narasimhan hug during Starbucks Investor ...

Interim CEO Howard Schultz, left, and incoming CEO Laxman Narasimhan hug during Starbucks Investor Day 2022, Tuesday, Sept. 13, 2022, in Seattle. (AP Photo/Stephen Brashear)

(AP Photo/Stephen Brashear)

Starbucks __ ringing up record sales but struggling with low employee morale __ plans to spend $450 million next year to make its North American stores more efficient and less complex.

The company also said it plans to open 2,000 net new stores in the U.S. by 2025, with an emphasis on meeting the growing demand for new types of service, including drive-thru, mobile ordering and delivery. Drive-thru now makes up 50% of U.S. sales, for example, while delivery demand has grown by 24% so far this year.

“It’s clear that our physical stores have to change. Our physical stores were built for a different era,” said John Culver, Starbucks’ chief operating officer, at a day-long event for investors in Seattle Tuesday.

Culver said customizable cold drinks __ which now make up as many as 75% of Starbucks’ U.S. beverage orders __ are taxing employees in kitchens designed for simpler hot drinks. Starbucks debuted a new work station that requires less movement and can cut 50 seconds off the process of making a blended iced mocha. It also announced a new patented technology that will cut the time needed to make cold brew coffee from 20 hours to a few seconds.

The introduction of an increasing number of hot food items is also slowing Starbucks’ kitchens. Culver said Starbucks expects to serve 300 million breakfast sandwiches in the U.S. this year, each of which takes up to 85 seconds to warm in its ovens. Starbucks plans to start cooking them in batches and storing them in warmers next to the drive-thru windows.

The company touted other upcoming benefits for workers, including more flexible scheduling, more generous sick time accrual and expanded ability for mobile customers to tip.

Starbucks executives made little mention of a growing unionization effort at its U.S. stores during morning presentations Tuesday. But it has clearly been an impetus for the company to think more deeply about ways to improve employees’ work life. Since late last year, 236 of Starbucks’ 9,000 company-owned U.S. stores have voted to unionize, an effort the company opposes.

“The reality is, we have a trust deficit with our partners,” said Frank Britt, Starbucks’ executive vice president and chief strategy officer. “The work we do in our stores today is too physically hard.”

It wasn’t immediately clear if the new investments and technology would be offered to non-union stores; Starbucks said the company hasn’t yet decided how the investment will be doled out. But in May, Starbucks announced $200 million in additional pay and training but said that benefit would only go to non-union stores.

Starbucks says it is required to negotiate new benefits with union stores. But in August, the Seattle office of the National Labor Relations Board filed a complaint against the company, saying it was violating U.S. labor law by withholding wage increases and other benefits from workers in unionized stores. A hearing in that case before an NLRB administrative judge is scheduled for October.

Starbucks Workers United, the union organizing workers, said around 300 protesters picketed outside the Starbucks meeting on Tuesday.

Culver said the company will respect the unionization process and negotiate with the stores that vote to unionize. But he also reiterated the company’s position.

“There are two paths. We can work together as partners, side by side, or we can have a third party between us,” he said.

Leading the company’s revamp will be Laxman Narasimhan, a former PepsiCo executive who was named Starbucks’ CEO last week. Narasimhan will spend the next six months shadowing interim CEO Howard Schultz, who helped shape the company after buying it in 1987 and has been leading it on a temporary basis since April. Schultz will remain on Starbucks’ board when Narasimhan assumes the CEO position in April.

“It’s an incredible opportunity for me to be learning at the feet of one of the best entrepreneurs in the world,” said Narasimhan, who described himself as a “right-brained” operational expert who also loves art, music and writing poetry.

Narasimhan, 55, who most recently was CEO of the U.K.-based consumer health and hygiene company Reckitt, also said he agrees that Starbucks has to renew its focus on exceeding its’ employees expectations if it wants to serve its customers well.

Schultz said Starbucks notched the best sales week in its 51-year history in August when it introduced its fall drink lineup. But Schultz said Starbucks lost its way during the pandemic, when employee retention tumbled even as customers demanded new service like curbside pickup.

Starbucks shares fell 1.4% Tuesday during a broader market downturn as investors fretted about stubbornly high inflation.

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.


File - People shop at an Apple store in the Westfield Garden State Plaza mall in Paramus, New Jerse...
Associated Press

A key inflation gauge tracked by the Fed slowed in February

The Federal Reserve's favored inflation gauge slowed sharply last month, an encouraging sign in the Fed's yearlong effort to cool price pressures through steadily higher interest rates.
2 days ago
FILE - The OpenAI logo is seen on a mobile phone in front of a computer screen displaying output fr...
Associated Press

Musk, scientists call for halt to AI race sparked by ChatGPT

Are tech companies moving too fast in rolling out powerful artificial intelligence technology that could one day outsmart humans?
3 days ago
Associated Press

Starbucks leader grilled by Senate over anti-union actions

Longtime Starbucks CEO Howard Schultz faced sharp questioning Wednesday before the Senate Health, Education, Labor and Pensions Committee
4 days ago
FILE - The overdose-reversal drug Narcan is displayed during training for employees of the Public H...
Associated Press

FDA approves over-the-counter Narcan; here’s what it means

The U.S. Food and Drug Administration on Wednesday approved selling naloxone without a prescription, the first over-the-counter opioid treatment.
4 days ago
FILE - A Seattle police officer walks past tents used by people experiencing homelessness, March 11...
Associated Press

Seattle, feds seek to end most oversight of city’s police

  SEATTLE (AP) — The U.S. Justice Department and Seattle officials asked a judge Tuesday to end most federal oversight of the city’s police department, saying its sustained, decade-long reform efforts are a model for other cities whose law enforcement agencies face federal civil rights investigations. Seattle has overhauled virtually all aspects of its police […]
5 days ago
capital gains tax budgets...
Associated Press

Washington moves to end child sex abuse lawsuit time limits

People who were sexually abused as children in Washington state may soon be able to bring lawsuits against the state, schools or other institutions for failing to stop the abuse, no matter when it happened.
5 days ago

Sponsored Articles

Compassion International...

Brock Huard and Friends Rally Around The Fight for First Campaign

Professional athletes are teaming up to prevent infant mortality and empower women at risk in communities facing severe poverty.
Emergency Preparedness...

Prepare for the next disaster at the Emergency Preparedness Conference

Being prepared before the next emergency arrives is key to preserving businesses and organizations of many kinds.
SHIBA volunteer...

Volunteer to help people understand their Medicare options!

If you’re retired or getting ready to retire and looking for new ways to stay active, becoming a SHIBA volunteer could be for you!
safety from crime...

As crime increases, our safety measures must too

It's easy to be accused of fearmongering regarding crime, but Seattle residents might have good reason to be concerned for their safety.
Comcast Ready for Business Fund...
Ilona Lohrey | President and CEO, GSBA

GSBA is closing the disparity gap with Ready for Business Fund

GSBA, Comcast, and other partners are working to address disparities in access to financial resources with the Ready for Business fund.

Medicare open enrollment is here and SHIBA can help!

The SHIBA program – part of the Office of the Insurance Commissioner – is ready to help with your Medicare open enrollment decisions.
Starbucks to revamp stores to speed service, boost morale