Starbucks is revamping its stores to speed up service and boost morale

Starbucks __ sees record sales but struggles 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 United States by 2025, with a focus on meeting growing demand for new types of services, including drive-thru, mobile ordering and delivery. Drive-thru now accounts for 50% of sales in the US, for example, while demand for delivery has increased 24% so far this year.

“It is clear that our physical stores must change. Our physical stores were built for a different era,” John Culver, Starbucks chief operating officer, said at a one-day investor event in Seattle on Tuesday.

Culver said customizable cold beverages __ which now account for up to 75% of Starbucks’ U.S. beverage orders __ are taxing employees in kitchens designed for simpler hot drinks. Starbucks has launched a new workstation that requires less movement and can cut the process of making a mixed iced mocha by 50 seconds. He also announced a new patented technology that will reduce the time it takes to make cold brew coffee from 20 hours to seconds.

The introduction of an increasing number of hot meals is also slowing Starbucks kitchens. Culver said Starbucks plans to serve 300 million breakfast sandwiches in the United States this year, each taking up to 85 seconds to heat up in its ovens. Starbucks plans to start cooking them in batches and storing them in water heaters next to drive-thru windows.

The company touted other upcoming benefits for workers, including more flexible hours, a more generous sick leave accrual and increased tipping ability for mobile customers.

Starbucks executives said little a growing effort to unionize in its U.S. stores during morning showings on Tuesday. But it clearly prompted the company to think more deeply about ways to improve the working lives of employees. Since late last year, 236 of Starbucks’ 9,000 U.S. stores have voted to unionize, an effort the company opposes.

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

It was not immediately clear if the new investments and technologies would be offered to non-union stores; Starbucks said the company has not yet decided how the investment will be distributed. But in May, Starbucks announced $200 million in additional pay and training, but said that perk would only go to non-union stores.

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

Starbucks Workers United, the union that organizes workers, said about 300 protesters picketed the Starbucks meeting on Tuesday.

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

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

The corporate overhaul will be led by Laxman Narasimhan, a former PepsiCo executive who was named CEO of Starbucks 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 running it temporarily since April. Schultz will remain on Starbucks’ board when Narasimhan assumes the CEO role in April.

“This is an incredible opportunity for me to learn 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 poetry writing.

Narasimhan, 55, who was most recently CEO of British consumer health and hygiene company Reckitt, also said he agreed Starbucks needed to renew its focus on exceeding employee expectations if it was to serve its customers well. clients.

Schultz said Starbucks had the best sales week in its 51-year history in August when it introduced its line of fall beverages. But Schultz said Starbucks went astray during the pandemic, when employee retention plummeted even as customers demanded a new service like curbside pickup.

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

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