Brian Niccol wants all Starbucks locations to have seats.
The coffee shop giant is examining its store portfolio as it works on a broad-based turnaround. But one concept on the chopping block: The chain’s line of up to 90 mobile order and pickup locations.
Some of those locations will close. Others will be converted into traditional coffee shops.
The reason is simple: Cafes without seats do not have the “warmth and human connection” that Niccol, Starbucks CEO, wants out of the chain going forward.
“We plan to sunset our mobile order and pick-up only concept” next fiscal year, Niccol told analysts. “We found this format to be overly transactional and lacking the warmth and human connection that defines our brand.”
Mobile order remains a vital part of Starbucks sales, representing 31% of transactions. But Niccol believes the company can effectively service those customers without abandoning seating.
The end of Starbucks’ pickup-only concept doesn’t represent a significant number of locations. But it is symbolic of the chain’s shift back to its roots as a traditional coffeehouse chain.
Starbucks began building pickup stores in 2020. Many of these stores are in urban areas that turned into ghost towns during quarantine. The locations were designed purely for walk-in and mobile-order customers.
At one point, the company said it planned to convert up to 400 locations into pickup stores but less than a quarter of that was ultimately done.
Starbucks was hardly the only chain doing such a thing. A lot of fast-food chains experimented with drive-thru-only concepts in suburban areas and walk-in-only restaurants in urban locations.
Starbucks is adding 30,000 seats to its restaurants. | Photo courtesy of Starbucks.
It made sense. Takeout was the only thing available in 2020 and many industry observers felt that it would remain elevated in the future. Seeking to improve unit economics and fuel expansion, many chains experimented with eliminating indoor seating.
Yet that effort appears to have quieted, at least among traditional fast-food chains. While takeout and delivery orders remain stronger than they were before the pandemic, visits through quick-service drive-thrus have declined while in-store visits are increasing.
Starbucks in particular has turned its attention back to the environment inside its coffee shops.
Sales at the chain turned negative starting in late 2023, which persisted through the end of last quarter, the chain’s worst negative streak since 2009. The company brought in Niccol, overhauled management and restructured operations. And Niccol quickly shifted focus back to the in-store customer.
Starbucks over the past few months has walked back many of those takeout-centric decisions. The company has brought back its self-serve creamer stations, for instance. And it is writing on cups again. It has also brought back ceramic mugs for in-store customers and is taking various steps to encourage them to stick around, such as free coffee refills and a new code of conduct.
The brand is also bringing back seats. Starbucks eliminated 30,000 seats from the system after the pandemic and is now adding them back in. The company has started this process in New York, which costs about $150,000 per location. It will soon start the process in Southern California and expects to complete at least 1,000 such renovations by the end of next year.
(Check out our look at a remodeled Starbucks location.)
The company is also evaluating its entire portfolio of locations and expects that process to be complete by the end of September. Niccol said the process is being done “to ensure we have the right coffeehouses in the right locations to drive profitability and deliver the Starbucks experience.”
It’s not like the company plans to build expensive locations. Starbucks has a new standalone prototype that will open next year that has 32 seats, a drive-thru and will cost 30% less to build, Niccol said.
The company is also building a smaller, 10-seat prototype in New York City expected to be open in the next few months. Niccol said that the prototype will improve unit economics and fuel growth opportunities in more markets.
“We’re going to continue to reset our coffeehouse portfolio strategy,” Niccol said. “We’re prioritizing warmth, connection, community, and I’m really excited about what I’m seeing in the uplifts that we’ve started to do and how we’re creating the coffeehouse of the future.”
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