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Howard Schultz leaves big stamp on restaurant industry

While some debate whether he will run for a seat in the Oval Office, his seat atop Starbucks left an undeniable impact on the restaurant business.
Starbucks

The Bottom Line

For the second time in a month I find myself writing about the impact of a departing chief executive of a major U.S. restaurant chain, this time Starbucks Executive Chairman Howard Schultz, who is stepping down as executive chairman at the end of this month.

And there’s no question that Schultz, like departing Domino’s CEO Patrick Doyle, has had an outsized impact on the restaurant industry during his 36-year tenure.

Think about it: Schultz proved that consumers would not only pay $2 for a coffee, but they would also do so with regularity.

He took the habitual nature of the morning coffee, put a premium on its price, and wrapped the U.S. in its restaurants. The chain’s white and green paper coffee cups with their brown insulated wraps have become an important accessory in urban and suburban areas across the country.

All of that has allowed Starbucks to become the second-largest restaurant chain in the U.S. based on system sales, according to Technomic's Top 500 Chain Restaurant Report. It will this year overtake McDonald’s to become the second-largest chain by unit count, with more than 14,000, right behind leader Subway.

Much like Doyle’s Domino’s, Starbucks also proved that restaurants can use technology to make the ordering and payment process easier.

The company helped to make in-store Wi-Fi a must for any restaurant that wishes to attract younger, data-hungry consumers. And it proved that a chain can thrive not just by getting customers through the doors quickly, but also by encouraging them to stay for a while, and perhaps buy a larger cup of coffee.

Starbucks took the simple concept of the gift card and turned it into a virtual currency. Starbucks cards make a routine appearance at gift exchanges.

The chain also has arguably the most popular and groundbreaking loyalty program in the industry, with 15 million members who account for 39% of all spending. Loyalty members use the company’s popular smartphone app, load it with money, and essentially give Starbucks an interest-free loan.

Schultz pushed his chain into new, technologically driven territory to make it an ultra-convenient concept and brace the company for the inevitable decline in retail traffic.

To be sure, Starbucks has had some bumps and bruises along the way. The chain’s foray into food has had numerous fits and starts. It recently closed 379 Teavana locations inside malls, a victim of the retail decline Schultz himself has warned about for years.

More recently, there is a slowing growth in its vital U.S. market, where competition—using many of the strategies that Starbucks helped pioneer—has picked off some of its customers, and where many consumers simply aren’t willing to go along with its ultra-high-tech payment strategies.

Schultz’s own departure was reportedly delayed a month after his chain found itself in the center of racial tensions after a manager at a location in Philadelphia called the police on two African-American men waiting for a business associate inside one of the stores.

And there is Schultz himself, who has earned some conservative ire for his progressive policies—policies that many believe will lead Schultz to explore a presidential bid as a Democrat.

Yet in the end, Schultz’s creation remains a cultural phenomenon, a place where people go to meet one another or do their homework or simply spend time away from the office. And where they’ll go every morning on their way to work because that’s what they do, and that’s the coffee they prefer.

Even if it costs $2 a cup.

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