Starbucks wants fewer mall locations and more drive-thrus

The chain says it will relocate more locations from malls to drive-thrus and build more pickup stores and add curbside and delivery options.
Photograph courtesy of Starbucks

Starbucks plans to relocate more of its mall locations to units with drive-thrus in the coming months, as the Seattle-based coffee giant adapts to a post-coronavirus world in which an even greater percentage of its orders are takeout.

In a letter to customers on Thursday, CEO Kevin Johnson said the company plans to accelerate a shift toward more drive-thru locations that started before the pandemic shutdown.

“Our digital leadership and ability to transform lower-performing locations and formats to successful new store formats (i.e., relocate Starbucks stores from low-traffic malls to new, thriving Starbucks locations that combine the third place with drive-thrus) are unique strengths we will lean into in the coming months,” Johnson wrote, referring to the chain’s “third place” strategy of giving consumers a place outside of work and home.

“The plans we had for this broader store transformation over a three- to five-year period will now occur over the next 12 to 18 months.”

The company also plans to add more mobile order pickup stores like the takeout location it opened in New York City’s Penn Plaza last year.

“By blending traditional Starbucks stores in dense markets with these new Starbucks Pickup stores optimized for the mobile order occasion, we not only improve the customer experience for those who want to sit in our store and enjoy their beverage but also create a great experience for those customers who want a convenient way to pick up their beverage on-the-go,” Johnson wrote.

Even before the pandemic, 80% of Starbucks’ occasions were for takeout. With even fewer customers expected to drink their coffee in the stores, the company is working to improve its service to those takeout customers.

At the same time, the chain emerged as a place where people would go and spend a few hours every afternoon to do homework or have meetings. As mobile orders increased, the chain has periodically ran into challenges serving both groups of customers. Pickup stores in urban areas and drive-thrus in more suburban locations are viewed as important solutions.

Malls are seeing fewer customers, and most of them were closed altogether during the shutdown.

Drive-thrus, on the other hand, have become a popular option for customers during the pandemic, viewed as a safer alternative to dine at restaurants, and long drive-thru lines at fast-food chains have become commonplace in recent weeks.

At Starbucks, the only stores open throughout April were its drive-thru locations. The company has started reopening stores this month and expects more than 90% to be open by early June.

The potential shift in locations comes as Starbucks is working to renegotiate rent with its landlords. Restaurant Business first reported last week that the company has requested lower rent for a year from its landlords, a request that didn’t go over well in the real-estate community.

The coffee chain is now working to rebuild sales. In the short term, more of its locations will have curbside pickup, and the chain now has delivery in 48 states. In his letter, Johnson noted,

“the look and feel of many stores will change” coming out of the pandemic.

Starbucks said it expects worker hours to build as traffic increases at its locations, but Johnson in his letter that the hours employees were accustomed to before the pandemic “won’t be available.”

The company said it is extending an unpaid leave policy through the end of September for workers who want to keep benefits but access emergency employee benefits through federal or state sources.

Johnson said the company will cover health care premiums for workers during the crisis, and those on leave, and said details are expected to be shared with its U.S. workers next week.

Johnson said that, since opening its locations, Starbucks has regained “60% to 65%” of last year’s same-store sales.

Yet Johnson still sounded a cautious note about the near-term future. “Until a vaccine is developed and broadly available, consumers will be cautious as they return to work or go back to school,” he said. “And with over 36 million Americans suddenly out of work and concerned about their future, there are questions about the overall shape of the economic recovery in this COVID-19 economy.”

Still, the company has introduced its new summer menu and has turned on its marketing, hoping to get more customers back into its doors. The menu features a new Iced Guava Passionfruit drink, a new Unicorn Cake Pop, Grilled Chicken and Hummus Protein Box, and the return of its S’mores Frappuccino.

“We know it will take time to fully recover and post positive comparable-store sales growth,” Johnson said.

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