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Brian Niccol, the CEO of Starbucks, made the rounds of investor conferences last week, and you can bet that he talked about “customer connection” inside the company’s coffee shops (he did so seven times, which was vaguely disappointing).
The company under Niccol has shifted its focus back on its shops, adding seats and store employees while working with them to improve service and speed.
In theory, customers want that kind of service even if all they do is come in, get their latte and leave. And it follows the strategy of high-growth beverage concepts 7 Brew and Dutch Bros, which have used service as a crucial selling point to consumers.
And yet here comes Luckin Coffee, which has gone from zero to 35,000 locations in less then a decade and which takes its orders on the app. You do not order at the counter. Luckin already has 18 locations in New York City, though its plans for U.S. expansion are unclear.
The two approaches are different, though it is worth pointing out that Starbucks does plenty of business through its mobile app. U.S. consumers are clearly perfectly willing to order from their phone, and there’s no reason that brands can’t integrate some customer service with heavy app ordering.
It’s is an interesting contrast. Starbucks’ biggest problem, as Niccol sees it, is that it became “soulless” in recent years as it shifted more of its attention to its mobile and takeout customers.
But Luckin is designed for the mobile customer. And though it is taking deliberate steps to highlight its quality, there was no mention of “connection” during an experience at a New York City presentation recently.
We tend to think the app approach is a limiting factor in a tough U.S. market. But we don’t necessarily think it’s wrong, per se. This is how Luckin was built. Starbucks, on the other hand, was created as a destination. Mobile ordering and drive-thru service conflicted with that mission, putting pressure on the company to make it all work. Luckin has no such conflict, and has now set its customers’ expectations accordingly.
We’ll see if those customers like those expectations.
This week’s financial news
Speaking of Luckin — and 7 Brew — it is part of a generation of restaurant chains created in 2017 that have turned the restaurant industry on its head.
And speaking of Starbucks, the company is shrinking its stores to expand its footprint.
An infestation is threatening to screw with beef prices.
There’s another attempt at a settlement of a long-running legal battle over interchange fees charged by Visa and Mastercard. But restaurants don’t like it all that much.
That lawsuit was filed in 2005, by the way. You know what didn’t exist back then? The iPhone, TikTok and Instagram, pretty much the entire AI infrastructure, mRNA vaccines, Bitcoin, mobile ordering at restaurants, third-party delivery, an awful lot of restaurant chains, and many other things. Sheesh.
Oh hey, Cracker Barrel outperformed expectations, proving that the stupid logo controversy was far more superficial than it appeared.
Number of the week
How unusual is it that three chains from 2017 are among the Top 100 restaurant chains? Only one other concept in the 100 was founded in that decade.
Quote of the week
“The reality is, we’re not all the way back to where our transactions were just in 2023, and we’re definitely not back to where we were in 2018 or 2019. So we have capacity to service more demand.” -Brian Niccol, at an investor conference last week. Indeed: Starbucks traffic is 15% below where it was in 2018.
On the blog
I wrote about Luckin, 2017 and Cracker Barrel. Check out all my blog posts on The Bottom Line.
On the podcasts
On A Deeper Dive I talked with Giordano’s CEO Nick Scarpino. On The Week in Restaurants we talked Cava, Cracker Barrel and screwworms.
For questions, comments or story ideas, send me an email at jonathan.maze@informa.com. And follow me on Twitter at @jonathanmaze. And also LinkedIn. And TikTok.