Starbucks to close underperforming stores in restructuring efforts

As CEO Brian Niccol works toward a company restructuring plan worth $1 billion to revive the company’s struggling sales, Starbucks announced it will close its underperforming stores in North America.

The coffee shop made the announcement on Thursday.

Hit stores are unionized

Starbucks’s largest unionized location in Seattle, which had an in-house roastery, was one of the closed stores, the company confirmed.

More than 12, 000 baristas are represented by the Workers United union, which started negotiations last April, but they have since hit a halt.

In a strike that lasted for several days during the busiest holiday season in multiple US cities in December, some union members took their jobs.

Workers at the Seattle store, which is close to its headquarters, voted to unionize in 2022, and the union took control of the store on Monday due to dispute over contract terms.

Ridge Avenue, a unionized store in Chicago, was also shut down, the union confirmed. The union claimed that the store’s employees planned to pick up on Thursday morning as part of a strategy put forth prior to the store’s closure.

The Chicago area’s stores were the picket line’s source of the baristas. Diego Franco, a resident of a store in Des Plaines, said, “We’re here to remind the company that it’s the workers who actually bring the people into the stores.”

A Starbucks spokesman said that the store union status “did not play a role in the decision-making process.”

Starbucks Workers United criticized the closures in a statement. The union stated that it planned to bargain for the affected workers so they could be moved to other locations. “It has never been more clear why baristas at Starbucks need the backing of a union,” the union said.

According to TD Cowen’s analysts, the restructuring impacted about 500 of the company’s stores in North America.

The Workers’ Union, which represents over 12, 000 baristas, and Starbucks started talking about it in April, but negotiations have since broken down.

Attempts to change

In his first year at Starbucks, Niccol has focused on lowering management layers, reducing service times, and restoring a coffee-house atmosphere.

As demand for its pricey lattes declined as consumers began to become picky and competition was soaring, the company has experienced a string of quarterly sales declines in the US.

In a letter to employees, Niccol wrote, “We identified coffeehouses where we’re unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance.”

Nearly 18,300 Starbucks locations, both privately owned and licensed, would be present at the end of the fiscal year, according to the CEO, who stated that the business would have closed in the US and Canada. In contrast, the 18, 734 locations that were disclosed in a regulatory filing in July, are 18.

Since taking over as CEO of Chipotle Mexican Grill, Niccol has gained the support of investors and is credited with leading the burrito chain’s turnaround.

“Starbucks is aggressively pursuing turnaround initiatives. We believe the store closures fall within management’s previously announced zero-based budgeting framework, according to TD Cowen analyst Andrew Charles, while the store closures are more than we anticipated.

Starbucks added that many of its support teams would be closed as well as a number of other open positions as well as the company would make job cuts on Thursday.

As of September 29, 2024, the company had about 10,000 employees working outside the coffee industry.

According to Niccol, “This is a more significant action that we know will have an impact on customers and partners.”

Starbucks is also making investments in enhancing the staffing and incorporating technology to improve the efficiency of the ordering process and enhance the customer experience.

Source: Aljazeera

Starbucks to close underperforming stores in restructuring efforts