Starbucks is revamping stores to speed up service and boost morale

The company also said it plans to open 2,000 new online stores in the United States by 2025, with a focus on meeting the growing demand for new types of services, including mobile ordering and delivery. Drive-thru now makes up 50% of US sales, for example, while delivery demand has grown 24% so far this year.

“It’s clear that our physical stores have to change. Our physical stores are built for a different era,” Starbucks COO John Colfer said at an all-day event for investors in Seattle Tuesday.

Culver said customizable cold drinks — which now make up as much as 75% of US beverage orders for Starbucks — are taxing employees in kitchens designed for simple hot drinks. Starbucks has launched a new workstation that requires less movement and can cut 50 seconds off the process of making blended iced mocha. It also announced a new patented technology that will cut the time needed to brew cold coffee from 20 hours to a few seconds.

The introduction of an increasing number of hot food items is slowing down Starbucks kitchens. Culver said Starbucks expects to serve 300 million breakfast sandwiches in the United States this year, each of which takes up to 85 seconds to heat up in its ovens. Starbucks plans to start cooking it in batches and storing it in heaters next to the drive-through windows.

The company touted other upcoming benefits for workers, including more flexible scheduling, more generous sick time accruals, and an expanded ability for mobile customers to tip.

Starbucks executives made little reference to increased union efforts in its US stores during Tuesday morning presentations. But it was clearly a trigger for the company to think more deeply about ways to improve the working lives of employees. Since late last year, 236 of Starbucks’ 9,000 US-owned Starbucks stores have voted to form a union, an effort the company opposes.

“The truth is we have a trust deficit with our partners,” said Frank Britt, Starbucks’ executive vice president and director of strategy. “The work we do in our stores today is very challenging physically.”

It was not immediately clear whether the investments and new technology would be offered to non-union stores. Starbucks said the company has not yet decided how the investment will be distributed. But in May, Starbucks announced $200 million in additional pay and training, but said the benefit would only go to non-union stores.

Starbucks says it is required to negotiate new benefits with Union stores. But in August, the Seattle office of the National Labor Relations Board filed a complaint against the company, saying it was violating US labor law by withholding wage increases and other benefits for workers in union stores. A hearing in the case is scheduled for an NLRB administrative judge in October.

The Starbucks Workers’ Organization, the organizing union of workers, said about 300 protesters protested outside a Starbucks meeting on Tuesday.

Culver said the company will respect the unionization process and will negotiate with stores that vote to join unions. But he also reiterated the company’s position.

“There are two paths. We can work together as partners, side by side, or we can have a third party between us.”

The company’s renewal will be led by Laxman Narasimhan, a former PepsiCo CEO who was named Starbucks CEO last week. Narasimhan will spend the next six months pursuing interim CEO Howard Schultz, who helped shape the company after buying it in 1987 and has led it on an interim basis since April. Schultz will remain on the Starbucks board when Narasimhan takes over as CEO in April.

Interim CEO Howard Schultz, left, speaks after introducing new CEO Laxman Narasimhan during Starbucks’ 2022 Investor Day, Tuesday, September 13, 2022, in Seattle. AFP / Stephen Brashear

“It’s a great opportunity for me to learn under the feet of one of the best entrepreneurs in the world,” said Narasimhan, who described himself as a “right-brained” operations expert who loves art, music and writing poetry.

Narasemhan, 55, who was recently chief executive of UK-based consumer health and hygiene company Reckitt, also said he agreed that Starbucks must renew its focus on exceeding the expectations of its employees if it is to serve its customers well.

Schultz said Starbucks had the best sales week in its 51-year history in August when it introduced its fall beverage lineup. But Schultz said Starbucks lost its way during the pandemic, when employee retention rates plummeted even as customers demanded a new service like curbside shuttle service.

Starbucks shares fell 1.4% Tuesday during a broader market slump as investors worried about rising inflation.

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