Home Investing Here’s how Starbucks plans to improve its stores

Here’s how Starbucks plans to improve its stores

by

Starbucks cafes across the country are starting to change how they make drink orders, among other tweaks designed to reduce bottlenecks and long wait times that have dogged the chain.

The overhaul comes as the coffee giant prepares for an anticipated swell of orders through its mobile app.

At the heart of the plan is Starbucks’ “Siren Craft System,” a series of processes that aim to make baristas’ jobs easier and speed up service times for customers. Starbucks said more than 10% of its 10,000 stores have already implemented the system, which includes changing the production order for hot and cold drinks. It will be deployed across North America by the end of July, according to the company.

Executives hope the changes will provide a much needed jolt to Starbucks. In April, the company reported a disappointing second quarter, as U.S. same-store sales fell 3% and traffic dropped 7%. The coffee chain cut its 2024 outlook.

Starbucks reported rates of incomplete mobile app orders in the mid-teens and said occasional customers came in less. CEO Laxman Narasimhan mentioned the need to make improvements to stores.

The most immediate shift that needed to happen in cafes was better handling the unexpected, Katie Young, SVP of store operations at Starbucks, told CNBC in an interview. 

“It’s the ability to flexibly respond to things we cannot predict,” she said.

The store changes will be key this month, as Starbucks on Monday started opening up its app to non-rewards members, which the company believes will increase traffic and orders.

“My sense is that they have a lot of demand in certain stores, and the footprint of the kitchen is so small, you have to find ways to be more efficient,” BTIG Managing Director Peter Saleh said. 

Losing customers because of slow orders and other store frustrations could cost Starbucks at a particularly vulnerable time. Americans have become cost conscious in the face of ongoing inflation, and in some cases have pulled back on morning or afternoon beverages and snacks. Narasimhan in April said consumers are spending more cautiously.

Starbucks has done something uncharacteristic in recent weeks, joining the stream of value offerings with a $5 food and beverage combo option. Communicating value to customers is also part of the plan to drum up business. 

Starbucks has been diagnosing the bottleneck issue for more than a year, since the company’s reinvention plan rollout in 2022, said Young. At the time, Howard Schultz was at the helm, having returned during a burgeoning unionization movement and shifts in consumer preferences. The changes underway in cafes were first previewed that fall, to be rolled out in the years to come. Narasimhan took over for Schultz in March 2023. 

The Siren Craft System processes were developed with worker feedback on which issues stopped them from creating beverages and connecting with customers. 

Starbucks plans to add a role akin to an expediter in a restaurant production line, a “play caller” who steps away from production and helps solve for logjams in cafes, handling tasks like restocking cups or helping when an unexpected crowd arrives. The company plans to train existing workers for the role or potentially add new baristas, if needed.

“One of the pain points we saw was [that] our espresso machine was often running all the time, and that was one of the things that kept our partners from being able to check in. And another thing we saw that you didn’t necessarily know was which part of the store would get crowded,” Young said. “We needed to actually have a partner that was dedicated when things got busy to pulling out of production and just helping.”

Starbucks will also change the order in which beverages are made. Previously, cold drinks were prioritized from start to finish, even if a hot beverage order came in first, as pulling espresso shots was the last step. This could create a traffic jam in the drive-thru, for example, if a person ordered one of each beverage, as the cold item would be ready while the hot drink was still in production. 

Macoy McGlaughlin, manager of Seattle’s First and Walker Starbucks location, said producing beverages in the order they were placed allows for a faster, streamlined process.

“We actually have proper sequencing between our hot and cold bars, versus cold bars becoming as popular as ever, to really have a consistent experience for the customers. So we’re actually making them in the order they’re coming in,” McGlaughlin said, adding that the cafe feels busier, but customers in store and in the drive-thru are getting drinks faster. 

Baristas also will have more control over the company’s Digital Production Manager, an iPad system that controls the sequencing of orders in various channels from cafes, mobile orders and the drive-thru. Workers will have more flexibility over changing order priority.

Young said the app changes added a sense of urgency to the Siren training rollout. She feels confident stores will be ready if traffic increases.

Mobile order and pay will also be available on third-party platforms to reach more customers. 

The potential increase in traffic and workloads come as some baristas for years have raised issues about staffing and scheduling, particularly employees who have sought to organize with the Workers United union. In internal surveys and in bargaining committee meetings, union-represented workers consistently rank it as their highest priority issue.

Starbucks says it has made significant progress over the past two years on staffing and scheduling.

BTIG’s Saleh said the company has moved uncharacteristically slowly.

“The Siren System was first introduced at its investor day in 2022 with Howard [Schultz] at the helm,” said Saleh. “Historically, Starbucks doesn’t do anything slowly. They move quickly, find something they like and roll it out fast.”

Young said the Siren Craft changes have provided a “material reduction” in things like wait times for orders. Starbucks said that in stores where the company has used the Siren Craft System to optimize operations, it has seen an increase in the number of customers served at peak times that it estimates to be worth 1 percentage point of comparable sales annually.

“We feel very confident about the investments we’ve made in our staffing system and all the precision we can bring there,” Young said. “But no system or internal efforts can predict that today, a group of high school kids decided to gather all their friends and pop in at 2 p.m., when we normally wouldn’t see a lot of business.”

Additional store changes will also involve a slower rollout of new equipment under the same Siren moniker, with a custom ice dispenser, milk-dispensing system and faster blenders to reduce steps for baristas and get drinks to customers faster. Equipment investment will take multiple years, Young said. She added that updated equipment, coupled with the new training processes in store, has led to meaningful returns on investment. Ten percent of stores will have the Siren equipment by the end of the year.

Young said Starbucks wants customers to feel like wait times are better managed and that “everyone is just in a good place even when it gets busy.”

This post appeared first on NBC NEWS

You may also like