Image Courtesy of Starbucks
September 30, 2025
Is Retrenchment the Next Wise Step for Starbucks?
Starbucks last week unveiled a $1 billion restructuring plan that will shutter about 400 North American cafés, cut 900 non-retail jobs, and remodel over 1,000 locations.
The moves mark an acceleration of CEO Brian Niccol’s “Back to Starbucks” transformation strategy. Niccol, who was appointed CEO last September after leading Chipotle, said in an internal blog memo, “While we’re making good progress, there is much more to do to build a better, stronger, and more resilient Starbucks.”
Niccol said the café’s goal is having “every coffeehouse to deliver a warm and welcoming space with a great atmosphere and a seat for every occasion.” The “Back to Starbucks” strategy envisions Starbuck’s returning back to its roots as a “third place” for consumers — or the hangout between home and work that first made Starbucks a global brand in the 1990s — while also smoothly accommodating the surge in mobile orders over the years, largely from customers seeking a speedy pick up.
Starbucks’ company-operated café count in North America will be reduced by about 1% in its fiscal year ending September 2025, based on a net of openings and closures. Niccol said as part of a review, Starbucks “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, and these locations will be closed.”
Starbucks, over the next 12 months, will also renovate more than 1,000 locations “to introduce greater texture, warmth, and layered design.” Niccol added, “Early results from coffeehouse uplifts show customers visiting more often, staying longer, and sharing positive feedback.”
At the corporate level, Starbucks will “eliminate approximately 900 current non-retail partner roles and close many open positions” as it prioritizes investments. Niccol said, “Where we’ve invested in more green apron partner hours so that there are more partners working at busy times, we saw improvements in transactions, sales, and service times, alongside happier, more engaged partners.”
Starbucks Continues To Endure Falling Same-Store Sales
Starbucks, in the fiscal third quarter ending June, saw global same-store sales fall for the sixth consecutive quarter.
The weakness is attributed to heightened competition from new and old rivals, including Dunkin’, McDonald’s, Dutch Bros., and Luckin. Budget-conscious consumers may be seeking less-expensive options as compared to Starbucks’ pricey lattes.
Niccol’s “Back to Starbucks” plan has primarily focused on improving the in-café experience, including hiring more baristas and reducing in-store menu offerings to reduce wait times — as well as adding comfy seating. Newer items have been rolled in, including a 15-gram protein cold foam, coconut water-based tea, and customizable energy drink offerings, to revive traffic.
Analysis by CoStar showed many of Starbucks’ closures will focus on high-profile urban that might reflect the shift toward remote work as well as concerns over crime and safety. Reports arrived in June that Starbucks was lowering prices in China to better compete in the region, but Niccol has stressed the importance of maintaining the chain’s premium positioning, including moving last fall to scale back promotional offers to mobile app users.
Discussion Questions
Is closing less-productive stores and trimming non-café jobs likely the next logical step in Starbucks’ recovery efforts?
Where should Starbucks be focusing its resources?
Poll
Loading …BrainTrust
Mark Ryski
Founder, CEO & Author, HeadCount Corporation
Neil Saunders
Managing Director, GlobalData
Gene Detroyer
Professor, International Business, Guizhou University of Finance & Economics and University of Sanya, China.
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Starbucks has two issues. One is around saturation. The other is around the proposition. The closures are designed to address the first issue. They are a necessary rebalancing from a chain that has too much capacity relative to demand; and has some capacity in the wrong places – especially since post-pandemic foot traffic and dynamics have shifted. However, to avoid further closures and shrinking, Starbucks needs to rebalance the proposition to allow it to compete better with rivals. This means practical things like reducing wait times, making cafes more attractive, offering better value in the menu and so forth. This is where the hard work needs to happen.
A closure list in the local paper supports – somewhat – your premise: many closures in downtown areas (that no longer need two store on the same corner) But the culling of that excess was laregly completed in prior cutbacks, and many of the locations are in neighborhood centers that, logically, should be doing well.
It was never completely culled nor dealt with overlaps. And after that 2021 cutback they simply ramped up expansion again. So much so, that prior to these latest cuts, they had more North American stores than they did in 2020!
Closing unproductive stores is the right move. No operator wants to close stores, but ‘pruning for excellence’ is a must in a turnaround situation. Trimming expenses are also a necessary evil, but it’s not a silver bullet, either. Ultimately, Starbucks needs to drive demand for their products and deliver a great store experience, like they used to. Starbuck’s strategy seems sound, but delivering it all takes time, money, and patience – none of which are in abundance after six consecutive quarters of negative same-store sales. Executing a turnaround on a business that has as much profile as Starbucks is not for the faint of heart. And despite making a lot of what appears to be the right moves, ultimately, the market will decide if these changes are making a difference. Pressure to deliver quarterly earnings, that comes with the territory.
“deliver a great store experience,”… that would focus on the rumbling of consumers.
Which will prevail first, the star or the bucks?
Opportunity in North America as weather grows colder to pick back up share, for hot drinks.
The next wise step? Well it’s defintiely the next step, tho I’m not sure “wise” is the right adjective (“necessary” seems a better fit). If you don’t have sales at a given location, and you don’t think they can be rebuilt, then closure makes sense; of course the (multi)Billion Dollar Question is how one decides that rebuilding is impossible (Maybe “defeatist” is the right word.) And unfortunately for Starbucks, unlike many retail consolidations, where sales simply shift into a nearby open location, that seems doubtful: there are just too many alternatives to count on people going 5 or 10 miles just to keep what they’re losing.
All that open real estate with drive-thru windows, perfectly calibrated for a coffee shop, is just going to invite Dunkin and Dutch Bros. into new markets for a steal of a deal. Just closed a standalone location Friday situated on the way to my office – that had only opened this spring!
I suspect this is exactly the right choice. Ping Fu, 2005 Entrepreneur of the Year for Inc Magazine, observes “We underestimate the value of stepping back because we are trained to perceive a willingness to make concessions as weakness or looking for alternatives as being inconsistent.” This CEOs predecessors just kept pushing for growth at all costs — even as it became evident the strategy wasn’t working and the costs were extraordinarily high. My hope is the board give him the support he needs while the value of new strategy emerges.
Yes — I think closing underperforming stores and pruning non-café roles is a logical (and perhaps overdue) step for Starbucks as it seeks to refocus and right-size its footprint. Starbucks has already announced plans to shutter “coffeehouses where we don’t see a path to financial performance” and eliminate roughly 900 non-store jobs as part of its “Back to Starbucks” plan. These are hard but defensible moves: by shedding excess or weak assets, Starbucks can free capital and managerial bandwidth to double down where it still has competitive advantage.
That said, closing stores or cutting staff alone won’t restore growth. Starbucks must channel resources into areas that differentiate it—especially in response to nimble challengers. Brands like 7Brew and Dutch Bros are growing share in the U.S. in part because they emphasize streamlined operations, lower labor complexity, and a strong “speed + format” model that has fewer of the structural labor burdens that Starbucks has struggled with in recent years (e.g. large back-office teams, fixed cafe staffing ratios). Starbucks must match that operational focus while preserving the premium “third place” appeal it’s known for.
The bulk of strategic investment should go toward elevating the in-store experience, speeding service, simplifying operations, and innovating formats. Starbucks should redesign stores to better balance the dual demands of mobile order/pickup and café dwell time, optimizing layouts, staff workflows, and technology that reduce friction. It should also selectively pilot leaner formats in underserved areas—smaller footprint, drive-thru or express formats with fewer overheads. Finally, investing in data, predictive demand modeling, and inventory automation will help reduce wasted labor and improve throughput. By concentrating on those core levers rather than spreading resources thin, Starbucks has a better shot of stabilizing market share even as fast, efficient competitors nibble at its edges.
Starbucks needed to make closures happen several years ago as the quest for every corner wouldn’t ultimately be profitable. But the bigger issue is they evolved into being many things to many people, confusing the brand promise, and ultimately execution. All at one time Starbucks was a slow and comfy third place, with premium coffee, sandwiches, desserts, wine bar, refreshing drinks, and tea. Yet also tech enabled for speed, hurried airport service, yet also upscale coffee roasters with meal service. Meanwhile, places like Dutch Bros experienced double digit growth, driven largely by Gen Z with simple drive-up huts, offering a creative and fun vibe with catchy drinks.
Starbucks has needed to shed pieces of its business and unprofitable locations to take the next steps, to redefine its brand proposition, and be a more focused and better operator. This is a good move, as painful as it is.
Here’s how I see these types of situations. This time it’s the story of Starbucks. The growth, expansion, and changes over the years aren’t working the way they hoped or used to. So, changes have to made. That could include store closings, layoffs, etc. The option to maintain the status quo could have disastrous consequences, potentially putting the company out of business. It’s never fun to announce store closings and layoffs, but sometimes that is the only way to stay in business.
Closing structurally underperforming stores is a necessary action in a turnaround situation. However, that will not ignite the turnaround, nor is this the core issue that Starbucks faces: over the past six quarters, the latest four under Brian Niccol show mixed results and problematic employee morale. However, Starbucks’ high-service “Back to Starbucks” model has potential, especially if it can successfully recapture the premium segment of its customer base and manage the executional and operational complexities of its vast store network. Given the high costs, complex operational logistics, and entrenched consumer behavior, this is a non-trivial bet with more moving parts than what Brian Niccol faced at Chipotle. From a performance perspective, the potential of higher footfall and larger baskets to offset costs will be the ultimate measure of the plan’s long-term success.
Dropping the dogs and redeploying capital to the stars makes sense as Starbucks regains strategic clarity.
Looking ahead, RTO mandates will impact more households’ daily habits. We may see lower demand for suburban Starbucks stores during work hours and more demand for urban third place escapes.
Yes, strategic clarity is what they need. As they melded into a-cup-and-go purveyor, they lost their uniqueness. The real question for Starbucks is how they can attract customers that every other place offering a-cup-and-go can’t.
Yes. The focus on efficient throughput outweighed their investment in comfort and hospitality to build relationships and deepen loyalty.
along with RTO, there is also forthcoming USA job insecurity/belt tightening. Do those cancel each other out?
USA consumer segments… are high end spenders enough (volume & frequency & geography) to uplift Starbucks share? The aspirationals have been voicing complaint of high product prices. The perceived ‘personal value’ & quality issues need to be fixed in latest strategy.
Corporate image & goodwill also needs a smooth streak… fewer employee labor issues/ less squashing of unions. That is social media feed.
Closing 400 stores out of 18,000 hardly sounds like an issue. More retailers should embrace the churn. The other problems are more challenging.
Starbucks changed the coffee culture, not only in the U.S, but around the world. The
“Third Place” was brilliant. It changed how people thought about coffee. It also taught people they didn’t have to make coffee at home, or, more importantly, there were 10,000 differnet combinations of java to satisfy individual palates.
I am not sure anyone makes coffee anymore. How do all these alternative places stay in business? As I sit at my regular coffee spot, writing RW, I note that it is one of the coffee places on the block, along with one Starbucks. Across the street is a Dunkin’. If I turn left out of my apartment building, there are three more grab-and-go coffee places. A quick turn around the corner, and there is one more.
Starbucks must distinguish itself from this type of competition. It seems that is what they are thinking.
The drive to overbuild stores is intoxicating. And no one in top leadership puts on the brakes because it would be a negative to tell investors you want to slow down or build smartly for success. Agree with you, 400 stores is really nothing in the scheme of 18,000. Feel bad for the employees being let go.
Starbucks oversaturated in many areas that was driven by office workers daily commute which doesn’t exist as much. Starbucks need to get their stores footprint in line with revenue, and concurrent fix their store experiences and product mix to drive same store sale growth. Pursuit of growth by store openings isn’t the right path now.
This is a very old script with a new retailer in the headline position. A retailer overbuilds while formidable competition keeps emerging and building out its own store count. In this case, there are several formidable competitors. This week the headline retailer doing the resetting is Starbucks. Last week in was Lululemon. And before that department stores. In each case the reset was overdue. That seems to be the nature of the beast. It’s reeeeallllyyy difficult to stay ahead of the curve in retail.