Starbucks coffee shop in Krakow, Poland on February 29, 2024.
Beata Zawrzel | Nuphoto | GettyImages
At the heart of the plan is Starbucks’ “Siren Craft System,” a series of processes designed 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 order in which hot and cold beverages are made. It will roll out across North America by the end of July, the company said.
Executives hope the changes will provide a much-needed boost to Starbucks. In April, the company reported a disappointing second quarter, with U.S. same-store sales falling 3% and traffic falling 7%. The coffee chain has revised its outlook for 2024 downward.
Starbucks reported incomplete mobile app order rates in the mid-teens and said casual customers were coming in less. CEO Laxman Narasimhan cited the need for store improvements.
The most immediate change that needed to happen in coffee shops was to better handle the unexpected, Katie Young, senior vice president of store operations at Starbucks, told CNBC in an interview.
“It’s the ability to respond flexibly to things we can’t predict,” she said.
The store changes will be key this month as Starbucks on Monday began opening its app to non-rewards members, which the company says will increase traffic and orders.
“I feel like there’s a lot of demand in some stores, and the kitchen footprint is so small that you have to find ways to be more efficient,” said Peter Saleh, BTIG’s general manager.
Losing customers due to slow ordering and other frustrations at stores could cost Starbucks at a particularly vulnerable time. Americans have become more cost-conscious in the face of continued inflation and, in some cases, have forgone consuming drinks and snacks in the morning or afternoon. Narasimhan said in April that consumers were spending more cautiously.
Starbucks has done something unusual in recent weeks, joining the flood of value offerings with a $5 food and drink combo option. Communicating value to customers is also part of the plan to boost sales.
Starbucks has been diagnosing the bottleneck problem for more than a year, since launching the company’s reinvention plan in 2022, Young said. At the time, Howard Schultz was in charge, having returned during a nascent unionization movement and changes in consumer preferences. The changes underway at the cafes were first presented this fall, to be rolled out in the coming years. Narasimhan took over from Schultz in March 2023.
The Siren Craft System processes were developed with feedback from workers about the issues that were preventing them from creating drinks and connecting with customers.
Starbucks plans to add a role similar to that of an expediter in a restaurant production line, a “player” who steps away from production and helps resolve traffic jams at cafes, handling tasks like such as restocking cups or helping out when an unexpected crowd arrives. The company plans to train existing workers for this role or possibly add new baristas, if necessary.
“One of the issues we found was that our espresso machine was often running all the time, and that was one of the things that prevented our partners from being able to check in. And another thing we found, it’s that you didn’t know what part of the store would be crowded,” Young said. “We really needed a partner who would be dedicated when things were starting to get out of production and just help us out.”
Starbucks will also change the order in which drinks are prepared. Previously, cold drinks were prioritized from start to finish, even if a hot drink order came first, because pulling espressos was the last step. This could create a traffic jam in the drive-thru, for example, if someone ordered one of each drink, because the cold drink would be ready while the hot drink was still being produced.
Macoy McGlaughlin, manager of Starbucks’ First and Walker stores in Seattle, said producing drinks in the order they were placed allows for a faster, more streamlined process.
“We actually have proper sequencing between our hot and cold bars, instead of cold bars becoming as popular as ever, to really provide a consistent experience for guests.” So we make them in the order they come in,” McGlaughlin said, adding that the cafe seems busier, but in-store and drive-thru customers get drinks faster.
Baristas will also have more control over the company’s Digital Production Manager, an iPad system that controls order sequencing across different channels from cafes, mobile ordering and drive-thru. Workers will have more flexibility to change the priority of orders.
Young said the changes to the app have added a sense of urgency to the Siren training rollout. She’s confident stores will be ready if traffic increases.
Mobile ordering and payment will also be available on third-party platforms to reach more customers.
The potential increase in traffic and workloads comes as some baristas have raised staffing and scheduling issues for years, particularly employees who have sought to organize with the Workers United union. In internal surveys and at bargaining committee meetings, workers represented by the union consistently rank this issue as their top priority.
Starbucks says it has made significant progress in staffing and planning over the past two years.
BTIG’s Saleh said the company was moving unusually slowly.
“The Siren system was first introduced at their investor day in 2022 with Howard (Schultz) at the helm,” Saleh said. “Historically, Starbucks doesn’t do anything slowly. They move quickly, find something they like and roll it out quickly.”
According to Young, Siren Craft’s changes have resulted in a “material reduction” in wait times for orders, for example. Starbucks said that in stores where the company used the Siren Craft system to optimize operations, it saw an increase in the number of customers served during peak hours, which it said represents 1 percentage point of sales annual comparables.
“We’re very confident in the investments we’ve made in our staffing system and how much precision we can bring to it,” Young said. “But no system or internal effort can predict that today a group of high school students decided to gather all their friends and hang out at 2 p.m., a time when we don’t normally see much work. »
Additional changes to the store will also involve a slower rollout of new equipment under the same Siren name, with a custom ice dispenser, a milk dispensing system and faster mixers to reduce steps for baristas and get drinks to customers faster. The equipment investment will take several years, Young said. She added that the updated equipment, coupled with new in-store training processes, has led to significant returns on investment. Ten percent of stores will be equipped with 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 comfortable, even when it’s busy.”