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Starbucks Closing Hundreds of Stores

Starbucks is closing 600 of its 7,000 company-operated stores in the US and letting about 12,000 employees go. Here's hoping that local indies are able take up some of the slack.

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  1. I kind of doubt if there actually is slack, given that pricy brewed coffee is one of the first things to go when you have to shell out an extra $30 to fill your gas tank to get to work. In fairness, I simply refused all along to pay their prices and almost never visit any coffeehouse. But when dragged to Starbucks for a meeting last week, I was not impressed with the lukewarm, tasteless mocha and extremely dry blueberry scone I spent $5 on.

    1 Reply
    1. re: Emm

      I actually used to be a frequent customer of Starbucks. Then my household started feeling the pinch of this economy, and sure enough, the first step I took was to give up getting Starbucks coffee to go on my way to work (saving $2 per day), and take the extra time to brew it at home every morning instead.

      So I completely understand why they are closing locations.

    2. I wonder why it took them so long to learn the Mcdonalds lesson of market saturation. When you have 3-5 stores within walking distance of eachother, you're only stealing business from yourself.

      I kinda feel sorry for the teens/college kids who make Starbucks their hangout. Maybe now they'll learn the simple pleasures of getting high next to the dumpsters behind the Quick-E-Mart and loitering in parking lots. Just like in the Bruce Springsteen song.

      Or they could learn to make their own coffee.

      2 Replies
      1. re: monkeyrotica

        << I wonder why it took them so long to learn the Mcdonalds lesson of market saturation. When you have 3-5 stores within walking distance of eachother, you're only stealing business from yourself. >>

        I remember that in the 1990s they did study the question of how densely to place their stores in Downtown Seattle, at least. They came up with an answer along the lines of people being willing to walk two blocks to their store, with 1 block being the optimal distance, and long elevator rides counting as a block. This is how they ended out with some buildings having a Starbucks on one side and another on the opposite side. Not to mention one very tall building with the same setup, plus a store halfway up the building.

        Makes me wonder if they've been relying on Downtown Seattle data on saturation that doesn't apply elsewhere. After all, Seattle is pretty coffee-crazed; even in the late 80s - early 90s when the economy wasn't so great, there were coffee carts covering the city, often across the street from each other downtown. There was even a cart inside the University library and another inside the bookstore.

        1. re: monkeyrotica

          They were never stealing business from themselves. Three 100sf Sbux on one block is one 3000sf Sbux. They're company-owned stores and it all goes to their bottom line. McDonald's are franchises. You cannot compare the two.

        2. I feel bad for its employees, and it's depressing news for the US economy in general. Hopefully, the company will offer good severance packages. As someone pointed out, it's doubtful that local indies will take up the slack at times like this. And they certain won't be able to absorb the number of unemployed from Starbucks.

          13 Replies
          1. re: gloriousfood

            Starbuck's has been opening stores at an alarming rate in my area: three drive-thrus within two miles of each other since the beginning of the year. We now have six Starbucks (in a town of 100,000) when we had just three a year ago. I wonder if we'll lose the older, walk-up ones in favor of the drive-thrus, which is not a great statement to make in the wake of $5 gas.

            1. re: brendastarlet

              The vast majority they are closing have been opened in the past two years. They're typically stores opened up in close proximity to other Starbuck's that have never made any money. Chances are you'll keep the original ones and the newer drive-thru ones will be the ones to go.

              1. re: brendastarlet

                Well, of course, there's the "Simpson's" episode where Homer and Bart pass by six consecutive Starbucks in a mall, and the lone merchant they find tells them to hurry up because "they're putting in another Starbucks".

                I live in a suburb of Toronto of about 180,000 people. We have 8 Tim Horton's outlets (Tim's is a Canadian born coffee/doughnut chain). We have three Starbucks.

                Tim's is always busy - no matter what time of day or night, there's a line. On the other hand, the Starbucks are generally line-free; even in the morning rush, there might only be two or three people in front of you, whereas at Tim's, the line is often ten or more. Far from closing stores, they are planning to open new ones, and have "Help Wanted" signs in all their stores.

                Perhaps it's because Tim's sizes are "small, medium, large, and extra large", not some foreign words. Perhaps it's because Tim's charges $1.49 for a large coffee, not $3. Perhaps it's because Tim's offers reasonably good tasting sandwiches, soups, bagels, etc. as well as pastries. But mostly I think it's because at Tim's, I don't get a bucketful of attitude from some jumped-up "barrista" who sneers at me because I don't spend five minutes discussing the provenance of their beans before ordering.

                We have "upscale" Canadian coffee chains as well - Second Cup and Timothy's (both, BTW, predate Starbucks) - that offer different roasts and beans, but they have managed to keep their expansionary dreams in check. There are two of each in my town, and they seem to have a steady business.

                Starbucks, IMHO, is just following the path of Krispy Kreme - believing their own hype, expanding too quickly, and cashing in on stock options - and is now on the same downward slope. (SBUX is now trading at roughly what it was 5 years ago, and down more than 60% from its peak.)

                1. re: KevinB

                  If all you want is a coffee, SBux doesn't usually go over 2 bucks. It's the espresso drinks that will ring you in at ridiculous prices.

                  Even so, Tim's is for the common man who just wants a quick coffee. They have their own formula in the Double Double that satisfies the fat and sugar cravings most people have.

                  Krispy Kreme has other issues. Who's going to order stacks of donuts when you get them for free just waiting in line?

                  1. re: WingMan72

                    I think Tim Horton is pretty damn good for the price. I'd pick theirs over SB drip any day. Why pay $2 for a cup of burnt SB drip coffee when I can get a good cup of $1 McD brew? I haven't been back to SB since I started drinking McD coffee again.

                    1. re: dpan

                      In Columbus, TH is about 0.20 cheaper than SB on regular coffee. The major difference is that the lines at TH are non-existent since they bring in most of their baked goods frozen.

                      1. re: dpan

                        I really wanted to like Tim Horton's. I tried their coffee once, and it was quite disappointing to me. It was VERY weak IMO. I will certainly give them another shot, if they would only open a location closer to Boston

                        1. re: Ralphie_in_Boston

                          The Canadian locations have very good coffee. The US locations are really inconsistent. In Canada, I'll do TH. In the US, SB.

                          1. re: jlawrence01

                            That's strange. Doesn't coffee get imported from halfway around the world? Howcome they can't properly transport it across the border?

                            1. re: jlawrence01

                              My TH experience was based on visits to locations in Toronto. I have not been to one in the US.

                      2. re: KevinB

                        I don't like either SB or Tims for regular coffee. I'll go to Timothy's or Second Cup before either, if available.
                        That said, I agree with what you're saying in the 'burbs, but downtown in the business district, the two Starbuck's that are about a two min walk from each other in the same building, are always VERY busy, with lines out the door. The Tim's are equally busy (in another busy). I think the difference is, there is the right demographic to keep both busy downtown, whereas Tim's appeals to the mini-van demographic in the burbs, more then Starbuck's.

                      3. re: brendastarlet

                        I'm in a city of one million (Calgary Canada) we now have 101 Starbucks. 6/100k is not close to saturation.

                        And here in Canada, they're not closing any locations.

                        1. re: John Manzo

                          that may change as the economy worsens in Canada as well (it's been a slower decline)

                    2. Claire, Maybe this will encourage some young people to go to college instead of getting covered with tattoos and becoming "baristas".

                      1 Reply
                      1. re: Leper

                        At the Starbucks nearest my old apartment, most of the baristas were grad students at the nearby university. The flexibility in hours combined with decent salary and benefits were of great help to those in programs that didn't have a lot of assistantships to hand out.

                      2. This makes me wonder if Starbucks consciously opened up too many stores simply as a way to drive others out of business, knowing that these sorts of cutbacks would eventually take place and that their market would be secured due to lack of competition. Or am I being paranoid?

                        As for severence checks, since the closures are to take place over the next year and a half, I suspect that many employees will leave the job before their stores even close. High turnover workforce and all.

                        2 Replies
                        1. re: Cachetes

                          Cachetes: On the contrary, there are more independent and mini chains of espresso shops than ever. They are following the Starbuck's model, that is the original model that Starbuck's developed--the coffee aroma (due to the grinding the beans in house), a place to meet rather than drive throughs, etc.

                          1. re: jayjay

                            I've given up the drive-thru/grab and go lattes. I can make coffee at home pretty cheaply. But I will go to Starbucks if i'm going to meet a friend for coffee. We can hang out and chat for hours for a few bucks. A pretty good deal. Of course, i'm in Seattle and there are other small coffee shops where i would rather do that (hello, El Diablo on Queen Anne). Starbucks tends to happen more with the friends i meet up with on the eastside.

                        2. It's all those people doing the ghetto lattes fault. They dared steal from . . . my precious.

                          1. The local joints have been more popular in my area all along, and I would be surprised if a couple closed here (there are only 5 in a town of 100k).

                            And no, hourly employees don't get severance. They don't get healthcare either.

                            6 Replies
                            1. re: mojoeater

                              Does that apply to everyone who works in a SB store or just the baristas?

                              Some store employees must b/c this man wrote a book about how Starbucks saved his life. He was some high-powered finance guy who blew it all away and, in desperate need of health insurance, got a job at Starbucks, which provided him with the benefits he needed.

                              1. re: mojoeater

                                You get health insurance benefits if you work 20+ hours a week. You must fulfill one quarter before getting to opt in.

                                1. re: kindofabigdeal

                                  Thanks for the clarification. I knew SB employees got benefits, including health care.

                                  1. re: gloriousfood

                                    It's not the world's best coffee, it's a bit more expensive than McDonald's and the like, some claim to have had bad experiences with snotty baristas (I never have though), but they're a very progressive company that treats their employees right and has proven you can do that while succeeding financially in a free market(let's call this recent move a "correction"). They offer donation matching for employees, help with tuition, insurance benefits, stock options and other things.

                                    As a customer I'm the come-in-and-stay-a-while type, usually for studying. Where else can I sit around for four hours for just two bucks? With energy costs, I can't even do that in my own apartment (A/C)

                                    1. re: kindofabigdeal

                                      I don't know much about SB's policy toward its employees, just that a few things I've read here and there have me thinking that it's a company that generally treats its employees well (like Costco) with a few hiccups along the way. What I don't get is the derisive tone toward people working as baristas. Why? The ones I know are generally hard-working, patient people who have to deal with entitled customers all day long. You try doing that for half a day before you run out of the store screaming!

                                      There sometimes seems to be a universal glee upon hearing that a chain is shutting down (emphasis on the word "chain"). We should remember that people's jobs and livelihood are at stake here.

                                  2. re: kindofabigdeal

                                    That's what I meant when I said "hourly." Most of the employees in our area are college kids working a couple days a week.

                                2. I read that they will be closing 19% of the stores that they opened (in the US) in the past two years. Wow.

                                  1. What do you expect between them raising thier prices and OVER expanding.

                                    1. We have one here in Schertz,and there was talk about opening up one on FM3009
                                      near Clemens High School and the new post office,but I guess that's on hold.
                                      The one in the Olympia Forum is always busy.I think they over expanded becuase they got greedy plain and simple.

                                      2 Replies
                                      1. re: HollyDolly

                                        "Greed is good..." Maybe what capitalism derives its success from is greed. Or like anyone else or any other corporation, they are just doing what they feel will improve their lot in life. Whatever the case, I think there is a lot to be said for a company like Starbucs that is being accused of greed that in reality offers pay and benefits unmatched for the most part in the food service industry, and is constantly reassessing its corporate goals to assure that they are being a good corporate citizen.

                                        Corporations are not favored on this site - the hatred is palpable. Some deserve the enmity of which they have certainly built a reputation for. However, if Starbucks is so greedy, and if this closing of so many units is devine retribution for their cupidity, then just about every other major corporation is being smote as well. The fact of the matter is, so many businesses, both large and small, are shutting their doors. The current economic slide is resulting in an overcapacity of consumer goods and services units in general. And obviously fuel prices, which impact literally everything in our daily lives, has recently been the coup de grace to any remaining doubters that this recession is for real. Starbucks is being singled out because they have been a phenom in the business world in creating and expanding an industry which has changed society, and are one of the easiest, most visible and understandable examples to follow for the everyday man or woman.

                                        High-visibility consumer-level corporations like Gap, The Limited, Abercrombie & Fitch, Home Depot, and hundreds of others are closing down major percentages of their units (if not all) because of overcapacity. Many of these closures are in newer suburban areas as well as where a higher density of existing units and new units can be found. And of course, of particular focus are the districts and regions that our being severely hit by the recession. Airlines and other fuel-intensive industries are barely staying alive, mostly due to fuel surcharges, massive furloughs, and route/equipment cancellations.

                                        I think we need to focus on what truly is happening here and view Starbucks as an example of what is happening to many more corporations (which equals people) throughout this country.

                                        1. re: bulavinaka

                                          I agree--it's not just Starbucks that attracts the hatred--my business is automotive research and you would not believe the people who are practically gleeful that the US automakers are struggling. No one seems to think that the failure of these large companies is going to impact their lives, unless they actually work for Starbucks or GM.

                                          MBA driven short term thinking is one of the culprits. The current crop of Starbucks execs will probably get honking bonuses for saving the company money by closing those stores--genius. The prior crew probably got huge bonuses for building those stores, making sales rise (temporarily). Same crap at the automakers, the Gap, Home Depot (and god help Chrysler for hiring the guy who drove HD into the ground and left with a huge golden parachute), and any number of companies who focus almost exclusively on the short term.

                                          But I think that the bottom line is that we're seeing the result of getting rid of a lot of decent paying jobs, and not having enough equivalent replacement positions for the people that were, as the Brits put it, "made redundant". Factory worker making $20 an hour can afford a latte or two every week. Ex-factory worker working at Wal Mart making $7.50 an hour has zero discretionary income. No lattes, no new cars, no recreational shopping, just subsistence.

                                      2. I know of a couple opening up a few blocks from each other in TO and even the Indies are crowding themselves out. On one strip of street there's a coffee place every few doors down.

                                        1. Another factor nobody's mentioned is that any old indie café has free Internet, but Starbucks has never had it and seems to be botching it now that they're trying to introduce it.

                                          1. Howard Schultz came and spoke in one of my business classes in college - unfortunately, his company has violated a simple principle they teach in business school, getting away from your core business. They were founded on coffee, but ventured into tea, music, and other things that had nothing to do with it. And the Frappucino - no need to belabor the point.

                                            Weekly numbers, that's what it's about. It used to be about coffee (whether you believe that or not).

                                            6 Replies
                                            1. re: azhotdish

                                              In certain industries or businesses, I'd agree with your statement. However, in beverages, especially coffee-based beverages, I don't think this applies well.

                                              I don't know if you've been to Asia, or for that matter geographic areas in the US that have a large Asian population. Coffee & tea shops are everywhere. Like in the Starbucks vs. The Other Guys model, there are both chains as well as mom&pops. And the diversity of drinks - primarily known for boba tea and coffee drinks - and other unrelated products offered is a booming industry. These shops will typically offer over 100 types of drinks. In fact, I was initially surprised that Starbucks never tried the boba product or other related items in their stores. But after giving this concept more thought this might have been a stretch for them. Properly making and storing boba would have been more than a simple addition of another ingredient to add to drinks - which tells me that they do a fair amount of scrutiny before expanding their product line.

                                              I don't doubt your contention that it's about weekly numbers. But maybe I can add to the weekly results the fact that most well-run corporations analyze numbers by the hour, day, month, quarter, year, as well as year-over-year, etc. Trends are what help drive decisions for the future. Obviously tons of businesses are now paying for their overcapacity and it will take time for many who are still in business to regroup and strategize a different forecast model.

                                              I don't mean to sound like a Starbucks defender - I drop by our local shop maybe once a month - I don't think that qualifies me as a staunch supporter. I think given that many companies are in the same boat right now - ones that were doing very well financially up until recent shake-ups in the economy - it's not about just Starbucks. It's about the current economic climate and how companies will do a better job at forecasting their growth.

                                              1. re: bulavinaka

                                                And I don't want to sound like a Starbucks-detractor by any means - I worked there 3+ years in high school and college and still stop in about once a week. My point, however, is that in their barista training program, the focus was coffee education. They conducted extensive coffee tastings, and every partner was required to fill out a "passport" of all their offerings so knowledge across the board was more consistent. The other big focus was the "third place" concept, which is well-known. However, when I now visit their stores, I no longer feel like anyone is focusing on extending their coffee knowledge, nor are they interested in really creating the "third place" environment. At least to me, it feels like the partners are now well-aware of the type of analysis they are doing on sales; as you state, the numbers are crunched heavily - daily, weekly, monthly, hourly numbers, sales per till, sales per partner, mark-outs, pastry, whole-bean, retail, etc. I can't think of the last time I saw a partner conducting an in-store coffee tasting via french press - when I worked there, this was done daily. Now, I just don't see it happening and it's disappointing. Sure you need to adapt to the market, introduce new products and services, and stay ahead of the curve. But it seems they have forgotten they were founded to be in the coffee business, and not these other things. Had they stuck to their original purpose, I don't see the aggressive growth happening, which could have prevented these closures.

                                                1. re: azhotdish

                                                  Points well taken... having been on the business-side of the counter, do you think this retrenching will result in a change in their focus? Does Starbucks management encourage suggestions, criticism and comments from their frontline employees?

                                                  1. re: bulavinaka

                                                    I was surprised over the weekend when I watched the movie Akeelah and the Bee and saw that it was presented by Starbucks Entertainment. Huh? Now that seems to be moving away from the core business. I can understand other beverages, even music in the store but a movie?

                                                    1. re: RobynS

                                                      You got me on that one. But I think it's wise for businesses to broaden their scope where it is practical. If your core business takes a hit, and your other profit centers are doing well, the company stay afloat from its diversification. The classic example of balancing a firm's portfolio is to make bombs in wartime and plowshares during peace. Not that I'm prescribing war, but you get the drift.

                                                      If Starbucks is gradually shifting more of its capital expenditures into entertainment, and they know what they are doing, then the branding of movies and such with their name could be quite successful, but at the cost of people like you and me scratching their heads wondering how serious they still are about serving decent coffee. Starbucks has been all about branding since day 2. They may eventually evolve into a multi-headed firm that slaps its brand on more things as well.

                                            2. anyone who thinks starbucks did not oversaturate on purpose and planned this in advance is not paying attention. This is called the wal-mart method. very successfully used by duane reade. You over saturate to drive competition out of business, and then you cut back to just what you need to dominate the economic niche. business red in tooth and claw

                                              (full disclosure - i posted this comment on yelp a few days ago)

                                              1 Reply
                                              1. re: thew

                                                They really botched the Treating-Employees-Like-Crap aspect of the Wal-Mart method, however.

                                              2. A sign of the times. In central gulf Florida, the Sam Seltzer steakhouse chain filed for bankruptcy last week, most (not all) of the Mel's Diners are recently bankrupt and dark, likewise the R. J. Gators. And numerous restaurants have stopped serving grouper because of the cost/affordability issue. I sense more and more people are brewing their own coffee and cooking their own meals, including me.

                                                1 Reply
                                                1. re: Veggo

                                                  Hopefully if and when the dust settles, potentially huge opportunities for great mom&pops to rise up and become successful will occur. Keep your eyes open for those that fit the profile... and good for the groupers...

                                                2. Being a stat's gal, I saw the writing on the wall years ago..
                                                  From a business acumen...they lost their way..