Starbucks is shutting down an entire line of cafes
'We found this format to be overly transactional and lacking the warmth and human connection that defines our brand,' Starbucks CEO Brian Niccol said on its earnings call late Tuesday.
The store model, which launched in New York in 2019, encouraged customers to order via their mobile app and wasn't meant to be a place to linger, like a traditional location that has seating. Although some have a small indoor area, others have only pick-up windows.
Dubbed 'Starbucks Pick Up,' the spin-off eventually grew into roughly 90 locations across the United States, usually built in downtowns, airports and hospitals. Some of those locations might be converted to a traditional Starbucks in the future, but the company didn't immediately respond to comment about which locations will be changed.
Niccol said that the company's 'strong digital offering' with its app 'can deliver the same level of convenience through our community coffeehouses.'
Since becoming CEO last September, one of Niccol's top directives is restoring the coffeehouse vibes the chain was original known for. That 'third place' objective has diminished in recent years as Starbucks prioritized speed and convenience. In June, the chain took CNN on a tour of a new cafe with cozier chairs, power outlets and larger tables that's intended to be the model for the Starbucks of the future.
Niccol unveiled on Tuesday that Starbucks is also building a 'small format version' of its stores with just 10 seats in New York City.
'We believe this new prototype will deliver an exceptional customer experience, improve unit economics and unlock growth opportunities in more markets,' he said.
Still, Niccol has a lot of work to do: The chain reported its sixth consecutive quarter of sales declines at stores open at least a year, with North American sales in that category falling 2%.
'While our financial results don't yet reflect all the progress we've made, the signs are clear — we're gaining momentum,' Niccol said. He noted that purchases from non-Rewards members returned to growth and the average receipt transaction grew 1%.
Starbucks (SBUX) shares rose nearly 5% in premarket trading.
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