Inside Starbucks plans to improve stores

Starbucks Cafes across the country have begun implementing various measures, such as changing the way customers order drinks, to reduce the congestion and long waiting times that have plagued chain restaurants.

The major overhaul comes as the coffee giant prepares for a surge in orders through its mobile app.

At the center of the plan is Starbucks’ “Siren Craft System,” a set of processes aimed at making baristas’ jobs easier and accelerating service time for customers. Starbucks says more than 10 percent of its 10,000 stores already have the system, which also includes changing the order in which hot and cold drinks are made. The company says the system should be rolled out across North America by the end of July.

Executives hope the shakeup will provide a much-needed boost for Starbucks, which in April reported disappointing second-quarter results that included a 3% drop in U.S. same-store sales and a 7% drop in customer traffic. The coffee chain cut its 2024 outlook.

Starbucks reported incomplete order rates on its mobile app in the mid-teens and said casual store visits had dropped off, and CEO Lakshman Narasimhan cited the need for improvements in stores.

Katie Young, Starbucks’ senior vice president of store operations, said in an interview with CNBC that the most immediate change needed at its cafes is to improve how they handle unexpected events.

“It’s the ability to be flexible and adapt to the unexpected,” she said.

Store changes will be key this month: Starbucks began opening up its app to non-rewards members on Monday, which the company believes will boost foot traffic and orders.

“My sense is that in certain stores, demand is so high and the kitchen footprint is so small, they have to find ways to be more efficient,” said Peter Saleh, a managing director at BTIG.

Losing customers due to delayed orders or store frustration could hurt Starbucks, especially during a crisis. Americans are becoming more cost-conscious as inflation continues to rise, in some cases cutting back on morning or afternoon drinks or snacks. Mr. Narasimhan said in April that consumers are becoming more careful with their spending.

Starbucks has been making some unusual moves in recent weeks, joining the value offer bandwagon with $5 food and drink bundle options, and communicating value to customers is part of its plan to boost business.

Starbucks has been diagnosing the bottleneck problem for more than a year, Young said, since announcing the company’s transformation plan in 2022. At the time, it was led by Howard Schultz, who returned amid a growing labor unionization movement and changing consumer preferences. The changes underway at its cafes were first previewed that fall and were to be rolled out over the next few years. Narasimhan replaced Schultz in March 2023.

The Siren Craft System process was developed based on employee feedback about issues that hindered them from creating beverages and connecting with customers.

Starbucks plans to add roles similar to the expeditioners on its restaurant production lines, or “play callers,” who will step away from production to help decongest cafes and perform tasks like refilling cups and handling unexpected customer arrivals. The company plans to train existing employees for the roles or add new baristas as needed.

“One of the problems we saw was [that] “Our espresso machines were often running all the time, which was one of the reasons why our partners couldn’t check in, and we didn’t necessarily know which parts of the store were going to be busy,” Young says. “We needed a dedicated partner who could stop production and help out when it got busy.”

Starbucks is also changing the order in which it makes drinks. Previously, cold drinks were prioritized from start to finish, even if a hot drink was ordered first, because making the espresso shot was the last step. So, for example, if each drink was ordered one at a time, it could cause traffic jams at the drive-thru as the cold drink was made while the hot drink was still being made.

Macoy McGlaughlin, manager of Starbucks First and Walker stores in Seattle, said serving drinks in the order they’re ordered allows for a faster, more streamlined process.

“With our cold bar becoming more popular than ever, we have a proper sequence between the hot bar and the cold bar to ensure we’re providing a consistent experience for our customers, so we’re actually making drinks in the order that customers come in,” McGloughlin said, adding that while the cafe may feel busier, dine-in and drive-thru customers are receiving their drinks quicker.

Baristas will also have more control over the company’s Digital Production Manager, an iPad system that manages the ordering of orders across different channels including cafes, mobile ordering and drive-thru, and employees will have more flexibility to re-prioritize orders.

Young said the app changes have added urgency to the Siren training rollout, and she’s confident stores will be ready if foot traffic increases.

Mobile ordering and payment will also be available on third-party platforms To reach more customers.

The potential increase in traffic and workload comes after some baristas, particularly those hoping to join a union, have raised issues for years about staffing and schedules, which unionized workers have consistently cited as a top priority during internal surveys and bargaining committee meetings.

Starbucks says it has made great strides in staffing and scheduling over the past two years.

BTIG’s Saleh said the company is moving slower than usual.

“The Siren System was first introduced with Howard during our 2022 investor presentation. [Schultz] “Starbucks historically doesn’t do anything slowly. They move quickly, find something they like and roll it out quickly,” Saleh said.

Young said the Sirencraft changes have “significantly reduced” wait times for orders and other issues. Starbucks said stores that have optimized their operations with the Sirencraft system are serving more customers during peak hours, equating to an estimated 1 percent of annual peer sales.

“We’re very confident in the investment we’ve made in our staffing systems and the accuracy they bring to the table,” Young said, “but no system or internal effort could have predicted that today a group of high school kids decided to gather all their friends and stop by at 2 p.m., a time when we don’t usually have many customers.”

Further changes to the stores will also include the slow rollout of new equipment, under the same Siren name, including custom ice machines, milk delivery systems and high-speed blenders to reduce work for baristas and get drinks to customers faster. Investing in the equipment will take several years, Young said. She added that the updated equipment, coupled with a new training process at the stores, has led to a strong return on the investment. By the end of the year, 10 percent of stores are expected to have Siren equipment.

Young said Starbucks wants customers to feel like wait times are better managed so “everyone can feel comfortable even when it’s busy.”