Inside Starbucks plans to improve its stores

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 cut its 2024 guidance.

Starbucks reported rates of incomplete mobile app orders in the mid-teens and said casual customers were coming in less. CEO Laxman Narasimhan mentioned the need to make improvements to the stores.

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 in-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 order turnarounds and other frustrations in 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 cut back on morning or afternoon beverage and snack purchases. Narasimhan said in April that consumers were spending more cautiously.

Starbucks has done something unusual in recent weeks, joining the flood of value deals with a $5 food and drink combo option. Communicating value to customers is also part of the plan to drive sales.

Starbucks has been diagnosing the bottleneck problem for more than a year, since rolling out the company’s reinvention plan in 2022, Young said. At the time, Howard Schultz was at the helm, having returned during a burgeoning labor movement and shifts in consumer preferences. The ongoing changes to the coffee shops were first anticipated this fall, to be rolled out in the coming years. Narasimhan succeeded Schultz in March 2023.

The Siren Craft system processes were developed based on 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 on a restaurant production line, a “role player” who steps away from production and helps resolve traffic jams in cafes, handling tasks like replenishing cups or helping with unexpected crowds. The company plans to train current workers for the role or potentially add new baristas, if needed.

“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 was that you didn’t know what part of the store was going to be busy,” Young said. “We really needed a partner to step in when things started to go 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 espresso was the last step. This could create a traffic jam at the drive-thru, for example, if someone ordered one of each type of drink, because the cold item would be ready while the hot drink was still being made.

Macoy McGlaughlin, manager of Starbucks First and Walker stores in Seattle, said producing the 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 the sequencing of orders across channels, from coffee shops to mobile orders and drive-throughs. Workers will have more flexibility to change the priority of orders.

Young said the changes to the app added a sense of urgency to the Siren training rollout. She is confident the 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 workload comes as some baristas have raised issues about staffing and scheduling 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 unions consistently rank this issue as their top priority.

Starbucks says it has made significant progress over the past two years in staffing and planning.

BTIG’s Saleh said the company has moved unusually slowly.

“The Siren system was first introduced at the 2022 investor day, 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 come in at 2 p.m., when we wouldn’t normally see a lot of business.”

Additional changes to the store will also involve a slower rollout of new equipment under the same Siren name, with a custom ice dispenser, milk dispensing system and faster mixers to reduce steps for baristas and route customers. 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.”