Closure of Select U.S. Stores Additional 900 Layoffs Following 1,100 Earlier This Year Global Sales Decline for Sixth Consecutive QuarterPhoto=Starbucks
Starbucks is embarking on sweeping restructuring measures, including store closures across North America and the layoff of 900 employees. The initiative seeks both a turnaround in sales and a recalibration of cost structures, but with consumer re-engagement hampered by elevated pricing and performance recovery still elusive, doubts linger over whether the move will amount to more than a cost-cutting exercise.
USD 1.4 Billion Reform Drive
On the 25th, Starbucks disclosed in a filing to the U.S. Securities and Exchange Commission (SEC) a restructuring program worth USD 1 billion. The plan calls for a reduction of about 1% of North American company-owned outlets during fiscal 2025, taking into account both new store openings and closures. Among the shuttered outlets will be the Reserve store inside Starbucks’ Seattle headquarters as well as the flagship Capitol Hill Reserve Roastery. As a result, the company’s North American store count is expected to fall from 18,734 at the end of June to roughly 18,200 by the end of September, a net decrease of around 500 outlets.
Starbucks will also dismiss approximately 900 non-retail employees on the 26th. Of the USD 1 billion restructuring budget, USD 150 million is earmarked for severance, termination packages, and outplacement programs, while the remaining USD 850 million is allocated to store closure costs. The company noted that a substantial portion of these expenses will be reflected in fiscal 2025. Starbucks intends to stabilize its North American store base at around 18,200 by the end of the fiscal year before resuming expansion in 2026. “We will invest closer to customers and coffeehouses to reverse the sales decline,” the company said.
In a letter to staff, CEO Brian Niccol stated, “Some stores cannot provide the environment expected by customers and partners, or are not financially sustainable. This restructuring is about amplifying what works and concentrating resources.” Baristas at closing outlets will be reassigned to nearby stores, though some will receive severance packages.
‘Back to Starbucks’ Project Heightens Employee Frustration
This marks the second major round of layoffs under Niccol, who became CEO in September 2024. Earlier this year, Starbucks cut 1,100 headquarters staff. His appointment had initially raised hopes of revival, given his track record at Chipotle Mexican Grill. When Niccol took over Chipotle in 2018, the company was grappling with weak quality controls and stagnant menus; under his leadership, annual revenue nearly doubled to almost USD 10 billion, with Chipotle continuing to outpace rivals in growth and profitability.
At Starbucks, Niccol launched the “Back to Starbucks” project aimed at drawing customers back. Initiatives included free plant-based milk substitutions for dairy drinks, the revival of the self-service bar offering milk and syrups, and efforts to recreate the traditional café atmosphere where patrons lingered over lattes. This encompassed reinstating the green apron dress code for baristas, handwritten customer names on cups, and store remodels for a cozier ambience.
Niccol also identified long wait times as a key driver of customer attrition, instructing baristas to deliver drinks within four minutes, akin to fast-food operations. Starbucks committed over USD 500 million to additional staffing and order optimization technology. However, promotional drinks often require complex preparation. “The Strawberry Matcha Strato Frappuccino this summer needed six ingredients and two blenders,” complained Brooke Allen, a California barista. “If that were the only order, sure, one minute. But that’s not reality.”
Baristas also voiced resentment over being compelled to write messages or draw on cups. According to the New York Times, failure to personalize every cup during rush hours now triggers disciplinary warnings. “If you say you don’t have time, the response is, ‘Do you want to keep working here or not?’” said Jasmine Relli, a Buffalo barista.
Price Hikes Deepen Customer Exodus
From the consumer’s perspective, soaring beverage prices remain the most formidable barrier. Starbucks has repeatedly raised prices to offset surging coffee bean costs from drought in key producing regions and the Trump administration’s imposition of a 50% tariff on Brazilian coffee. As prices climbed, customers retreated. Revenue Management Solutions data show store visits dropped roughly 7% in Q1.
Meanwhile, lower-cost rivals offering inventive drinks have multiplied. Arkansas-based 7 Brew Coffee and Nebraska’s Scooters Coffee are prominent examples. A drive-through chain in Oregon has doubled its stock price over the past year by selling customizable energy drinks, mirroring Starbucks’ personalization model. Substitutes are proliferating.
Ultimately, Niccol’s initiatives have thus far satisfied neither employees nor customers, and performance gains remain absent. In July, Starbucks reported that global same-store sales had fallen for six consecutive quarters. North American sales dipped 2%, slightly better than the market consensus of -2.5%. Yet while the restaurant and bar sector index rose 6.5% over the past year, Starbucks shares sank 13%.