On Thursday, the espresso big unveiled a $1 billion restructuring plan that can shutter greater than 100 North American cafés, lower 900 non-retail jobs, and rework over 1,000 areas.
The reset, CEO Brian Niccol mentioned, is about restoring heat and luxury—an effort to re-create the “third place” he has championed since taking the helm final 12 months, the hangout between residence and work that first made Starbucks a world model within the Nineties.
On the identical time, Starbucks seems to be dropping floor with Gen Z, one thing it tacitly admitted in its newest earnings, when it moved to shutter mobile-only “pickup” shops constructed for velocity and “frictionless” transactions that it assumed could be catnip for a digital-native technology. Its market share among the many cohort has slipped from 67% to 61% over the previous two years, marking 4 consecutive quarters of declines, in keeping with Client Edge.
Starbucks denies that they’ve misplaced traction with Gen-Z: throughout their latest quarterly earnings name, Niccol famous that their buyer worth perceptions are at close to two-year highs, pushed by positive factors amongst Gen Z and milennials who “make up half our customer base.”
Nevertheless, arguably, like many restaurant chains, Starbucks misinterpret the technology. Seeing their social awkwardness and desire for digital ordering, the corporate wrongly assumed it ought to construction its shops round these behaviors. However Niccol instructed analysts in July that the mobile-only format was “overly transactional and lacking the warmth and human connection that defines our brand.”
However Gen Z, Niccol is betting, craves that previous Starbucks feeling the identical manner it pines for a “’90s kid summer.”
Dubbed by some because the loneliest technology, they’re gravitating as an alternative towards quirky, native espresso retailers that double as neighborhood hubs and cultural signifiers—the type you’d see on reveals like Buddies or How I Met Your Mom, Client Edge knowledge present.
Niccol thinks the reply is within the authentic Starbucks innovation of the “third place.”
Bringing again that Central Perk feeling
Nevertheless, that vibe has been more durable to seek out lately. Drive-thrus and cell pickup now outnumber lengthy sit-down visits, and 6 straight quarters of falling same-store gross sales counsel that prospects aren’t sticking round. Niccol mentioned in his observe the objective now could be to carry individuals again.
“Our goal is for every coffeehouse to deliver a warm and welcoming space with a great atmosphere and a seat for every occasion,” he instructed workers.
The corporate says the brand new funding will prioritize shops that may be reworked into “lingering spaces.”
Anticipate extra ceramic mugs, softer seating, shops and layouts designed to gradual prospects down relatively than velocity them out the door. Starbucks ended its fiscal 12 months with roughly 18,300 areas throughout North America, however retailer development gained’t resume till 2026.
The as soon as and future ‘third place’
The worth tag is steep: Starbucks expects $150 million in severance prices and $850 million tied to closures and transforming. The announcement follows an earlier $500 million funding in barista hours via its “Green Apron Service.”
However labor tensions loom. Starbucks Staff United, which represents greater than 12,000 baristas, mentioned it might demand bargaining over the closures. Union leaders warned the cuts danger undercutting the very neighborhood vibe Starbucks says it needs to revive.
Past funds, the stakes are cultural. As Oldenburg argued, third locations are important to social cohesion—areas the place individuals of all types can rub shoulders. Lately, many third locations have vanished, a development accelerated by the pandemic.
“Public leisure space is critical for society,” Notre Dame professor Gwendolyn Purifoye instructed the New York Occasions. “If you don’t build places to gather, it makes us more strange, and strangeness creates anxiety.”
[This story has been updated to include comments from Starbucks’ earnings call about its staying power with Gen Z.]
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