Starbucks says it will close underperforming stores across North America as CEO Brian Niccol pushes ahead on a company restructuring effort, which is expected to cost $1bn in a bid to revive the company’s flagging sales.
The coffee chain announced the decision on Thursday.
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Overall, store count in the United States and Canada is expected to drop by 1 percent, or several hundred stores, by the end of the 2025 fiscal year, including its iconic Seattle roastery.
Niccol is trying to restore the chain’s “coffeehouse” feel to bring customers back to its outlets after six consecutive quarters of declining US sales.
The cuts are expected to affect 900 workers and follow 1,100 corporate cuts earlier this year. But the cuts are underscored by Niccol’s compensation package valued at $95.8m last year, 6,666 times more than the average barista. It is the largest CEO-to-worker pay gap of any company in the S&P 500, according to the Institute for Policy Studies’s 2025 executive excess report.
Unionised stores hit
Among the closed stores was Starbucks’s flagship unionised location in Seattle, a large cafe with an in-house roastery, the company confirmed.
Talks between Starbucks and the Workers United union, which represents more than 12,000 baristas, began last April, but have hit a wall since.
In December, some members of the union walked off their jobs in multiple US cities in a strike that spanned several days during the peak holiday season.
Workers at the Seattle store, which is located near its headquarters, voted to unionise in 2022, and the union picketed the store on Monday over contract negotiation disputes.
A unionised store in Chicago, on Ridge Avenue, was also closed, the union confirmed. Baristas at the store were picketing on Thursday morning, in a plan made before the store’s closure was known, the union said.
Baristas on the picket line came from stores across the Chicago area. “We’re here to remind the company that it’s the workers who actually bring the people into the stores,” said Diego Franco, who came from a store in the Chicago suburb of Des Plaines.
A Starbucks spokesperson said the union status of stores was “not a factor in the decision-making process.”
In a statement, Starbucks Workers United criticised the closures. “It has never been more clear why baristas at Starbucks need the backing of a union,” the union said, adding that it planned to bargain for affected workers so they could be transferred to other stores.
Analysts at TD Cowen estimate that about 500 North American company-owned stores were affected by the restructuring.
Talks between Starbucks and the Workers United union, which represents more than 12,000 baristas, began last April, but have hit a wall since [File: Matt York/AP Photo]
A revamp attempt
In his first year on the job, Niccol has zeroed in on investing in Starbucks’s stores to reduce service times and restore a coffee-house environment, while also trimming management layers.
The company has posted a string of quarterly sales declines in the US as demand for its pricey lattes took a hit from consumers turning picky and competition ramping up.
“During the review, we identified coffeehouses where we’re unable to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance, and these locations will be closed,” Niccol said in a letter to employees.
The CEO said the company would end the fiscal year with nearly 18,300 total Starbucks locations – company-operated and licensed – across the US and Canada. This compares to the 18,734 locations disclosed in a July regulatory filing.
Niccol has enjoyed the confidence of investors since taking over after his leadership at Chipotle Mexican Grill, where he is credited with leading a turnaround at the burrito chain.
“Starbucks is taking more aggressive actions within turnaround efforts. The store closures are more than we anticipated, while we believe the layoffs fit within management’s previously announced zero-based budgeting framework,” TD Cowen analyst Andrew Charles said.
Starbucks said on Thursday the job cuts would be in its support teams and added the company would also close many open positions.
The company employed about 10,000 people in non-coffee-house roles in the US, as of September 29, 2024.
“This is a more significant action that we understand will impact partners and customers,” Niccol said.
At the same time, Starbucks is investing in improving staffing and incorporating technology to more efficiently sequence orders at its coffee shops and enhance customer experience.
The company said earlier this year it would eliminate 1,100 corporate roles. In August, it also announced a modest 2 percent hike to all salaried employees in North America this year.
