Starbucks was once known for its limitless expansion; however, the company seems to be changing its strategy. Previously, it was focused on saturating urban areas to draw coffee drinkers on their way to work in the morning. However, the sustainability of this approach has come to question with rising competition, as well as the prevalence of remote work.
CEO Brian Niccol, hired last year from Chipotle to revive Starbucks, no longer wants its stores to be right next to each other. Starbucks is closing roughly 400 stores nationwide that are concentrated in large metro areas as part of its $1 billion restructuring plan.
Starbucks closed 42 locations in New York City, or 12% of the total in the city. It recently lost its top spot as the largest chain in Manhattan to Dunkin’ Donuts, according to Center for an Urban Future, a New York City thinktank that tracks chain openings and closings.
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Starbucks also closed more than 20 locations in Los Angeles, 15 in Chicago, six in Minneapolis, five in Baltimore, and dozens more in other cities.
The chain reviewed its more than 18,000 stores in the United States and Canada, and “closed locations that were underperforming or unable to meet our brand standards,” a Starbucks spokesperson said in an email. The company also plans to open stores and remodel others in 2026 including in major metro cities like New York and Los Angeles.
According to CNN, Starbucks is a “victim of its own success.” “Before Starbucks, people couldn’t fathom paying more than two bucks for a cup of coffee, let alone have any concept of a latte.” However, the company is now swamped by competition, from niche coffee shops, smaller chains such as Gregory’s and Joe’s Coffee, and a wave of smoothie, bubble tea and other beverage shops.
“Urban America has seen a dramatic increase in competitive coffee shop openings that eat away at the store’s volume,” said Arthur Rubinfeld, the mastermind of Starbucks’ real estate and design strategies alongside CEO Howard Schultz during the 1990s and again from 2008 to 2016. Rubinfeld now runs Airvision, a consultancy for consumer brands.
The rise of remote work also caused a major challenge in many central business districts that relied on the stream of office workers commuting every day. Starbucks closed locations in the ground floors of several downtown office buildings in Los Angeles as a result, said Catherine Yeh, the director of market analytics at CoStar Group.
And the company has also grown weary of being the public restroom provider of choice for many American cities. “The mental health crisis in the country is severe,” former CEO Schultz said in 2022. “There is an issue of safety in our stores, in terms of people coming in who use our stores as a public restroom.”
Starbucks recently got rid of its policy to let people hang out in their stores or use their restrooms without making a purchase.
Starbucks recently saw a major strike by its labor union. The striking workers have demanded better hours and increased staffing. Earlier this month, Starbucks agreed to pay more than 15,000 New York City workers to settle claims it denied them stable schedules and arbitrarily cut their hours.