Starbucks Cafes across the country are starting to change the way they place drink orders, in part with the aim of reducing shortages and long wait times that have plagued the chain.
The revamp comes as the coffee giant prepares for an expected surge in orders via its mobile app.
At the heart of the plan is Starbucks’ “Siren Craft System,” a set of processes aimed at making baristas’ jobs easier and reducing service times for customers. Starbucks says more than 10% of its 10,000 stores have already implemented the system, including changing the production order for hot and cold drinks. According to the company, it will be in use across North America by the end of July.
Executives hope the changes will give Starbucks a much-needed boost. In April, the company reported a disappointing second quarter as U.S. same-store sales fell 3% and traffic fell 7%. The coffee chain lowered its outlook for 2024.
Starbucks reported an incomplete mobile app order rate in the mid-teens and said occasional customers were coming in less frequently. CEO Laxman Narasimhan mentioned the need to improve the business.
Katie Young, senior vice president of store operations at Starbucks, said the most immediate change that needs to happen in coffee shops is to better deal with the unexpected.
“It’s the ability to respond flexibly to things we can’t predict,” she told CNBC in an interview.
Starbucks coffee shop in Krakow, Poland on February 29, 2024.
Beata Zawrzel | Photo only | Getty Images
The store changes will be crucial this month as Starbucks began opening its app to non-rewards members on Monday, which the company believes will increase traffic and orders.
Analyst Peter Saleh, managing director at BTIG, said: “My impression is that there is a lot of demand in certain stores and the kitchen footprint is so small that you have to find ways to be more efficient.”
Losing customers due to slow orders and other in-store frustrations could cost Starbucks at a particularly vulnerable time. Americans have become cost-conscious amid ongoing inflation, in some cases skipping morning or afternoon drinks and snacks. Narasimhan said in April that consumers were becoming more cautious about spending money.
Starbucks has done something unusual in recent weeks and joined the bargain offerings pack with a $5 food and drink combo. Communicating values to customers is also part of the plan to boost business.
The siren system
Starbucks has been diagnosing the shortage problem for more than a year since the company rolled out its reinvention plan in 2022, Young said. At the time, Howard Schultz was at the helm, having returned during a burgeoning union movement and changes in consumer preferences. The ongoing changes in cafes were first introduced in the fall and are expected to be implemented in the coming years. Narasimhan took over from Schultz in March 2023.
The Siren system’s processes were developed with employee feedback about what issues prevented them from making drinks and engaging with customers.
Starbucks said it plans to add a role similar to an expediter on a restaurant production line, a “play caller” who steps away from production and helps resolve traffic jams in cafes, perform tasks such as refilling cups, or to help when an unexpected crowd arrives. The company plans to train existing employees for the role or potentially hire new baristas if necessary.
“One of the pain points we saw was [that] Our espresso machine was often running all the time, and that was one of the reasons our partners couldn’t check in. And another thing we saw that wasn’t necessarily known was which part of the store would be crowded. “We actually needed a partner who was willing to step away from production and just help,” Young said .
Starbucks announced that it would 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 in first, as dispensing espresso shots was the last step. For example, this could lead to a traffic jam in the drive-thru if someone orders one of each drink because the cold product would be ready while the hot drink is still in production.
Macoy McLaughlin, manager of Starbucks’ First and Walker locations in Seattle, said making the drinks in the order they were ordered allows for a quicker and more efficient process.
“We actually chose the right order between our hot and cold bars so that the cold bars aren’t as popular as ever to really provide a consistent experience for customers. So we actually make them in the order they arrive,” McLaughlin said, adding that the cafe is busier, but customers get drinks quicker at the store and drive-thru.
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 cafes to mobile ordering to drive-thru, the company said. Employees have more flexibility to change order priority.
Starbucks app is expanding
Young said the app changes added a sense of urgency to the introduction of Siren training. She’s confident stores will be ready when traffic increases.
Mobile ordering and payment will also be possible on third-party platforms to reach more customers.
The potential increase in traffic and workload comes as some baristas have been raising issues with staffing and scheduling for years, particularly employees who have tried to organize with the Workers United union. In internal surveys and collective bargaining committee meetings, union-represented employees consistently rank this as their top priority issue.
Starbucks says it has made significant progress in staffing and scheduling over the past two years.
BTIG’s Saleh said the company has been developing unusually slowly.
“The Siren System was first introduced to Howard at its investor day in 2022 [Schultz] at the top,” Saleh said. “Historically, Starbucks hasn’t done anything slowly. They act quickly, find something they like and bring it to market quickly.”
Young said the changes to the Siren system had resulted in a “significant reduction” in wait times for orders. Starbucks said it has seen an increase in the number of customers served at peak times in stores where it has deployed the Siren system to optimize operations, which it estimates represents 1 percentage point of comparable sales per year.
“We’re very confident in the investments we’ve made in our workforce system and the precision we can achieve there,” 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 over at 2 p.m. when we normally wouldn’t see much business.”
The company said the rollout of new equipment under the same Siren name will be slower, with a customized ice dispenser, milk dispensing system and faster mixers to reduce steps for baristas and get drinks to customers faster. Investments in equipment will take several years, Young said. She said the updated equipment, coupled with the new training processes in stores, had resulted in a significant return on investment and 10% of stores would have the Siren equipment by the end of the year.
Young said Starbucks wants to make customers feel like wait times are better managed and that “everyone is in a good place, even when it’s busy.”
Correction: This story has been updated to correct the spelling of Macoy McLaughlin’s name.
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2024-07-01 21:19:38
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