Starbucks CEO Brian Niccol is closing a comfort that was explicitly focused towards Gen Z’s style for “frictionless” experiences: their mobile-only “pickup” shops. The transfer alerts a deliberate shift away from the high-speed, tech-driven mannequin that outlined a lot of the chain’s current enlargement. The espresso big will convert or shut roughly 80 to 90 of those cell order-only places nationwide by the tip of 2026, Niccol stated on Tuesday’s earnings name with analysts, marking the tip of a six-year experiment that catered to on-the-go prospects who appeared to favor cell ordering to lingering over a latte.
Asserting the closures, Niccol was direct in regards to the rationale on Starbucks’ Tuesday name with analysts. “We discovered this format to be overly transactional and missing the heat and human connection that defines our model,” he stated.
Constructed primarily in city facilities, airports, and hospitals, these shops have been designed to maximise comfort—no money registers, restricted or zero seating, and an environment friendly grab-and-go expertise orchestrated by the Starbucks app. Starbucks desires to convey again the nice and cozy coffeehouse.
The transfer comes amid a interval of problem and transition for Starbucks. Gross sales at shops which were open for at the least one 12 months have declined for six straight quarters, with North American gross sales have dropped by 2% most lately. Analysts level to buyer fatigue with impersonal, tech-centric transactions and “soulless” atmospheres, particularly as rivals provide new types of hospitality and engagement. It’s additionally a tough needle to string, as Starbucks disclosed in its earnings that 31% of all transactions are cell, making it a crucial a part of the enterprise.
The corporate stays dedicated, in line with Niccol, to enhancing digital and cell experiences by technical upgrades to the Starbucks app and its Rewards program, set for rollout in 2026. However Starbucks’ different actions are suggesting that these experiences shouldn’t really feel cell.
Niccol, who took over as CEO in September 2024, has staked his turnaround technique on restoring the model’s emotional resonance, echoing former CEO Howard Schultz’s recognition that buyers wanted a “third house” that wasn’t dwelling or work. Niccol argued on the decision that customer-value perceptions are close to two-year highs, they usually’re pushed by beneficial properties amongst Gen Z and millennials, who make up over half of Starbucks’ buyer base. It exhibits that youthful customers needed extra heat than beforehand thought.
Uplift by inexperienced aprons
Starbucks has a program below strategy to “uplift” its espresso homes, which entails investing $150,000 per retailer to improve seating, lighting, and environment in additional customary places. The chain’s new prototype shops—already being piloted in New York Metropolis—reintroduce cozy chairs, energy shops, and enormous tables, fostering a extra communal and linger-friendly atmosphere. Niccol stated some mobile-only shops will get transformed to this new setup, the place it is smart.
“We plan to finish an analysis of our North American portfolio by the tip of this fiscal 12 months to make sure we have now the proper espresso homes in the proper places to drive profitability and ship the Starbucks expertise,” Niccol stated on the earnings name.
Starbucks can be piloting smaller-format shops with restricted seating to mix comfort with a way of place—one other signal the model isn’t abandoning fast service, however is as a substitute recalibrating its strategy. As the corporate prepares to sundown its transactional pickup mannequin, Starbucks is doubling down on its legacy: espresso outlets as group anchors, not simply effectivity engines. The period of the “app-only” Starbucks is ending, as the corporate bets that its future lies in connection, not simply comfort.
These investments are a part of Niccol’s $500 million “Inexperienced Apron Service” initiative, meant to revive “hospitality” to the middle of its enterprise. It entails a revamped barista gown code that includes, sure, the inexperienced apron, but additionally emphasizes customized service. Starbucks believes that is what Gen Z actually desires, not a frictionless cell order that hardly entails interacting with a human. There may be different proof that Gen Z craves extra human connection, with 91% telling the Harris Ballot they need extra of a steadiness between distant and workplace work.
Starbucks COO Mike Grams spoke with CNBC earlier this week and likewise supplied ideas on how the corporate views Gen Z. He argued in favor of an strategy the corporate describes as “hospitality” and, when requested about evolving “social cues,” he described how Starbucks is working to lean right into a extra subjective expertise. “Connection is various things to completely different individuals,” he stated, arguing that Starbucks baristas are effectively positioned “to know what every particular person buyer desires in that second in time.” In different phrases, Starbucks is risking a collision with the “Gen Z stare,” as a result of it’s working to guarantee that the human connection is entrance and heart in its enterprise.
When reached for remark, Starbucks referred Fortune to the earnings report and Niccol’s feedback on the analyst name.
For this story, Fortune used generative AI to assist with an preliminary draft. An editor verified the accuracy of the data earlier than publishing.
