Starbucks announced a $1 billion restructuring plan Thursday that involves closing some of its North American coffeehouses and laying off more workers as it moves ahead with its “Back to Starbucks” transformation under CEO Brian Niccol.
The number of company-operated stores in North America will decline by about 1% in fiscal year 2025, accounting for both openings and closures, the company said in an SEC filing. Starbucks operated more than 11,400 locations in North America as of June 29, suggesting that more than 100 cafes will shutter their doors as part of the restructuring plan.
Approximately 900 non-retail employees will be laid off on Friday, Starbucks said.
Starbucks estimates that 90% of the expected $1 billion restructuring cost will be attributable to the North America business. In total, the company expects to incur about $150 million in employee separation costs, plus about $850 million in restructuring charges related to the store closures, according to the filing. A significant portion of expenses will be incurred in fiscal year 2025, it said.
The company plans to end its fiscal year with almost 18,300 North American locations, including both company-operated and licensed cafes. Starbucks plans to start growing its footprint again in fiscal 2026.
Starbucks said in the filing it is prioritizing investment “closer to the coffeehouse and the customer” as it looks to reverse a sales slump in its biggest market. The company’s same-store sales have fallen for six straight quarters, hurt by increased competition and price-conscious consumers.
This is the second round of layoffs in Niccol’s tenure, after 1,100 corporate workers were let go earlier this year. Starbucks ended 2024 with about 16,000 employees who work outside of store locations.
“These steps are to reinforce what we see is working and prioritize our resources against them,” Niccol wrote in a letter to employees Thursday. “I believe these steps are necessary to build a better, stronger, and more resilient Starbucks that deepens its impact on the world and creates more opportunities for our partners, suppliers, and the communities we serve.”
In July, the company announced its biggest investment ever into labor and operating standards, “Green Apron Service,” which involves a more than $500 million investment in labor hours across company-owned cafes in the next year.
In an interview earlier this month, Niccol told CNBC, “I really hope we’re moving towards being the world’s greatest customer service company, [and] the world’s greatest customer centric company.”
In the message to employees Thursday, Niccol said the company had reviewed and identified stores where the company would be “unable to to create the physical environment our customers and partners expect, or where we don’t see a path to financial performance.”
Starbucks executives had previously said that the company would be slowing new openings in favor of remodeling existing locations this year. The renovated cafes are meant to encourage customers to linger, taking the coffee chain back to its roots as a “third place” for consumers, outside of home and the office.
Baristas from closing locations will be transferred to nearby locations or, in some cases, receive severance packages, Niccol said in his letter to employees. Starbucks Workers United, which represents 12,000 baristas across more than 650 cafes, said in a statement to CNBC that it will be sending a formal request to the company about the closures.
“We expect to engage in effects bargaining for every impacted union store, as we have done elsewhere, so workers can be placed in another Starbucks store according to their preferences,” the union said in the statement.
Following Thursday’s announcement, share of Starbucks were roughly flat in early trading. The stock has fallen more than 7% this year.
In addition to focusing on the customer experience, Niccol has enacted additional changes to operations including a return to four days in office, beginning next month.
He’s also brought on a new executive team including CFO Cathy Smith, Global Chief Brand Officer Tressie Lieberman and Chief Operating Officer Mike Grams. Grams and Lieberman worked with Niccol in his previous roles at Chipotle and Yum Brands.
Read Niccol’s full memo to Starbucks staff:
Partners,
I’m grateful for the work everyone is doing to put world-class customer service at the center of everything we do and focus on creating an elevated Starbucks experience for every customer, every time.
While we’re making good progress, there is much more to do to build a better, stronger and more resilient Starbucks. As we approach the beginning of our new fiscal year, I’m sharing two decisions we’ve made in support of our Back to Starbucks plan. Both are grounded in putting our resources closest to the customer so we can create great coffeehouses, offer world-class customer service and grow the business.
Changes to some of our coffeehouses
First, I shared earlier this year that we were carefully reviewing our North America coffeehouse portfolio through the additional lens of our Back to Starbucks plan. Our goal is for every coffeehouse to deliver a warm and welcoming space with a great atmosphere and a seat for every occasion.
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.
Each year, we open and close coffeehouses for a variety of reasons, from financial performance to lease expirations. This is a more significant action that we understand will impact partners and customers. Our coffeehouses are centers of the community, and closing any location is difficult.
To put it into context: Since we’ve already opened numerous coffeehouses over the past year, our overall company-operated count in North America will decline by about 1% in fiscal year 2025 after accounting for both openings and closures.
We will end the fiscal year with nearly 18,300 total Starbucks locations – company operated and licensed – across the U.S. and Canada. In fiscal year 2026, we’ll grow the number of coffeehouses we operate as we continue to invest in our business. Over the next 12 months, we also plan to uplift more than 1,000 locations to introduce greater texture, warmth and layered design.
Partners in coffeehouses scheduled to close will be notified this week. We’re working hard to offer transfers to nearby locations where possible and will move quickly to help partners understand what opportunities might be available to them.
For those we can’t immediately place, we’re focused on partner care including comprehensive severance packages. We also hope to welcome many of these partners back to Starbucks in the future as new coffeehouses open and the number of partners in each location grows.
Reducing non-retail partner roles
Second, we’re further reducing non-retail headcount and expenses. This includes the difficult decision to eliminate approximately 900 current non-retail partner roles and close many open positions.
As we build toward a better Starbucks, we’re investing in green apron partner hours, more partners in stores, exceptional customer service, elevated coffeehouse designs and innovation to create the future. We will continue to carefully manage costs and stay focused on the key areas that drive long-term growth.
Non-retail partners whose roles are being eliminated will be notified tomorrow morning (Friday). We will offer generous severance and support packages including benefits extensions.
Unless your job specifically requires you to be on site in the office, we’re asking you to work from home today and tomorrow.
What’s next
These steps are to reinforce what we see is working and prioritize our resources against them. Early results from coffeehouse uplifts show customers visiting more often, staying longer and sharing positive feedback. Where we’ve invested in more green apron partner hours so that there are more partners working at busy times, we saw improvements in transactions, sales, and service times, alongside happier, more engaged partners.
I know these decisions impact our partners and their families, and we did not make them lightly. I believe these steps are necessary to build a better, stronger and more resilient Starbucks that deepens its impact on the world and creates more opportunities for our partners, suppliers and the communities we serve.
To those partners who will be leaving, I want to say a profound thank you. To those continuing on our turnaround journey, I deeply appreciate your commitment to helping us get back to Starbucks.
Brian
