Starbucks’ Bet On The Third Place | Fast Five Shorts

Starbucks is doubling down on its back to Starbucks turnaround with two significant moves this week.

The coffee chain unveiled its new uplifted store designs in Chicago and separately announced a new performance bonus program and expanded tipping options that could put up to 1,200 more dollars per year into Barista's pockets, according to the Chicago Tribune.

On the store design front, Starbucks unveiled one of its first Chicago area uplifted locations on Cicero Avenue in the old Irving park neighborhood.

And and it features, just wait for it folks, leather couches, cushy chairs, throw rugs, drapes.

I see Jen smiling in the background, neighborhood specific art and a decidedly cozier feel.

Well, it would have to if it has couches and cushy, cushy chairs.

On the barista compensation front, starting in July 2026, Starbucks will introduce a new quarterly bonus program.

Baristas and shift supervisors can earn up to $300 per quarter or $1,200 per year when their location meets or exceeds sales, operational and customer service targets.

And Starbucks is also expanding tipping options so customers can tip via credit and debit card through mobile, order and pay and scan and pay at the register.

Previously, tips were only available on in store cash and card transactions and drive thru.

I did not know that all us store employees will also move to weekly pay which is important to starting in August.

John, on a scale of 1 to 10, 1 to 10, how confident are you that the Back to Starbucks plan is actually working as intended?

So I would say if you're forcing me to scale once, I'm bullish.

First of all, I would say okay, I'm bullish.

So put bullish at maybe an 8.

I don't want to be overly confident and be completely wrong.

But look, I love the, the moves that the company is announcing.

First of all, just going back to kind of the comments about leadership generally, I think Brian Nicholl watching closely what they're doing on a daily basis at that brand, I love the kind of turnaround plan that they're putting in place.

But some of these specific initiatives that we're talking about here I think are spot on.

There's a saying or an aphorism that we talk about the customer experience is never going to exceed the employee experience.

You know, I think that, you know, the, the best brands out there in restaurant companies like your Chick Fil A's and things like that are known for investing in their teams and doing moves like this.

And I think that, I think, you know, it's going to pay dividends.

You know, it'll Take some time.

You know, these things, you know, don't happen overnight.

And it doesn't change kind of behaviors necessarily overnight.

But I think the direction it's going makes a ton of sense.

I've seen, and actually we've helped companies implement very similar, like incentive programs.

A lot of times in the restaurant space, you know, incentive pay is limited to maybe a general manager, assistant manager.

It doesn't get down to the, to the, in this case, the barista level or the supervisor level.

But I mean, we've, we've done this for a couple of different companies to, frankly, I'll be honest with you, mixed results.

Sometimes the, you know, the baristas don't always think about it in those terms.

One question I have is the quarterly payout, you know, is that too long for a barista?

Where they say, okay, yeah, you know, they just think about it, you know, more on a shorter or near term basis.

That's some of the challenges that I've seen in the past with these types of incentive programs.

But to me, it's, it's, it's sharing some back, some of the benefits of what they're trying to drive in terms of efficiency and improve profitability of these units.

Sharing some of that back through, through these incentive programs with the baristas and supervisors, the people on the front lines that they need to help, you know, know, put in place the turnaround plan, to me is, is a great idea and it's, it's hitting on all, all the right messages.

So frankly, I love it.

Got it.

Okay, John, so based on your experience, I'm curious because they talked about three things.

They talked about, you know, giving more access to tips.

They talk about a quarterly incentive program.

They talked about weekly pay.

Which of those three things in your mind, given your experience will be most enjoyed or liked by the, the, the baristas themselves, if you had to guess.

My guess is that the baristas, it's going to be the weekly pay and the tipping.

Me too.

And then, and then for the supervisors, it's going to be the quarterly incentive.

Yeah, I think that's just how, how, you know, different people in different stages of their life and different stages of their career, that's kind of just how they think about it.

And so, I mean, who knows?

I mean, but that would be my guess.

And John, why, why is we, we could pay seems pretty differentiating, but it also seems like that's where my head goes too.

Like that's what, if I was an employee, that's what I would want what is it that, what is it that generally prevents like retailers or QSR operations from just doing that to begin with?

Or do you think we'll start to see a move in that direction?

So I've, I've done a lot of stuff in my career.

One of the things that I've done, and I won't get into all the backstory or whatever on it is, is help very frontline in the weeds payroll processes, where I was basically helping prepare payroll files and all these different things for, for certain brands that I was working with.

And I'll be honest with you, it sounds simple and it should be simple, but I think for a lot of companies, some of these processes are, you know, it does take time and some of them are manual.

You're managing exceptions like, because if you're thinking about weekly pay, that means you got to close out the hours and all that kind of stuff and get that correct.

So it does.

Having to do that on a weekly cycle rather than a bi weekly cycle, it just adds twice as much work overall for the managers and the people who have to go through that process and process all of that.

So to me, there's an element of just kind of back office work that needs to get done to do it.

So it doesn't come, it's not as easy as just flipping the switch or whatever.

There's work to do on it.

So I think a lot of it is very practical considerations like that.

But I think they're doing the right thing to say, okay, we're going to do that.

We're going to invest in kind of putting resources and time behind that because we think it's going to make a difference to our teams and hopefully that is reflected in how they interact with the guests and, and implement the different aspects of the plan that they want to, that they want to do.

Yeah.

So, I mean, I think it says a lot about Starbucks too, that they're willing to unwind years and years of doing it at the scale that they are doing it because there's going to be a cost to put this into place, like you said.

Yes, but they're, they're, they're, they're, they're taking on that cost and trying to do this for the benefits of their employees.

All right, Jed, I'm curious, are you as bullish as John, though?

John gave it an eight.

John gave it an eight.

I think you can tell which way I'm leading.

I'm not quite as bullish, but I want to go to you first.

So like a scale of 1 to 10.

How bullish are you on the back to Starbucks turnaround plan?

I wouldn't give a number, but I'd say I'm cautiously optimistic.

They're improving so above a five.

A five.

All right.

I would say closer to where John is, you know, they're improving but it's not proven yet.

So I want to see how it plays out.

I think the biggest challenge for Starbucks today is it's really three businesses.

It's a cafe experience, a drive thru QSR and a digital pickup model.

I was looking into it and about 60% of their transactions touch the store.

But only half are actually people enjoying the cafe, while the other half is mobile pickup.

And then Obviously the remaining 40% is drive thru.

And so these are very different and often competing needs.

So they're doing the right things.

They're reinvesting in partners, as you guys mentioned.

They're simplifying the experience and bringing back the original notion of the third place.

But that tension is going to be the high, that highest ticket experience being in store.

It's actually the least efficient.

And while drive thru and mobile are what really are driving the throughput and profitability.

So my bullish, my, my, I would say leaning towards the bullishness on is I think they've rediscovered the soul of the brand.

But the question is really going to be whether they can operationalize that at scale.

Yes, yes, I 100 agree.

And I think, you know, when I came into this I was like, I was like a five because I was like, I was like right in the middle.

But I think talking to both of you, I'm kind of pushing it up into the 6 to 7 range because I think, you know, you know, as John, you are ticket, you had the quota quote of the show so far, which was the thing you said about, you know, customers in relation to employees.

These are the right moves for the employees.

And so Jen, to your point, like, even though, you know less and less customers are coming into the store every day, you still need happy employees to run the operations for mobile pickup and a drive through.

And that's fundamental.

So I like that in terms of the strategy.

But the one thing I just keep coming back to you is no matter how hard I try, every time I interact with Starbucks now it is through the mobile app.

And so that is going to become an operational throughput.

You did the same thing, right?

You've got your coffee cup right there.

And so like that's going to become an operational throughput issue over time.

The more and more people.

You push through that and I just don't know that this is enough.

There has to be more things than.

Than cozy couches and soft leather sofas and things like that to.

To.

To.

To ameliorate that problem.

But, Jen, I'll give you the last word here.

Yeah, I mean, as.

As you mentioned, they're trying to essentially determine will that draw customers in.

Right?

Like, is that what customers want anymore?

Do they.

Are they leaning back into the original notion of Starb, more experiential?

Or do they prefer things to be transactional in nature?

Like the mobile order pickup that I have in my hand.

Right.

Yeah.

The venti, I might add to that.

Looks like a venti.

It's early in California.

Oh, my God.

Yes.

You're.

I didn't ask you guys.

You ask you guys where you are to start off.

Yes.

It's very early.

Oh, my God.

Fair play to you, Jed.

And then the.

The traitor.

You need to get the traitor next time.