Starbucks has struggled with sales for half a year: by Q1 FY2025 (calendar Q4 2024), its global comparable-store sales fell 4%, driven by a 6% drop in customer transactions.
In contrast, competitors are booming. Placer.ai data show Dutch Bros’ traffic spiked 13.8% year-over-year in Q2 2025, underscoring analysts’ warnings that Starbucks risks losing ground as tastes shift.
Losing Ground with Younger Customers
Younger consumers are drifting away. Market surveys now show Dutch Bros leading on key attributes: Chatmeter found it “came out on top in every category, including customer service, in-store experience, value…”.
Starbucks saw sentiment around its pricing plunge 6.3% in 2024, nearly triple Dutch Bros’ 2.6% drop – evidence of a growing loyalty gap among Gen Z and millennial shoppers.
From Seattle Pioneer to Saturation
Starbucks grew from a single Seattle café to a global icon. As of Q3 FY2025, it operated roughly 18,734 North American stores. But rapid expansion has diluted the “third place” charm founder Howard Schultz once celebrated.
He wrote: “That’s what a Starbucks store is to many of its customers – a kind of ‘third place’ where they can escape…”, highlighting the community role the brand originally played. Critics say that ethos has faded amid today’s scale.
New CEO, Mixed Market Response
Niccol, formerly Chipotle’s CEO, took over in Sept 2024. Investors initially cheered – Starbucks’ stock “surged 25% on the day of the announcement”.
However, enthusiasm waned: over his first year, the stock was down “nearly 9%”, signaling Wall Street’s impatience with the paced turnaround. Niccol arrived with a growth-driven reputation, but early results have yet to match that hype.
Major Store Closures Announced
Starbucks confirmed Thursday it will shutter roughly 400 North American outlets in its latest shake-up.
These cuts (part of CEO Brian Niccol’s $1 billion “Back to Starbucks” plan) will trim the store count from ~18,734 to about 18,300 by fiscal year-end. Around 900 corporate jobs will also be eliminated.
Concentrated Cuts in North America
Closures are concentrated in the U.S. and Canada. Analysts at TD Cowen estimate roughly 500 North American company-owned stores will be closed.
The chain will end FY2025 with about 18,300 NA locations (vs. 18,734 previously).
Notably, even the flagship Seattle Reserve Roastery is slated to close, underscoring the focus on underperforming locations.
Motivation and Human Toll
Niccol framed the closures as pragmatic triage. In an internal memo, he wrote: “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”.
The plan includes cutting ~900 corporate support jobs (after 1,100 were cut earlier in 2025), with affected store partners offered transfers or severance.
Rise of the Rival Chains
One rival illustrates Starbucks’ challenge: Dutch Bros. It posted Q2 2025 revenue of $416 M (up 28% YoY)and now has over 1,000 U.S. outlets.
Traffic analytics confirm the surge — Dutch Bros visits grew 13.8% in Q2 2025.
Even its same-store sales grew (6.1% systemwide), showing how quickly it is poaching customers from Starbucks.
Economic Squeeze on Growth
Inflation has made premium lattes a harder sell. Last quarter, Starbucks posted a 1% drop in U.S. comparable sales (its fifth straight quarter of declines).
Its peers are in the same boat: McDonald’s saw U.S. comps fall 3.6% in Q1 2025 as consumers cut back. Analysts say traffic drops across quick-serve chains reflect consumers trading down in a tight economy.
Union Uproar
Starbucks Workers United immediately condemned the cuts. The union, representing roughly 12,000 baristas, said decisions “had been made without input from baristas” and vowed to demand formal effects bargaining to protect impacted workers.
It added that “fixing what’s broken at Starbucks isn’t possible without centering the people” who serve customers.
Employee Backlash
Internal tensions are rising. Staff have protested prior changes: over 300 Starbucks outlets saw barista strikes in December 2024 over pay and conditions.
Organizers warn this latest plan is another top-down move “with zero barista input”. This underscores that workers feel increasingly shut out of decisions that affect their jobs, fueling growing distrust of management’s turnaround agenda.
Schultz Endorses Strategy
At the June leadership conference, founder Howard Schultz embraced the new strategy. He said he “did a cartwheel in [his] living room” when first hearing Niccol’s plan.
Schultz added that he was “never more optimistic about the future” of Starbucks and lauded the plan as “short… exactly the tip of the spear of who we should be”.
His enthusiastic endorsement signals faith in returning to the brand’s roots.
Ambitious Store Makeovers
Starbucks plans a heavy investment to revive the café vibe. It will spend roughly $150K on each of 1,000 stores (by end-2026) in an “uplift” program. Upgrades include warmer woods, softer lighting, expanded seating, and outlets – all to encourage customers to linger.
Dawn Clark, Starbucks’ design chief, says the goal is “immersive, inclusive” spaces blending global heritage with local feel, aiming to reclaim the cozy third-place atmosphere.
Turnaround Timeline
CFO Cathy Smith cautioned that this turnaround “is a multiyear undertaking.” Management says it won’t see net growth in store count until FY2026, implying same-store sales are unlikely to sustainably rise before late 2025.
Though seasonal lifts (like record Pumpkin Spice sales) and steady morning traffic hint at progress, analysts still expect flat sales into year-end 2025.
Balancing Nostalgia and Efficiency
Starbucks now faces a big question: can it reconcile its nostalgia-driven renovations with demands for leaner operations? The $1B overhaul is a high-stakes bet.
Either this massive investment will lay the groundwork for a sustained recovery, or it will show that Starbucks’ sheer scale and legacy formats have become a burden in today’s fragmented coffee market.
Broader Labor Implications
These massive layoffs could spark debate over worker protections. Under current law, firms have limited obligations to unionize or notify ahead of restructurings, but unions argue that Starbucks’ case highlights gaps in labor policy.
Advocacy groups say the move will likely fuel calls for stronger laws on worker notification and bargaining rights during major overhauls.
Global Brand Vulnerabilities
Starbucks’ struggles also spotlight risks for U.S. brands abroad. Analysts warn that if Starbucks can’t keep domestic rivals at bay, other American chains may face even tougher battles internationally, where local players offer a closer cultural fit and value.
The situation may prompt legacy retailers to rethink expansion strategies, prioritizing local partnerships or adjustments to compete effectively overseas.
Legal Frontiers
Starbucks notes that during 2022’s store closures, it negotiated “effects bargaining” agreements for all unionized shops.
Labor experts say the company has a duty to do the same now. If Starbucks closes union-represented stores without bargaining over the impact on workers, it could violate federal labor law and face new NLRB complaints. Unions will be watching to ensure workers’ rights are upheld.
Rethinking the “Frictionless” Future
The shift from mobile-first convenience back to community spaces is a wake-up call. In fact, Starbucks is closing about 80 of its mobile-order–only pickup stores – a Gen Z-targeted concept – calling the format “too transactional” and “soulless”.
Management now says Gen Z customers actually “crave” real human interaction over purely frictionless transactions.
This challenges the assumption that younger consumers always prefer speedier, digital-only experiences.
A Defining Moment for Coffee Culture
Starbucks’ turnaround is more than cost-cutting – it’s a make-or-break for American coffee culture. The chain must prove it can blend nostalgia with modern efficiency and still resonate.
The success or failure of Niccol’s “Back to Starbucks” vision will send a clear signal: can a legacy retailer survive by leaning into its heritage, or will digitally-native competitors write the playbook for the next era of café business?