Starbucks revealed a sweeping $1 billion restructuring plan on Thursday. The move includes shuttering 400 underperforming stores across North America and cutting 900 corporate jobs.
This response comes after six straight quarters of declining sales amid mounting competition. The plan’s broad impact is expected to touch labor markets, real estate, and local communities across the U.S. and Canada.
Major North American Realignment Underway
Starbucks is targeting about 90% of its North American operating expenses with this overhaul, primarily affecting fiscal 2025. CEO Brian Niccol emphasized refocusing on customer experience rather than just efficiency.
Niccol, appointed in August 2024, draws on past turnaround success at Taco Bell and Chipotle. Leadership cited pressure from both legacy rivals and fast-growing chains as reasons for the pivot.
Store Count Shrinks for First Time in Years
The company forecasts ending fiscal 2025 with around 18,300 stores, down from 18,734 last quarter, a 2% reduction. This marks Starbucks’ first notable contraction in nearly 15 years in the U.S. and Canada.
Closures focus on oversaturated markets and locations still struggling post-pandemic. Management aims to shift from expansion to optimizing existing stores for profitability and consistent brand experience.
Declining Sales Prompt Urgent Change
In Q3 2025, global comparable sales fell 2% as transactions continued to drop. North America’s operating margin shrank to 13.3%, down 770 basis points, while consolidated margins sank to 9.9%. Revenue reached $9.5 billion, but earnings per share collapsed 47% year-over-year to just $0.49.
Inflation-wary customers either traded down to cheaper rivals or splurged at independents. Caught in the middle, Starbucks struggled to hold its ground.
Restructuring Costs Total $1 Billion
Of the $1 billion cost, $450 million covers lease break penalties for early store closures, reflecting premium rents and long-term commitments from prior expansion.
Severance expenses for 900 laid-off employees will total around $150 million, with $400 million in non-cash asset impairments from store write-downs. Cash costs will reach roughly $600 million.
Cuts Focused on U.S. and Canada Stores
About 90% of the closures and layoffs target Starbucks’ North American segment. International operations remain largely stable due to better performance and more flexible lease agreements.
“Our coffeehouses are centers of the community, and closing any location is difficult,” Niccol wrote. Windows were boarded overnight, with closure notices posted by dawn. Among them was the Capitol Hill Reserve Roastery, the first of its kind, which had just seen union protests earlier in the week.
Growth continues in Asia-Pacific and EMEA regions, where lower labor and lease costs reduce the need for restructuring. Starbucks signals ongoing plans to expand overseas amid North American challenges.
Mobile-Only Stores to be Phased Out
Starbucks will close 90 mobile-order and pickup-only locations by the end of 2026. Leadership believes these formats diminished the brand’s core “third place” community value.
Instead, the company plans to invest in upgrading over 1,000 stores with refreshed designs, enhanced seating, and richer in-store experiences. Renovations will average $150,000 per location.
Investing in Staff and Hospitality
Half a billion dollars will be devoted to frontline employee hiring, training, and better scheduling to tackle chronic understaffing at busy urban stores.
The “Green Apron” service program, piloted in 2024, will roll out companywide after stores reported improved customer satisfaction and increased sales per labor hour.
Enhanced Digital Tools and Menu Innovation
Starbucks will launch a revamped app featuring improved loyalty rewards and new order-ahead functionality to deepen customer engagement despite closing pickup-only outlets.
Menu expansions include globally inspired beverages, protein add-ons, and more afternoon snacks, with nationwide rollout of gluten-free and dairy-free options planned by 2026.
Job Cuts Impact Corporate Staff Mainly
“I know these decisions impact our partners and their families, and we did not make them lightly,” Niccol said Thursday. The 900 non-retail layoffs represent about 9% of Starbucks’ corporate workforce. Combined with 1,100 cuts in February, nearly 2,000 jobs disappeared in 2025.
Where possible, impacted workers are offered transfers to nearby locations. Unionized stores affected receive additional representation, and regulators will monitor compliance with labor protections.
Baristas React
Store-level staff learned about closures through paper notices taped to windows. At over 650 unionized stores, workers pushed for transparency about which locations would close.
While Starbucks offered transfers where possible, many would require relocation. For baristas, uncertainty and unease quickly set in, adding to long-running workplace tensions.
Communities Feel It
“It has never been more clear why baristas at Starbucks need the backing of a union,” Workers United said. Regulars found closures through boarded windows and signs.
The loss cut deeper than coffee runs. Starbucks has long been a “third place” for remote workers and neighborhood gatherings. With hundreds gone, many communities lost their meeting spot overnight.
Wall Street Moves
Starbucks stock closed at $83.83 on Sep 25, 2025, down 8% year-to-date from January’s $91.30. Analysts hold a “Hold” consensus, with an average $102 target.
Options data shows a put/call ratio of 0.78, suggesting cautious optimism. Institutional ownership has edged up in Q3 filings, but not dramatically. Investors are watching how Starbucks stabilizes from here.
Policy Pushback
“Things are only going backwards at Starbucks under Brian Niccol’s leadership,” said Workers United, which represents 12,000 baristas. Seattle officials also lamented the Reserve Roastery’s closure, calling it a cultural blow.
Meanwhile, state labor departments in Massachusetts and Washington have opened WARN Act inquiries. Local leaders are exploring how to repurpose shuttered community spaces.
Impact on Locals
Retail research shows anchor tenants like Starbucks can shape surrounding foot traffic. When they leave, nearby businesses often see ripple effects in sales.
Although specific numbers for Starbucks’ closures aren’t yet available, small shops that relied on Starbucks spillover may now face declining traffic. The local economy is part of the fallout.
Regional Hotspots
Closures hit hardest in urban centers, with Seattle losing both of its Reserve locations. Downtown areas remain weak, weighed down by remote work and dwindling office crowds.
High-rent markets like New York, Chicago, and San Francisco saw clusters of shutdowns. Meanwhile, suburban and rural drive-thrus have held on, showing resilience where customer traffic is steadier.
Why These Stores
“We identified coffeehouses where we’re unable to create the physical environment our customers and partners expect,” Niccol explained. Stores with weak seating layouts, expiring leases, or long-running losses would likely top the closure list.
Starbucks insists union status wasn’t a factor, though Seattle’s unionized Reserve location was cut. Mobile-only formats also faltered, proving that customers still want human connection.
Rivals Move In
Starbucks still has far more stores than Dunkin’, but competitors are circling. Dutch Bros, for instance, grew visits 13.8% year-over-year in Q2 2025.
Independents and small chains are also gaining, raising their market share from 3.2% to 4.4% over five years. For many, the draw isn’t just coffee—it’s the sense of belonging Starbucks closures are leaving behind.
Prime Corners
“Starbucks is taking more aggressive actions within turnaround efforts,” TD Cowen analyst Andrew Charles said. Lease terminations alone will cost $450 million.
That means hundreds of prime retail corners are suddenly back on the market. In a shaky real estate climate, the simultaneous release of so many premium sites could reshape the retail landscape.
Starbucks’ Future Hinges on Adaptation
Starbucks’ $1 billion restructuring echoes broader retail challenges. Downtown foot traffic remains 25–35% below 2019 levels, according to Brookings and INRIX.
At the same time, drive-thru and digital growth are reshaping restaurant real estate. Analysts warn Starbucks’ struggles show the limits of endless expansion in today’s shifting consumer landscape.