Starbucks is betting that people, not machines, might be the key to its turnaround.
The coffee chain is planning to hire more baristas and invest in hours for them to work at its stores, CEO Brian Niccol said after Starbucks reported its second-quarter earnings Tuesday. Starbucks is also using a new algorithm to determine the order in which store employees make drinks, avoiding long wait times.
Starbucks is planning to roll out the new approach, called the Green Apron Service model, starting next month. The goal is to have it in about a third of its US locations by the end of its 2025 fiscal year.
“We’re finding that investments in labor rather than equipment are more effective” at getting customers their orders and growing sales, Niccol said.
Starbucks’ shares were trading nearly 7% lower after hours on Tuesday after the company outlined its plans to invest in employee hours. The company reported second-quarter earnings that were slightly below analysts’ estimates.
The investment in employee hours is a departure from Starbucks’ approach to staffing stores over the last few years.
Before Niccol joined the company as CEO and chairman in September, the chain had cut hours, leading to understaffing at many Starbucks stores.
Instead, Starbucks added new equipment, such as faster blenders and dispensers that gave baristas just the right amount of an ingredient, such as ice or milk, instead of having them measure it out. It also implemented the Siren Craft System, which was meant to allocate employees to the most important tasks at busy times.
“Over the last couple of years, we’ve been removing labor from the stores, I think with the hope that equipment could offset the removal of the labor,” Niccol said on Tuesday.
“That wasn’t an accurate assumption with what played out,” he added.
Last quarter, Starbucks ran a pilot at 700 of its stores that involved adding more labor hours at those locations.
At one store in downtown Chicago, for instance, the additional hours allowed store employees to tackle mobile orders and lots of walk-in customers at that location, Niccol said.
At a suburban store, meanwhile, more hours went to staffing the drive-thru.
Starbucks is also betting that a new order sequencing algorithm will leave store employees more time to interact with customers. Niccol has said that he wants Starbucks to be a comfortable place for customers to hang out.
The algorithm, which Starbucks is using in 400 stores, has cut down on customer wait times by improving the order in which baristas prepare drinks.
“It’s a lot calmer,” Niccol said of stores that use the algorithm. “There’s the opportunity to provide great connection” between customers and baristas.
The changes are the latest Starbucks has made under Niccol. Others include asking patrons to make a purchase to hang out in-store and directing baristas to leave hand-written messages and doodles on to-go cups.
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