Can Starbucks reduce wait times at its airport cafes?

• The new Starbucks CEO, Brian Niccol, must reverse the company's sales decline.
• Airports, with their long lines, are a specific area that could be improved, according to him.
• The busiest Thanksgiving travel period ever will put airport concessions to the test, as airlines anticipate.

Numerous individuals, including travelers, flight crews, and airport staff, have experienced extended waits for their Starbucks cappuccinos, cold brews, and egg bites.

Coresa Barrina, a Starbucks patron at New York's LaGuardia Airport Terminal B, said she had been waiting 10 minutes and counting for her coffee. The nursing assistant, who was taking a flight back to Charlotte, North Carolina, said the wait when she buys her coffee at a Starbucks in Charlotte is about two minutes.

Starbucks' new CEO, Brian Niccol, has noticed the long waits and has pledged to win back customers and reverse the company's sales slump.

Starbucks' strategy of returning to its roots is being followed by licensed locations, such as those found in stores and airports, according to what Niccol told investors.

Niccol expressed on the company's quarterly conference call Oct. 30 that there is a significant opportunity to simplify the execution at airports and other related areas to improve the throughput and enable people to reach their destinations more efficiently.

This week, Starbucks' airport location staff and technology will be tested during some of the busiest travel days of the year, as the Transportation Security Administration predicts a record number of travelers during Thanksgiving week, with Sunday, Dec. 1, potentially being the busiest day of the year, with more than 3 million people screened at U.S. airports.

Airport congestion during peak times, such as Thanksgiving, has resulted in problems for airlines and the federal government, who are trying to address the issue. The aviation industry views bottlenecks at airport Starbucks as a sign of high demand and overcrowded airports.

In 2023, a record 1.05 billion individuals traveled through U.S. airports, surpassing the pre-pandemic total by a mere 100 million people, according to the U.S. Department of Transportation.

Struggles and fresh approaches

Sales at Starbucks have been declining for three consecutive quarters, with U.S. same-store sales falling by 6% in the period ending September 30. Despite efforts to attract customers through discounts and new products, consumers have been resistant to higher prices.

In late October, Niccol announced plans to enhance customer experiences and boost sales by reintroducing condiment bars, removing dairy surcharges, and streamlining the menu.

Reducing wait times is crucial: He aims to shorten service times to four minutes, thereby reducing queues and enhancing the customer experience.

Boosting sales and brand reputation at Starbucks' airport outposts could attract even lost customers during a crucial time.

As travelers return in large numbers following the pandemic, Starbucks and other restaurant chains have the opportunity to increase their sales.

Although concessions account for only about 4% of U.S. airport revenue annually, they are a crucial aspect for many passengers who are short on time and energy to refuel before a flight.

With more passengers on planes, restaurants at airports can become crowded during peak hours, resulting in limited space and longer wait times for customers, according to Ursula Cassinerio, an assistant vice president at Moody's Ratings.

According to Technomic's market research, the 25 busiest airports in the U.S. offer an average of 80 food and beverage brands for travelers.

Licensing model

Starbucks faces a challenge because its airport locations are managed by licensees, not the company itself.

In 2020, HMSHost ended the deal, allowing the operator to provide more coffee options to airports.

Since HMSHost still operates the majority of Starbucks' airport cafes, more operators, including Paradies Lagardere and OTG, have recently tried to take over some of its business.

This story did not receive a response from HMSHost, Paradies Lagardere, or OTG.

Operating inside an airport presents Starbucks with challenges such as staffing issues, high rents, and security checkpoints. While the coffee chain is accustomed to dealing with a surge of undercaffeinated customers in the mornings, the demand at an airport can be even more unpredictable.

According to Kevin Schimpf, director of industry research for Technomic, a plane lands and suddenly there are 100 people present, despite there being zero people there previously.

The trade-off is that Starbucks makes less money from those licensed restaurants.

Starbucks has over 16,300 cafes in the U.S. as of Sept. 24, but only runs about 60% of them; the rest are operated by licensees. This includes its cafes in 47 of the 50 busiest airports in the U.S., according to Starbucks. The company did not disclose its current airport store count to CNBC.

In fiscal 2024, licensed locations generated 12% of Starbucks' revenue, which amounted to $4.51 billion. These stores only contribute licensing fees, a portion of their monthly sales through royalties, and payments for the supply of coffee, tea, and food to licensees, as per company filings.

According to Bank of America analyst Sara Senatore, Starbucks generates about 7 cents of earnings before interest, taxes, depreciation and amortization for every dollar spent in a licensed store. In contrast, company-owned stores generate about 23 cents per dollar spent.

If Starbucks' business partners and third-party providers do not perform their duties, the company's brand could be negatively impacted, as stated in its latest annual filing.

""

Restaurants at airports are increasingly incorporating technology to speed up service.

To address labor challenges, airport restaurants have increased the use of kiosks and tablets.

Laurie Noyes, Tampa International Airport's vice president of concessions and commercial parking, acknowledged that airports can sometimes be located away from the city center. However, she stated that the airport has made progress in providing more digital options, allowing travelers to order food ahead of time through Eats and pick it up at airport restaurants.

DFWOrderNow, a website and platform available at digital kiosks, allows travelers to order food ahead at Dallas Fort Worth airport. Simkins stated that the airport's platform will redirect Starbucks customers to Starbucks' own platform. According to the chain's website, Starbucks offers over 170,000 possible drink orders. Simkins explained that the decision was made to maintain customer familiarity.

Simkins stated that the airport is exploring the use of robotic technology for faster delivery services. Additionally, the airport is testing meal and retail bundles from its restaurants and shops, allowing passengers to avoid multiple stops while planning their route.

Ampersand, a local coffee company based in Fort Worth, Texas, plans to open a robotic barista at DFW's Terminal C. The barista will be available 24/7 to accommodate flight crews arriving at off-hours.

Simkins said popular chains still draw a crowd.

Starbucks is one of those companies for Barrina, who was waiting for her coffee at LaGuardia.

"I just really love the brand," she said.