Union negotiations at Starbucks are set to resume as the company faces challenges in its stores.

• This week, Starbucks and Workers United will resume bargaining talks following a successful two-day session last month.
• Starbucks CEO Laxman Narasimhan acknowledged a more cautious consumer spending attitude following the company's latest earnings report, while also emphasizing the need for store improvements.
• Workers United is advocating for enhanced compensation, benefits, staffing, and scheduling.

The CEO of When and its baristas union may have renewed momentum at their backs during contract bargaining this week.

The coffee giant reported a challenging quarter last month, with U.S. same store sales falling 3% and traffic dropping 7%. Due to this, the company cut its 2024 forecast.

Starbucks CEO Laxman Narasimhan acknowledged that consumers were becoming more cautious about spending, but also emphasized the need to improve stores as the company observed concerning trends. According to Starbucks, the rate of incomplete mobile app orders was in the mid-teens, and occasional customers were coming in less.

In his address to Wall Street analysts, Narasimhan acknowledged the challenges union workers have been advocating for in their pursuit of improved working conditions.

In our U.S. stores, we are prioritizing the creation of a more stable environment for partners by investing in equipment innovation, process improvements, staffing, scheduling, and waste reduction. This is in line with our partners' values and priorities, as they aim to create a more satisfying work environment in our stores while minimizing risks to our business.

In an interview with CNBC's "Squawk on the Street," he stated that the company's throughput has improved and that the action plan will continue to build on that momentum with improvements to stores and better communication of value.

Narasimhan stated that we have enhanced our speed of service from quarter to quarter. By examining the processes we are introducing, particularly during peak periods, we have identified areas for improvement, which can be achieved through modifications in the tools and processes we offer to our partners during peak times.

The union behind the Starbucks organizing, Workers United, found his admission that more could be done to be promising.

Staffing challenges

Nearly three years ago, organizing efforts commenced in Buffalo, New York, under the leadership of then-CEO Kevin Johnson. Starbucks was already recognized as a company that offered progressive benefits to its employees at that time.

Despite the pandemic, baristas pushed for changes in the company's cafes. Now, after more than 430 unionized stores and two chief executives, the two sides have made "significant progress" in contract bargaining, striking a more optimistic tone after a successful two-day session last month.

The union and Starbucks are continuing to discuss the framework that will guide all future single-store contracts.

Michelle Eisen, a Workers United delegate and original member of the company's first organized union in Buffalo, stated ahead of negotiations that she believes the company is acknowledging the existence of significant issues.

Eisen, a delegate at the in-person bargaining sessions with Starbucks on behalf of the union for more than a decade, stated that they heard Narasimhan make the statement that they are aware of staffing issues in stores after the earnings call.

"As a worker at a unionized location, I am thrilled to hear the CEO acknowledge the existence of problems and express a desire to work towards fixing them."

In both internal surveys and bargaining committee meetings, union-represented partners consistently rank "staffing and scheduling" as their top priority issue. A majority of represented partners report frequently working short-staffed, and a simple majority of partners report that they are getting scheduled for fewer hours than they want or need.

The union has also pushed for better pay and benefits.

Starbucks has made significant progress in staffing and scheduling over the past two years, with an advanced model that considers historical trends, current trends, product types, and upcoming promotions. As a result, partner hours have increased, and retention and sentiment have both improved across the U.S.

Orders up

As Starbucks anticipates an increase in traffic and orders, staffing improvements may become even more crucial.

Starbucks aims to expand its mobile order and pay app to non-rewards members in July, in an attempt to attract back its occasional customers. This move will enable the company to offer new products and promotions to all customers, with the goal of increasing traffic.

The Siren System, a new equipment and protocol, will be introduced to address customer ticket times. This system includes a custom ice dispenser, milk-dispensing system, and faster blenders to streamline the process for baristas and get drinks to customers faster. It will be implemented in 1,000 stores by July.

Eisen described the feeling of being on the floor and pulling a sticker, looking at the time, and then looking up at the clock on the wall and realizing that you are already 8 minutes behind as a terrible one.

"Although eight minutes may seem insignificant, when you're processing 100 transactions every 30 minutes and realize you're likely behind by 20 orders, it's a frustrating experience," she remarked.

Schultz, the former CEO of Starbucks, has suggested in a LinkedIn post that management should spend more time with employees to comprehend their ongoing challenges.

Since leaving Starbucks and its board in 2022, Schultz has publicly commented on the company's operations three times, with a more confrontational tone in his latest statement.

Narasimhan was mentored by Schultz for six months and spent time in stores with baristas, earning his barista certification before becoming CEO in 2023.

"Schultz emphasized that the company's fix should start with its U.S. operations, which are the main reason for its decline. He stated that the stores need a relentless focus on the customer experience, from a merchant's perspective. According to Schultz, the solution does not lie in data but in the stores."

The coffee giant responded, "We value Howard's viewpoint. The challenges and opportunities he brings up are areas we are concentrating on. We share Howard's optimism about Starbucks' future."