Young Starbucks baristas are driving a growing movement to unionize.

• In December, two Starbucks stores in Buffalo, New York, were unionized following NLRB hearings.
• Over 30 stores have requested the NLRB's assistance in organizing, with young baristas driving the movement.
• A 2021 Gallup poll found that 77% of young adults aged 18 to 34 approve of unions.
• American adults self-reported union membership stood at 9%.
• The Starbucks Workers United campaign is being viewed as a "generational uprising" by those involved, but critics question the relevance of the union struggle to investors.

Across the country, young baristas are working together to unionize their coffee shops, using their combined strength to challenge the dominant coffee corporation in a battle that could reshape the entire restaurant sector and its workforce.

Two Starbucks company-owned stores have formally organized after a December vote and hearing before the National Labor Relations Board. More than 30 company-owned stores from Massachusetts to Tennessee and Arizona have filed for union elections at Starbucks, according to a CNBC analysis of NLRB filings. An industry-wide labor crunch and the high-profile union push from Starbucks workers could mean more chains see their employees follow suit.

According to MKM Partners analyst Brett Levy, this situation is a warning sign for both the union and the industry.

According to Richard Bensinger, union organizer with Starbucks Workers United and a former organizing director of the AFL-CIO, the petitions to organize have come faster than even those involved first believed possible. However, with the group organizing via single-store units, some say the push could take years before reaching critical mass for the coffee giant.

According to Bensinger, Starbucks corporate was taken aback by the rapid pace of the unionization movement, with hundreds of partners reaching out to organizers each week for more information on how to petition for unionization.

Starbucks spokesperson Reggie Borges stated that it is incorrect to assert that the company was taken by surprise and unprepared. He explained that this demonstrates a lack of comprehension of how our leadership interacts with our partners. This involves frequent meetings with employees and conducting listening sessions.

Borges stated that the number of stores that have filed petitions is a minute fraction of the coffee giant's almost 9,000 U.S. company-owned cafes.

According to Starbucks Workers United, most of the pro-union workers are in their early 20s, which led Bensinger to label them as part of a "Gen U" for unions. These workers are hopeful that organizing will enable them to assert their voices and influence management to improve the company during the third year of the pandemic, as stated by Bensinger.

"Young people are rediscovering unions as a means of having a voice in the workplace and improving their wages and benefits, according to Bensinger. This generational uprising stems from a sense of hopelessness among young people who feel that they are not doing as well as the previous generation, with issues such as student debt, inability to buy a house, and lack of access to healthcare and retirement security."

'It just doesn't add up'

Leo Hernandez, a supervisor at a Starbucks in Tallahassee, Florida, has been closely monitoring the union effort and has expressed frustration over a lack of transparency around Covid exposures, Covid policies, pay, and staffing challenges at the company.

Hernandez, a 25-year-old, cited the desire for a direct line into management and a sense of community with fellow union member partners as reasons for wanting to organize. Additionally, he wants a single job to replace the multiple shifts he currently works serving, babysitting, and doing grocery delivery to make ends meet.

"Hernandez stated, "I have a job that's good for me, and I love Starbucks and their benefits, but it could always be better. As the main provider in my household, I currently have four jobs, which doesn't add up. I would like to reduce my number of jobs to one.""

'Taking it into their own hands'

At a time when American approval ratings of unions are at an all-time high, a Gallup poll from September 2021 reveals that 68% of Americans approve of labor unions, the highest reading since 1965. The poll was based on responses from 1,006 adults.

For the past 20 years, the approval of unions has consistently exceeded disapproval, with 86% of union members currently expressing approval, although this is down from a recent high of 93% in 2019. The percentage of American adults who report being union members is 9%.

The United States experiences significant income, wage, and wealth disparities. According to Catherine Creighton, director of Cornell University's Industrial and Labor Relations branch in Buffalo, young people are disillusioned with this state of affairs and are taking action to address it.

While not all restaurant operators are against the idea of organized labor, a Datassential survey found that nearly half of them believe collective bargaining and labor unions are not a good fit for the industry. Additionally, roughly 90% of respondents didn't have a unionized workforce.

"While most operators believe that collective bargaining and unions cause more problems than they solve, approximately one-third of operators believe that they are necessary in the industry, according to Huy Do, publications manager at Datassential. This finding was somewhat unexpected."

In the restaurant industry, unions are scarce. In 2020, only 1.2% of employees at food and beverage establishments were union members, significantly lower than the private sector's unionization rate of 6.3%, as reported by the Bureau of Labor Statistics. The industry's high turnover rate and the prevalent franchise business model used by many fast-food and casual-dining companies make unionizing challenging.

'A case-by-case basis'

Despite the low unionization rate in the restaurant industry, experts are uncertain about the impact of Starbucks baristas' push for organized labor.

According to MKM analyst Levy, Starbucks' union push is already affecting the way it treats its U.S. workforce, as evidenced by its announcement in late October that it would give baristas at least two pay hikes in 2022.

"Their decision to increase their compensation is the best evidence of their intentions," he stated. "The measures were implemented prior to the vote, but they aim to tackle some of the concerns raised by potential union members."

If 10% of Starbucks' U.S. company-owned cafes receive a $1.50 per hour raise, the company's net income could decrease by approximately 3%. However, this change will not occur immediately.

"Initially, I assume that Starbucks will handle each case individually while negotiating with various stores and markets. If modifications occur, they will implement best practices uniformly across the system."

Starbucks' market value is currently $96.92 billion, a 1% decline from the previous year's market close, as of Thursday. The company will release its latest quarterly results on Tuesday after the bell.

Flexing organizing power

In January, Buffalo baristas demonstrated their organizing abilities through a walkout, protesting what they believed to be hazardous working conditions. However, there are doubts that this approach will persuade Starbucks to enter into a collective bargaining agreement with the union, as labor laws do not mandate it.

After a year, workers who lose faith in the union can petition to decertify, putting a ticking clock on negotiations. On average, it takes 409 days for unions to ratify their first contract, according to Bloomberg Law.

Borges, Starbucks' spokesperson, revealed that the company plans to use a store-by-store negotiating approach.

The union may benefit more from multistore negotiations, but Starbucks' strategy leverages its scale and resources, according to those familiar with the organizing effort.

Michael Saltsman, the managing director of the Employment Policies Institute, stated that Starbucks' extensive presence makes it unlikely that hundreds of unionized stores would significantly impact their stance.

Saltsman stated that the upcoming conflict would be a battle of wills, and it would depend on Workers United's willingness to persist over a five- or 10-year period, with a significant financial commitment and an uncertain outcome.