Starbucks cracks down on freeloaders to reverse sales decline
Coffee chain launches plan to get more paying customers back in stores as it reports fewer transactions
A man in a winter coat enters a crowded Starbucks café and lounges on a caramel-coloured seat. Then he gets up, goes to the bathroom and exits into a frigid downtown Manhattan.
One thing he does not do is buy a drink. Effective Monday, Starbucks plans to change that.
The world’s largest coffee shop chain is introducing new policies for the roughly 11,000 stores it operates across North America. Free cups of water are out. Free coffee refills, in ceramic mugs or glasses, will be in.
Customers will now be defined as people who make purchases. People who do not may be asked to leave.
Starbucks is acting with urgency. Its North American locations rang up 5 per cent fewer transactions in 2024, the first annual decline since the pandemic year 2020.
Same-store sales are expected to be 4.8 per cent lower in fiscal first-quarter results to be published on Tuesday, according to analysts polled by Visible Alpha.
Chief executive Brian Niccol has embarked on a turnaround plan he calls “Back to Starbucks”. The name is nostalgic: he seeks to make Starbucks a “community coffeehouse” again, a cosy place to linger and fraternise.
But it is also literal: Starbucks needs to get more paying customers back inside its stores.
In the past week baristas sat through three-hour training meetings that included how to enforce a new “code of conduct” that has begun appearing at stores.
A version of the code posted in the window of a New York café last week said the store was for use by “our partners and customers (people making purchases and those accompanying them) — this includes our cafés, patios and restrooms”.
Law enforcement was invoked as an option to remove those who do not comply.
Starbucks in 2018 declared any visitor a customer regardless of whether they made a purchase, weeks after a controversy over the arrest of two Black men who had asked to use the restroom before buying anything at a store in Philadelphia.
This month’s policy reversal is stoking concerns of its own.
Donald Whitehead, executive director of the National Coalition for the Homeless, said his advocacy group will petition the company to reconsider. He said Starbucks sometimes served as a “buffer” location for the homeless in the morning hours, after shelters emptied out and before libraries opened for the day.
“We don’t need less resources. We need more,” he said. “I know that Starbucks is not responsible for the welfare of the homeless population, but we are very concerned.”
Workers United, a labour union representing baristas at 538 stores, called on the company to make code of conduct enforcement part of formal talks over a new work contract. In a post on X it argued that “workers and customers are getting nickelled and dimed” as free water and open access to restrooms disappear.
Michelle Eisen, a barista and union organiser and bargaining delegate, said that she and her colleagues will “have a very hard time telling an unhoused person in Buffalo, New York when it’s negative 3 degrees that no, they can’t sit in our café for 10 minutes and warm up, because they can’t make a purchase. That is going to be a very difficult thing for me to carry out”.
Starbucks said it is not setting time limits for visitors to make a purchase: employees will not be expected to interfere with a guest quietly using a table in an empty store.
However, a visitor might be approached and asked to make a purchase in a crowded store where customers are waiting for a place to sit.
Most retailers already have codes of conduct, the company said, and its own will help “prioritise our paying customers who want to sit and enjoy our cafés or need to use the restroom during their visit”.
“The code of conduct change is Brian Niccol shifting Starbucks back to what is more of an industry standard,” said Gregory Francfort, an analyst at Guggenheim Securities.
Niccol introduced “Back to Starbucks” when he joined the company in September and has since spelled out goals including condensing the menu, a separate queue for mobile order pick-ups and a four-minute target to fulfil orders made at cafés.
He also wants to restore some of the warmth lost as Starbucks focused on app-based business and removed comfortable chairs to streamline operations. Among the other changes due Monday will be the return of “condiment bars” with creams and sweeteners for customers to choose.
Angele Robinson-Gaylord, Starbucks senior vice-president of store development Americas, told a commercial real estate conference in December that fewer new stores will open this year as a team of more than 750 people works on redesigns to incorporate “what you see, what you smell, what you hear, to create a full sensorial experience”.
The experience was austere at a Starbucks outlet in New York last week. Seating consisted of low windowsills warmed by HVAC ducts running underneath.
Some of the roughly 15 visitors sipped drinks or waited for their names to be called by baristas filling orders. Others appeared to be uninterested in the products for sale. One sat by a bathroom door watching videos on her phone.
Bryant Simon, author of Everything but the Coffee: Learning about America from Starbucks, said Niccol’s push to re-establish the chain as a community hub revealed a contradiction.
“This is the catch and the difficulty of creating community,” he said. “Not everybody wants everybody there.”
