Uber Eats and Doordash pickup and delivery area at Starbucks coffee shop, Queens, New York.
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It has become a familiar sight Starbucks coffee shops: a counter full of mobile orders, frustrated customers waiting for their drinks and overwhelmed baristas trying to keep up with everything.
Fixing that problem will likely be at the top of incoming CEO Brian Niccol’s to-do list to turn around the struggling coffee giant when he takes over the role on September 9.
Investors and executives have pointed to operational issues as one of the reasons the chain’s sales have lagged in recent quarters. Other culprits for its recent same-store sales declines include a weakening consumer, boycotts and the downgrading of the Starbucks brand.
Former CEO Howard Schultz, who has no official role at the company but remains involved, has also pointed the finger at the mobile app. He said it has become “the biggest Achilles heel for Starbucks,” in one episode “Acquired” podcast in June.
Mobile ordering accounts for about a third of Starbucks’ total sales and tends to be more complex. While add-ons like cold foam or syrups are more profitable for Starbucks, they tend to take up more of baristas’ time, frustrating both them and customers.
“I agree with Howard Schultz,” said Robert Byrne, senior director of consumer research for Technomic, a restaurant market research firm. “That’s not in the data—it’s in the store. That’s where the issue lies.”
Approaching the development of mobile phones
In late April, the current CEO Laxman Narasimhan said the company was struggling to meet demand in the morning – and was scaring off some customers with long wait times.
Schultz said he encountered the problem himself when he visited a Chicago location at 8 a.m.
“Everybody shows up and all of a sudden we’ve got a mosh pit, and this is not Starbucks,” Schultz said in the “Acquired” episode.
Improving the efficiency of mobile ordering is one of the key ways Niccol can reduce crowding at Starbucks.
When Schultz was building Starbucks into the coffee behemoth it is today, he positioned it as the “third place” between work and home. The chain has since lost that reputation as more customers rely on the convenience of mobile ordering and prefer not to linger at its coffee shops.
“Because it’s a drink and because I often consume it in the car or on the go, it has to be incredibly convenient,” Byrne said.
But neither did Starbucks make significant adjustments to its operations to anticipate this shift in consumer behavior.
In 2017, Schultz stepped down as CEO for a second time, handing the reins to Kevin Johnson. Before joining the coffee chain as CEO, Johnson served as CEO of Juniper Networks, a technology company. Under his leadership, Starbucks invested in technology and continued to grow digital sales, but restaurant operations were already struggling when he left the company.
Schultz returned as interim CEO when Johnson retired in 2022.
“The company didn’t do a good job of anticipating the technology improvements that needed to be made to prevent this from happening… The stock was at a high level, the company wasn’t investing ahead of the curve, it wasn’t paying attention to the speed of the application to cell phones and what was happening until it was too late,” Schultz said.
Shareholders have also experienced frustration with digital ordering – and see this as a critical area for Niccol to address.
“The problem you have in New York, for example, is the wait time,” said Nancy Tengler, CEO and chief investment officer of Laffer Tengler Investments, which owns shares of both Starbucks and Chipotle. “And then mobile ordering trumps in-store ordering. [Niccol’s] we have to turn it around somehow to get people to spend more time and more money in stores.”
Mobile ordering issues have added pressure on baristas. Burnout, fueled in part by the app, has helped inspire some employees to unionize, starting in 2021.
This November, Starbucks Workers United, which now represents workers at about 450 of the chain’s U.S. stores, pushed the company to disable mobile ordering when promotions are running. (Starbucks said at the time that it was already in the process of making the change possible.)
Channeling the power of Chipotle
Digital sales are not the same albatross for Niccol’s current employer, Chipotle.
In the last quarter, 35% of the company’s revenue came from online orders. The pandemic fueled a shift to online ordering that has stuck, as the share of digital orders has jumped from 18% in 2019.
When Niccol joined Chipotle in 2018, most of its restaurants had already installed a second prep line dedicated to digital ordering, aiming to avoid bottlenecks as online sales became more important to the business. That same year, it also began adding online-only drive-through lanes, which it calls “Chipotlanes.”
In his six-and-a-half years at Chipotle, Niccol and his executives increased digital sales through different promotions: orders of beloved sports stars, limited-time deals, a rewards program and the long-awaited launch of quesadillas. Specifically, quesadillas became a digital-only option because they would otherwise slow down operations.
Chipotle is also testing automation to make burrito bowls it orders through its mobile app through a partnership with robotics company Hyphen.
Mobile transformation
Starbucks has taken steps to speed up service and improve the baristas’ work experience.
In 2022, under the leadership of Schultz, Starbucks introduced a reinvention plan that included addressing bottlenecks through new equipment and other measures to speed up service.
Narasimhan has largely stuck to this strategy. This February, its mobile app finally started showing customers the progress of their orders, giving them a better idea of when their drinks will be ready. And in late July, Starbucks rolled out the “Siren Craft System” across North America, a series of processes to make drinks faster and baristas’ jobs easier.
But the problem for Starbucks could require more drastic measures.
For example, equipment rollout has been slow, with about 40% of North American sites expected to install the new machines by the end of fiscal year 2026. Speeding up that timeline could cut service times in half — as promised at investor day 2022 — and reduce the pressure on baristas.
“It’s not easy to do this by any means, because it will take time, training and investment and [capital expenditure]TD Cowen analyst Andrew Charles said.
“In our view, Brian has tremendous credibility where if he says to investors, ‘This is the answer to the problem we’re facing,’ and he can explain why he thinks that — he’s going to get a pass,” Charles said.
