Starbucks’ Three Stumbling Blocks for 2025

 

As Starbucks navigates a turbulent path through 2025, three critical challenges threaten its domestic performance according to Steven Johnson Grocerant Guru® at Tacoma, WA based Foodservice Solutions®. Johnson believes that Starbucks needs to close a significant number of underperforming stores, a potential double hit from declining traffic and sales amidst economic uncertainty, and the alienation of customers in pursuit of operational efficiency. Each of these hurdles, exacerbated by a sluggish return to urban offices, requires a nuanced strategy to prevent the coffee giant from stumbling further. Success does leave clues however don’t over look lessons learned when you stumble.

1. Closing 1,113 Underperforming Stores: A Difficult Necessity

Starbucks’ should plan to shutter 1,113 underperforming U.S. stores may seem drastic, but the history of the foodservice industry shows it could be an essential step to streamline operations and reinvigorate profitability. Chains like Ruby Tuesday and Quiznos serve as cautionary tales: their reluctance to address overextension led to closures far too late, diminishing brand relevance and exacerbating losses.

The underperforming stores, primarily located in low-traffic suburban areas and struggling urban markets, drain resources that could instead be funneled into high-performing units. Historical industry data supports this strategy. In 2008, Starbucks made the painful decision to close over 600 locations during the financial crisis. Although met with resistance initially, the closures ultimately helped stabilize the company and reallocate resources to stronger markets, allowing for future growth.

Failing to execute these closures swiftly risks delayed benefits and worsened financial strain. Closing fewer stores in 2025 would prolong the bleeding, stretch resources thin, and defer any meaningful recovery.

 

2. Economic Pressures and Dropping Sales in Early 2025

Inflation, rising interest rates, and slower-than-expected economic recovery spell trouble for Starbucks as it heads into 2025. Historically, coffee shop spending has been highly elastic in uncertain economies. During the Great Recession, Starbucks witnessed an 8% decline in same-store sales in just six months, underscoring the vulnerability of premium-priced items when wallets tighten.

Recent data echoes these concerns. Morning daypart visits, a cornerstone for Starbucks, have faced a significant downturn as hybrid work trends reduce foot traffic in urban locations. While fast-casual chains like Chipotle have proven resilient in comparable conditions due to flexible pricing models, Starbucks’ reliance on upscale offerings, often discretionary, makes it especially exposed to macroeconomic turbulence.

First-half forecasts for 2025 already suggest comparable store sales declining 3-4%, a concerning figure given the brand’s historical reliance on steady traffic growth. This is compounded by decreased weekday patterns in urban hubs such as San Francisco and New York, where office occupancy rates remain 30-40% below pre-pandemic norms.

 

3. Alienating Customers with Efficiency-Focused Changes

In its effort to reduce ticket times and streamline operations, Starbucks has considered narrowing its menu options—particularly customized and seasonal drinks that require longer preparation. While operational efficiency might improve, Starbucks risks alienating its loyal customer base that often frequents stores for exactly those personalized and unique options.

This move mirrors similar missteps by other chains. In 2017, Subway’s over-focus on operational simplicity through menu reductions contributed to a significant loss in customer traffic and eventually led to years of negative comparable sales. Starbucks must tread carefully, as today’s coffee culture thrives on personalization and variety, with competitors such as Dunkin’ and McCafé expanding their offerings to lure disaffected Starbucks customers.

Additionally, the migration of customers to smaller regional chains and Ready-2-Eat beverage providers shows consumers' increasing willingness to explore alternatives. A streamlined Starbucks menu could push convenience-focused consumers toward competitors offering better price-value propositions.

 

Key Urban Hubs: The Anchor That Isn’t Returning Fast Enough

Complicating all three challenges is the slower-than-anticipated return to work in urban centers. Historically, major coffee chains have relied on concentrated morning commuter traffic in city hubs to drive weekday profitability. Today, remote work trends have disrupted these patterns in ways that previous downturns did not.

Competitors like Panera Bread have already begun pivoting, targeting suburban settings to capture hybrid workers' dining occasions. Starbucks has been slower to pivot, instead doubling down on urban development strategies now yielding diminishing returns.

 

Lessons from Industry Struggles

History reveals a consistent theme: brands failing to act decisively in challenging periods often face prolonged recovery. Companies like Krispy Kreme learned that delayed decision-making in cutting losses led to brand dilution and financial hardship. On the other hand, brands such as Domino’s successfully navigated economic downturns by embracing bold, albeit painful, strategic shifts, including product reinvention and store repositioning.

 

2025: A Crossroads Moment

Starbucks finds itself at a pivotal moment as it strategizes to overcome these stumbling blocks. Its willingness to take decisive, calculated actions—whether by implementing significant store closures, tackling customer concerns regarding menu changes, or adapting more swiftly to new economic realities—will ultimately determine its resilience and longevity. If Starbucks stumbles, its position as an industry leader might be left vulnerable, opening the door for competitors eager to seize the moment.

Looking for success clues of your own? Foodservice Solutions® specializes in outsourced food marketing and business development ideations. We can help you identify, quantify and qualify additional food retail segment opportunities, technology, or a new menu product segment.  Foodservice Solutions® of Tacoma WA is the global leader in the Grocerant niche visit us on our social media sites by clicking one of the following links: Facebook,  LinkedIn, or Twitter