Is Starbucks’ CEO Hoodwinking Wall Street—or Is the Turnaround Really Working

 

The Grocerant Guru® asks: Is Starbucks really getting “Back to Starbucks,” or is Wall Street being handed a familiar restaurant turnaround script that sounds better than the consumer reality?

Let's be clear from the beginning: “hoodwinking” is a question, not an accusation. There is no evidence presented here that Starbucks CEO Brian Niccol is intentionally misleading investors.

But there is a legitimate food-marketing question worth asking.

When a restaurant company is under pressure, there is an old playbook: close underperforming stores, remodel the remaining stores, simplify the operation, improve service, invest in employees, refresh the menu, increase marketing—and then tell Wall Street that the turnaround is working.

That playbook can work.

But consumers don't buy turnaround plans.

Consumers buy coffee, food, convenience, experience and value.

And that's where the Starbucks story becomes considerably more interesting.

Starbucks announced September 24 that it would close approximately 250 additional North American coffeehouses, about 1% of its more than 18,000 North American locations. The company says the closures involve locations that cannot consistently deliver the desired customer and partner experience or that lack a path to acceptable financial performance. Starbucks also says it is accelerating toward 1,500 coffeehouse “uplifts.”

That sounds like classic portfolio management.

But the bigger question for Wall Street is:

Is Starbucks fixing stores—or is the coffee consumer changing faster than the Starbucks playbook?

Four food-marketing facts Wall Street should examine

1. Coffee consumers are increasingly buying specialty coffee—but that does not automatically mean Starbucks

The National Coffee Association's 2025 data found that 66% of American adults drank coffee on the previous day, while specialty coffee reached a record 48% of adults, up from 37% in 2021.

Even more interesting, specialty coffee drinkers were more likely than traditional coffee drinkers to have coffee prepared outside the home.

That's a huge opportunity.

But it is an opportunity for the coffee category, not necessarily a guarantee for Starbucks.

Consumers have more choices than ever: independent coffee shops, drive-thru specialists, convenience stores, regional chains, fast-food restaurants and increasingly sophisticated foodservice programs.

The coffee consumer is not waiting for one brand to tell them where to drink coffee.

2. Convenience has become part of the coffee product

Coffee isn't simply coffee anymore.

It is coffee + speed + location + portability + customization + food + technology.

NCA data reported in 2025 showed that 85% of past-day coffee drinkers consumed coffee at breakfast, 82% consumed it at home, and the average coffee drinker consumed nearly three cups per day.

That means Starbucks isn't competing only with another coffeehouse.

It is competing for one of the consumer's daily beverage occasions.

And that competition increasingly comes from places that were never historically defined as coffee companies.

That is the Grocerant Guru's no-silos consumer principle:

Consumers don't see restaurant, grocery, convenience-store and coffee-company silos. They see a coffee occasion.

3. Starbucks' own numbers show that transactions—not just higher tickets—matter

Here is where the Starbucks turnaround deserves credit.

In Q3 fiscal 2026, Starbucks reported U.S. comparable-store sales growth of 7.9%, consisting of 4.2% transaction growth and 3.6% average-ticket growth. North American comparable sales increased 8.1%, with transactions up 4.5%. Starbucks also reported that food attachment and beverage modifications contributed to the result.

That is important.

It means the current Starbucks story cannot fairly be dismissed as simply raising prices.

Customers were coming through the doors more frequently.

Earlier in fiscal 2026, Starbucks reported U.S. comparable transactions up 4.3% in Q2, after declines in the prior-year comparison.

So, if Wall Street wants evidence that the turnaround has traction, transactions are one of the most important pieces of evidence.

But that also creates the next question:

Can Starbucks maintain transaction growth after the easiest turnaround gains have been harvested?

That is a very different question from whether a quarter looks better than the previous year.

4. Look at what the fast-growing coffee competitors are actually building

The most revealing comparison may not be Starbucks versus Starbucks.

It may be Starbucks versus the emerging coffee occasion economy.

Dutch Bros reported Q2 2026 revenue growth of 32.5% to $550.9 million, opened 48 shops during the quarter and posted 8.3% company-operated same-shop sales growth. Systemwide same-shop sales increased 5.8%. The company finished the quarter with 1,225 shops.

Scooter's Coffee reached approximately 900 stores across 32 states in early 2026 after adding 83 stores during 2025, a 10% increase following 16% growth in 2024. Its model is heavily built around drive-thru convenience, speed, menu variety and franchise-led expansion.

And 7 Brew has been expanding at extraordinary speed, reaching more than 700 locations across 38 states in 2026, according to reporting on the company's expansion.

These brands are not simply selling coffee.

They are selling a coffee occasion designed around the way consumers increasingly live.

Fast.

Portable.

Customizable.

Drive-thru friendly.

Highly beverage-focused.

And increasingly accompanied by food and snack occasions.

The Starbucks problem may not be coffee

This is where the Grocerant Guru sees the bigger food-marketing issue.

Starbucks has a powerful brand.

It has enormous scale.

It has technology.

It has loyalty.

It has thousands of locations.

And its 2026 operating results show genuine improvement.

But the competitive landscape is changing.

The consumer is increasingly asking:

“Where can I get what I want, when I want it, at a price and experience that feels worth it?”

That is the same consumer question driving the Grocerant niche.

Ready-2-Eat.

Heat-N-Eat.

Foodservice.

Convenience.

Drive-thru.

Delivery.

Coffee.

Snacks.

Breakfast.

Lunch.

Dinner.

The consumer doesn't care which corporate department owns the occasion.

The old restaurant playbook versus the new consumer playbook

The old playbook says:

Close weak stores.

The new consumer playbook says:

Why was the store weak?

The old playbook says:

Remodel the store.

The new consumer playbook says:

What does the customer actually want from the experience?

The old playbook says:

Improve the menu.

The new consumer playbook says:

Build the menu around occasions, cravings, portability and value.

The old playbook says:

Increase the average ticket.

The new consumer playbook says:

Increase the frequency of visits and the consumer's perception of value.

That distinction matters.

Starbucks itself says its 2026 North American improvement has been helped by faster service, greater consistency, warmer coffeehouses, food attachment and beverage modifications.

Those are meaningful improvements.

But they aren't proprietary.

Competitors can copy speed. Competitors can copy menu innovation. Competitors can copy loyalty. Competitors can build drive-thru units.

What cannot be copied overnight is a consumer habit.

And that is the real Wall Street question.

The Grocerant Guru's bottom line

Brian Niccol's “Back to Starbucks” strategy is producing measurable results in 2026. Starbucks has reported four consecutive quarters of comparable-sales growth, and Q3 U.S. transaction growth was positive.

So this is not a story about Starbucks simply failing.

It is a story about whether Starbucks' improvement is being confused with a fundamental change in consumer behavior.

There is a difference.

A turnaround can make an existing business better.

A consumer migration can change the competitive landscape.

And coffee is increasingly part of a much larger food-and-beverage occasion.

The Grocerant Guru's Three Questions for Wall Street

1. Are Starbucks' improving transactions evidence of sustainable consumer migration—or are they primarily the first fruits of a successful turnaround investment cycle?

2. If consumers are increasingly choosing coffee based on speed, portability, customization, food attachment and perceived value, is remodeling Starbucks stores enough to defend the brand against drive-thru specialists and nontraditional coffee competitors?

3. When Dutch Bros, Scooter's and 7 Brew are expanding their footprints while building businesses around convenience and beverage occasions, should Wall Street measure Starbucks primarily by remodeled stores—or by the consumer's next coffee occasion?

That's the question.

Because Wall Street may invest in companies, but consumers invest in habits.

And in the food business, consumer habits—not corporate presentations—ultimately write the next chapter.

Are you ready for some fresh ideations? Do your food marketing ideas look more like yesterday than tomorrow? Interested in learning how our Grocerant Guru® can edify your retail food brand while creating a platform for consumer convenient meal participation, differentiation and individualization?  Email us at: Steve@FoodserviceSolutions.us or visit: us on our social media sites by clicking one of the following links: Facebook,  LinkedIn, or Twitter

The New Foodservice Rent Equation: How Much Can a Restaurant or C-Store Afford to Pay for Real Estate?

 

There is one fact about foodservice real estate that has remained true for decades:

If you pay too much for the location, you eventually pay for it with your profits according to Steven Johnson, Grocerant Guru® at Tacoma, WA based Foodservice Solutions®.

But today's foodservice business is considerably more complicated than simply saying, “Keep rent between 6% and 10% of sales.”

That old rule of thumb can be useful as a starting point, but it is not a universal profitability formula. In 2026, foodservice operators have to look at occupancy cost, labor, food costs, sales productivity, off-premise sales, technology, delivery economics and gross-margin mix together.

And there is another important distinction: rent is not the same thing as occupancy cost.

Occupancy can include rent, property taxes, insurance, common-area charges and other location-related expenses. The National Restaurant Association's latest operating data shows just how important this distinction has become.

The Real Number: Occupancy Cost as a Percentage of Sales

According to the National Restaurant Association's 2025 Restaurant Operations Data Abstract, based on data from more than 900 restaurant operators, median occupancy costs in 2024 were 5.7% of sales for full-service restaurants and 5.2% for limited-service restaurants.

Location matters.

For full-service restaurants, median occupancy costs were approximately 6.0% in urban/city-center locations, 5.5% in suburban locations and 5.4% in small communities or rural areas.

For limited-service restaurants, the difference was even larger: 6.0% in urban/city-center locations, 5.0% in suburban locations and just 3.2% in small communities or rural areas.

That is an important food marketing lesson.

The best location is not necessarily the location with the most traffic. It is the location capable of producing enough profitable sales to justify its occupancy cost.

A $20,000 monthly rent may be expensive for one restaurant and a bargain for another.

It all depends on the sales the location can generate.

Foodservice Has Become a Cost-Battle Between Labor, Food and Real Estate

Rent does not operate in a vacuum.

The restaurant operator is fighting several cost battles simultaneously.

The National Restaurant Association reports that in 2024, median salaries and wages including benefits represented 36.5% of sales for full-service restaurants and 31.7% for limited-service restaurants.

Food and non-alcohol beverage costs represented another 32.0% of sales for full-service restaurants and 32.4% for limited-service restaurants.

Put those three numbers together and the challenge becomes obvious.

A restaurant can already have approximately:

32% food + 32%–37% labor + approximately 5%–6% occupancy

before paying for utilities, insurance, technology, repairs, supplies, credit-card processing, marketing, administrative expenses, depreciation and everything else required to operate the business.

And the pressure has not disappeared.

In July 2026, the National Restaurant Association reported that restaurant expenses remained substantially above pre-pandemic levels. Compared with 2019, average restaurant employee hourly earnings had increased 41%, while average wholesale food prices were up 35%.

That changes the rent conversation.

The New Rule: Don't Ask “What Percentage Is Rent?”

Ask:

“What percentage of sales can this location afford to spend on occupancy while still producing the return we require?”

That is a much better question.

A restaurant doing $2 million in annual sales with $120,000 of occupancy costs is at 6%.

A restaurant doing $1 million in sales with the same $120,000 occupancy cost is at 12%.

Same building.

Same rent.

Completely different economics.

And that is why percentage-of-sales analysis is so important.

 

Example #1: The High-Sales Restaurant

Imagine a restaurant generating:

$2.5 million in annual sales

Annual occupancy cost:

$150,000

Occupancy percentage:

6.0%

That location may be highly attractive because the real estate is consuming only six cents of every sales dollar.

But suppose the operator can increase sales to $2.75 million without materially increasing occupancy.

The same $150,000 occupancy cost now represents only:

5.45% of sales.

That is the power of sales productivity.

The operator did not negotiate a cheaper lease.

The operator made the lease cheaper by generating more sales.

This is one reason food marketing matters so much to real estate economics.

Menu innovation, takeout, catering, delivery, loyalty programs, digital ordering, daypart expansion and Ready-2-Eat/Heat-N-Eat offerings can all help increase sales productivity without adding another restaurant.

 

Example #2: The Restaurant With “Cheap” Rent That Isn't Cheap

Now consider a restaurant with:

$1.0 million in annual sales

and:

$60,000 in annual occupancy costs.

That is also 6%.

On paper, everything looks fine.

But what happens if traffic falls and annual sales decline to $800,000?

The occupancy cost suddenly becomes:

7.5% of sales.

If sales fall to $700,000, occupancy becomes:

8.6%.

Nothing changed about the lease.

The restaurant simply lost the sales volume necessary to support it.

This is why operators should not only monitor occupancy as a percentage of sales—they should monitor sales trends and occupancy dollars together.

A rising occupancy percentage can be an early warning signal that a location is losing economic productivity.

 

Example #3: The C-Store Foodservice Opportunity

Convenience stores demonstrate why the old restaurant-only way of thinking about real estate is changing.

Foodservice has become one of the most important profit engines in convenience retail.

According to NACS, foodservice accounted for approximately 28% of U.S. convenience-store in-store sales in 2025 and 38.9% of in-store gross profit dollars. Prepared food alone represented 73.9% of foodservice sales.

That is a remarkable transformation.

Twenty years ago, foodservice represented only about 11.9% of convenience-store in-store sales.

Today, prepared food is helping redefine what a convenience store actually is.

It is no longer simply:

Fuel + cigarettes + packaged snacks + beverages.

Increasingly it is:

Fuel + beverages + snacks + fresh prepared food + breakfast + lunch + dinner + snacks + beverages + meal solutions.

And that changes the real estate equation.

A convenience-store operator may be able to justify a higher occupancy cost if the location supports substantially higher foodservice sales and gross profit.

NACS reported that foodservice generated approximately 38.3% of in-store gross profit dollars in 2025, demonstrating that foodservice's contribution to profitability is considerably larger than its share of sales.

That is precisely why foodservice should be considered when evaluating a site's rent.

 

The Grocerant Effect: Rent Can Be Supported by More Than One Revenue Stream

Here is where the traditional restaurant real estate model becomes even more interesting.

A restaurant location may generate revenue from:

·       Dine-in

·       Takeout

·       Drive-thru

·       Delivery

·       Catering

·       Mobile ordering

·       Loyalty programs

·       Family meals

·       Meal components

·       Ready-2-Eat products

·       Heat-N-Eat products

The same principle applies to grocery stores and convenience stores.

The physical location can become a food production and fulfillment platform, not simply a place where customers sit down to eat.

That means operators should increasingly evaluate real estate based on total foodservice revenue productivity, not just traditional dining-room sales.

This is particularly important as consumers continue shifting food occasions between restaurants, grocery stores and convenience stores.

The lines between these channels continue to blur.

 

What About Starbucks, Darden and Other Major Operators?

The original version of this article used Starbucks, Darden and 7-Eleven as examples of companies supposedly maintaining specific rent percentages.

I would be careful with that comparison.

Public companies do not always report “rent” in a way that allows an apples-to-apples comparison with an independent restaurant's lease expense.

For example, Darden's fiscal 2026 results show $13.21 billion in sales, with $4.04 billion in food and beverage costs, $4.18 billion in restaurant labor and $2.13 billion in restaurant expenses.

Darden's scale gives it enormous purchasing, labor, marketing and operating advantages that a single-unit restaurant does not have.

Likewise, Starbucks reported approximately $37.2 billion in fiscal 2025 revenue, while store operating expenses represented 45.9% of total net revenues.

The lesson is not that Starbucks or Darden has discovered one magic rent percentage.

The lesson is that large operators manage the entire economic productivity of the location.

That includes sales volume, labor productivity, menu mix, occupancy, throughput, technology and customer frequency.

 

The New Foodservice Real Estate Scorecard

I believe foodservice operators should evaluate every location using at least five measurements:

1. Occupancy Cost Percentage

How much of every sales dollar goes toward rent and other occupancy expenses?

2. Sales Per Square Foot

How much revenue is the physical location generating?

This is particularly important when comparing expensive urban locations with lower-cost suburban or rural locations.

3. Gross Profit Per Square Foot

Sales alone can be misleading.

A $1 million location selling low-margin products may be less attractive than a $900,000 location with a much stronger gross-margin mix.

4. Labor Productivity

How much sales volume is being generated for every labor dollar?

With labor costs remaining elevated, this is increasingly important.

5. Foodservice Contribution

What percentage of the site's sales and gross profit is coming from higher-value foodservice?

This measurement is becoming especially important in convenience retail.

 

The Most Dangerous Rent Is Not Always the Highest Rent

There is another lesson I have learned over decades of watching foodservice operators.

A high rent location can be profitable.

A low-rent location can lose money.

The difference is sales productivity and margin productivity.

Suppose Location A costs $200,000 a year in occupancy and produces $4 million in sales.

Occupancy:

5%

Location B costs $100,000 and produces $1 million in sales.

Occupancy:

10%

Location B has half the rent dollars.

But Location A is actually carrying the lower occupancy burden relative to sales.

This is why foodservice real estate decisions should never be made simply by asking:

“What's the rent?”

The better question is:

“What sales and gross profit can this location realistically produce?”

 

Three New Food Marketing Insights From the Grocerant Guru®

Insight #1: The New Rent Number Is a Sales Productivity Number

I would stop thinking about rent as an isolated expense.

Instead, think about rent divided by productive sales capacity.

The operator who can increase transactions, average check, dayparts and off-premise occasions can potentially reduce occupancy as a percentage of sales without negotiating one dollar off the lease.

Food marketing can therefore become real estate cost management.

 

Insight #2: Foodservice Can Make Expensive Real Estate Work

A location that once depended almost entirely on lunch and dinner may now have opportunities for breakfast, coffee, snacks, takeout, delivery, catering, family meals and prepared food.

That creates more revenue opportunities from the same four walls.

The winning question isn't:

“Is this rent too high?”

It is:

“What additional food occasions can this location capture?”

That is a very different real estate strategy.

 

Insight #3: The Future Belongs to the Operator Who Measures Profit Per Customer, Not Just Sales Per Customer

The foodservice industry has spent decades obsessing over sales.

But in today's cost environment, sales without margin can be dangerous.

Operators need to know:

Who is the customer?

What did they buy?

What did it cost to make?

How much labor did the transaction require?

How much did delivery or payment processing cost?

How much gross profit remained after the transaction?

Then—and only then—can the operator determine how much occupancy cost that customer can actually support.

That is the new foodservice real estate equation.

 

The Bottom Line

The old 6%–10% rent rule is not dead.

But it needs to be put into context.

Current restaurant operating data suggests that median occupancy costs are closer to 5%–6% of sales for many restaurant operators, with meaningful differences by format and geography.

At the same time, restaurants are dealing with historically elevated labor and food costs and extremely thin bottom-line margins. The National Restaurant Association reported median 2024 pre-tax income of only 2.8% for full-service restaurants and 4.0% for limited-service restaurants.

That means a few percentage points can make a very big difference.

So my advice to foodservice operators is simple:

Don't lease a location because the rent looks cheap.

Don't reject a location because the rent looks expensive.

Instead, determine how much sales, gross profit and customer frequency the location can realistically generate—and then calculate the occupancy cost that those economics can support.

Because in the end, the best foodservice location isn't the one with the cheapest rent.

It is the location where the real estate, food, labor and marketing work together to produce the highest sustainable profit.

That is the real Grocerant Guru® rent rule.

Make the four walls earn their keep.

About Foodservice Solutions®

Looking for your own foodservice growth opportunities? Foodservice Solutions® specializes in outsourced food marketing, business-development ideation and identifying, quantifying and qualifying opportunities across restaurants, grocery stores, convenience stores and the growing Grocerant niche.

The objective is simple: find more food occasions, create more customer value and make every square foot work harder.