Major Coffee Chain Announces Extensive Restructuring, Including Store Closures and Job Cuts
A well-known coffee chain is set to shutter a large number of its outlets across the United States and Canada, with plans to let go of around 900 non-retail workers. This move is part of a broader plan to focus on rejuvenating the company.
Immediate Beginnings
The closures will begin without delay, although the company has not disclosed the exact number of stores to be closed. By the end of the fiscal year, the company anticipates operating approximately 18,300 locations across North America, a reduction from the 18,734 locations currently in operation.
An industry analyst estimates that the coffee chain will likely close around 500 stores during the final quarter of its fiscal year.
Support for Affected Employees
The company plans to offer affected store employees opportunities for transfer to other locations where feasible, in addition to severance packages. Non-retail workers whose positions are being eliminated will be notified soon.
The company has also encouraged its employees capable of working from home to do so for the time being.
Reason Behind the Closures
In a letter to employees, the company's CEO and Chairman highlighted that the review process identified stores that were either financially unstable or unable to provide the expected customer experience. These stores will be the ones closing.
He emphasized that the company opens and closes coffeehouses each year for various reasons, including financial performance and lease expirations. However, the current action is more significant and will undoubtedly impact both employees and customers. He acknowledged the difficulty of closing any location, given their role as community centers.
Restructuring Costs
The company anticipates spending $1 billion on the restructuring process. This includes $150 million for employee separation benefits and $850 million for physical store closure costs and lease exit expenses. Following this announcement, the company's shares dropped by 1%.
Unionized Stores and Worker Reactions
It is unclear how many of the stores to be closed are unionized. Up to 650 company-owned locations in the U.S. have voted for unionization since 2021, but a contract agreement is yet to be reached.
The labor group organizing the workers has voiced its dissatisfaction with the decision, stating that the closures were made without the baristas' input. The group plans to engage in bargaining at each union-represented store set to close, to ensure workers can be placed at another store of their preference.
Future Plans
Despite the current closures, the company plans to increase its store count in North America during the next fiscal year. Additionally, over 1,000 locations will undergo a redesign in the next year to provide a more welcoming environment.
This restructuring is not the first of the year, as the company laid off 1,100 corporate employees globally and removed several hundred open positions earlier in the year. The CEO emphasized the need for the company to operate more efficiently and improve accountability.
The CEO, a renowned turnaround specialist, was brought in a year ago to reinvigorate the brand. His leadership at a struggling fast-food chain resulted in a substantial increase in revenue, profit, and stock price.
The company has been facing a decline in same-store sales for six consecutive quarters due to weak U.S. traffic. The CEO aims to reverse this trend by increasing staff, enhancing the store ambiance, and implementing software that prioritizes orders, ensuring customers can get their drink within four minutes.