Can Starbucks fix long lines at its airport cafes?
Customers wait in a long line outside a Starbucks cafe in a terminal at Miami International Airport in Miami, December 12, 2022.
Jeff Greenberg | Universal Images Group | Getty Images
Air travelers face a lot of headaches on their trips: slow security lines, long waits in exclusive lounges, the threat of delays or cancellations – and the airport Starbucks.
Many travelers, flight crews, and even airport workers have faced long waits for their Starbucks cappuccinos, cold brews, and egg bites.
“They need a better system,” said Coresa Barrino, a Starbucks patron at New York's LaGuardia Airport Terminal B earlier this month, saying she waited 10 minutes and counted for her coffee. The nursing assistant, who took a flight back to Charlotte, North Carolina, said the wait time when she buys her coffee at a Starbucks in Charlotte is about two minutes.
The long waits have caught the attention of the coffee chain's new CEO, Brian Niccol, who joined Starbucks from Starbucks Chipotle in September, promising to win back customers and reverse the company's slump in sales.
Niccol told investors that he believes licensed locations, such as indoor spaces, will be beneficial Goal B. Stores or airports are interested in pursuing the company's “Back to Starbucks” strategy.
“When I think about the airports and things like that, there's a big opportunity for us to simplify some of the execution there so that we can give people the high throughput that they want so they can get out and about,” Niccol said in the company's quarterly earnings conference call Oct. 30.
Starbucks airport location employees — and the company's technology — will be put to the test this week on some of the busiest travel days of the year. The Transportation Security Administration predicted record numbers of travelers for Thanksgiving week and said Sunday, Dec. 1, could be the busiest day of the year as more than 3 million people are screened at U.S. airports.
The surge in air travel, particularly at peak times like Thanksgiving, has caused congestion in airport security lines, lounges and gates – problems that airlines and the federal government are trying to resolve. For the airline industry, airport Starbucks bottlenecks are just another sign of rising demand and crowded airports.
According to the U.S. Department of Transportation, a record 1.05 billion people boarded planes traveling either to, from or between U.S. airports in 2023, narrowly surpassing the total in 2019, before the pandemic.
Struggles and new approaches
Starbucks has had problems recently. Sales fell for a third straight quarter in the period ended September 30 as consumers resisted higher prices and ignored initiatives such as discounts and energy drinks aimed at winning back customers. In the U.S., same-store sales fell 6% year-over-year.
In late October, Niccol unveiled plans aimed at improving the customer experience and boosting the company's sales, from reintroducing condiment bars to eliminating surcharges for dairy alternatives to trimming the menu.
Reducing waiting time is an important goal: He wants to reduce service times to four minutes to reduce long lines and improve the customer experience.
And although Starbucks began rolling out mobile ordering and payment at its airport locations in 2022, the change can sometimes add to confusion and chaos at the cafe counter rather than solving it. Additionally, some travelers may not be regular Starbucks customers who have already downloaded the app.
Improving the coffee chain's airport outposts could boost both sales and the brand's reputation at a time when it needs it most. Even the customers Starbucks lost could visit an airport location while traveling.
As travelers return in droves after the pandemic, Starbucks and other restaurant chains have an opportunity to boost sales.
According to the most recent data available from the Federal Aviation Administration, concessions account for about 4% of U.S. airport revenue annually, but are an important feature for many passengers who have limited time — and often energy — to refuel before a flight.
At Dallas Fort Worth International Airport, food and beverage revenue is growing faster than passenger numbers, said Jennifer Simkins, the airport's assistant vice president of concessions. According to Airports Council International, the airport has grown from 10th place in 2019 to become the third busiest passenger airport in the world.
Airlines are also packing more seats into their planes and are sometimes flying larger jets.
More passengers per plane means restaurants can be crowded at peak times as more customers wait to be served and space is limited, said Ursula Cassinerio, assistant vice president at Moody's Ratings, which covers airports.
She pointed out that many airports are undergoing major renovations or even the construction of new terminals. That means “more revenue opportunities when you have more space available for retail and restaurants,” she said.
The 25 busiest airports in the U.S. offer an average of 80 food and beverage brands as options for travelers, according to data from market research firm Technomic.
License model
One challenge for Starbucks is that licensees — rather than Starbucks itself — operate its airport locations.
Starbucks opened its first airport location at Seattle-Tacoma International Airport in 1991 with licensee HMSHost, serving Starbucks' hometown.
For nearly three decades, HMSHost operated the chain's airport locations under an exclusive contract with Starbucks, gradually expanding its airport presence to approximately 400 outposts.
But in 2020, HMSHost ended the deal, giving the operator the flexibility to offer more coffee options to airports.
While HMSHost still operates the vast majority of Starbucks' airport cafes, other operators such as Paradies Lagardere and OTG have since made the move.
HMSHost, Paradies Lagardere and OTG did not respond to requests for comment for this story.
“Airport locations are difficult because they make good money, but operationally they can sometimes be very challenging,” said Mark Kalinowski, restaurant analyst and CEO of Kalinowski Equity Research.
Customers wait in line at a Starbucks cafe in a terminal at LaGuardia Airport in New York City, November 11, 2024.
Leslie Josephs/CNBC
Licensing its stores saves Starbucks from the hassles associated with operating within an airport, such as staffing issues, high rents and security checks. And while the coffee chain is used to dealing with a rush of caffeine-deprived customers in the morning, the surge in demand at an airport can be even more unpredictable.
“A plane lands and suddenly there are a hundred people where there were no people before,” said Kevin Schimpf, head of industrial research at Technomic.
The downside is that Starbucks makes less money from these licensed restaurants.
The company has more than 16,300 locations in the U.S. as of September 24. However, it only operates around 60% of these cafes itself; Licensees operate the rest. That number includes cafes in 47 of the 50 busiest airports in the U.S., according to Starbucks. The company did not disclose to CNBC its current number of branches at the airport.
In fiscal 2024, licensed locations accounted for 12% of Starbucks' revenue, or $4.51 billion. From these stores, Starbucks collects only royalties, a percentage of monthly sales through royalties, and payments for supplying coffee, tea and food to licensees, company filings show.
For every dollar spent at a licensed store, Starbucks earns about 7 cents in earnings before interest, taxes, depreciation and amortization, according to Bank of America analyst Sara Senatore's estimates. Company-owned stores earn about 23 cents per dollar spent, Senatore wrote in a research note in September.
If its business partners and third-party vendors slack off, Starbucks' brand could be harmed, the company noted in the “Risk Factors” section of its most recent annual statement.
“The vast majority of customers don’t know whether it’s a corporate-owned Starbucks or a licensed Starbucks,” Kalinowski said. “They just want their Starbucks. They want it done right. They want it quickly. And they are in a situation of increased stress because they are trying to get to their gate.”
Airports themselves have introduced more technology in their restaurants to help speed up queues.
For example, work-related challenges have led to more kiosks and tablets in airport restaurants.
“Many of these restaurants are becoming more and more difficult to staff, so the savings that you can get at the front desk when customers are ordering through kiosks, tablets or whatever is really, really helpful,” Schimpf said.
Laurie Noyes, vice president of concessions and commercial parking at Tampa International Airport, said, “Sometimes the airports are a little behind the road.” However, she said the airport has made progress in providing more digital options and travelers can now order food in advance order Above Eat and pick it up at airport restaurants.
Dallas Fort Worth offers DFWOrderNow, a website and platform available at digital kiosks to allow travelers to order food in advance. Simkins said the airport platform will redirect Starbucks customers to Starbucks' own platform. According to the chain's website, Starbucks offers more than 170,000 possible drink orders. “We just found the value in maintaining familiarity for their customers,” Simkins said.
Simkins said the airport is developing robotic delivery technology to speed up service. It is also experimenting with offering food and retail packages from airport restaurants and stores so that passengers “no longer have to plan their route for multiple stops” at an airport, she said.
A local coffee company, Fort Worth, Texas-based Ampersand, plans to open a robot barista in DFW's Terminal C, Simkins said. It will be available 24/7 to accommodate flight crews arriving after hours.
Simkins said popular chains still attract a lot of people.
“There are some brands that people are lining up for,” she said.
For Barrino, who was waiting for her coffee at LaGuardia, Starbucks is one of those companies.
“I just really love the brand,” she said.
