What QSRs should learn from Starbucks’ attempt to reinvent itself

 Daniel Blaser (00:00):

Station. My name is Daniel and I am on Workstream's marketing team. And one of the things I do is hopefully share out some really interesting content and stories and webinars like today. And we're going to talk all about Starbucks. I feel like it would be kind of hard not to see some of the headlines pop up about Starbucks over the last couple of months. They're kind of in the midst of trying to reinvent themselves and fix some problems. And I invited Jeff here to come and talk a little bit more about that because it's not just kind the business strategy around what they're doing. There's a lot that can be learned for any operators, any franchisees, any managers. There's just a lot to learn. And that was the whole idea is let's bring in an expert like Jeff and talk about what are some of the things that all of us can take away from what Starbucks is attempting to do right now. So welcome Jeff.

Jeff Weinstein (00:59):

Hey, thank you, Daniel. I always enjoy our conversations. I'm especially interested in talking about this one. I've been in the food and beverage business now for well over 30 years, including some time running a company called Vital, which was a Jamba franchisee, but I also did spend a few years at Starbucks in field operations. And so this is a particular interest to me so close to the coffee business, and I continue to follow it really closely and I'm fascinated by what's happening there right now.

Daniel Blaser (01:33):

Yeah, yeah, absolutely. I'll say that our conversation, I don't think it'll take a full hour, and Jeff has agreed to tackle any of your questions. So specifically in terms of related to hourly workers, customer service, like some of those things, I don't think we're going to get too much into the, there's a lot of other topics related to this, but we're kind of trying to keep it focused on what we can all learn and hopefully incorporate into everyone's day-to-day operations and whatnot. So anyway, abs questions come to mind. Feel free to drop those into the q and a box and we'll take a look. If you have any other comments or anything along the way, feel free to drop those in the chat. So we definitely want this to be, it's not a rigid presentation, it's more of a conversation and learning what we can from Jeff and the experience that he mentioned.

(02:27):

So like I said, we we're going to try to make this actionable. We're going to talk a little bit and kind of set the stage around what is this back to Starbucks campaign strategy all about and what kind of led to that. And as once we kind of set the stage, get enough context that everyone's on the same page, that's when we're going to jump in to, we have three main takeaways I think that should be applicable to everyone here, so we're excited to get to those and hopefully make those as helpful as we can. Jeff, to kick things off, can you share what were the main challenges that Starbucks was facing that led to this turnaround strategy?

Jeff Weinstein (03:14):

Yeah. Well, the most obvious outward signal that they were struggling is in their sales results. Their global sales were down 7% the last quarter of last year, and same sort, sales are a really important indicator, and especially traffic counts, which were also down even more than that. So something was wrong. They needed to figure out how to recover sales. But in addition to that, there were just a lot of operational inefficiencies that were happening in the business that I think many customers at Starbucks were seeing long wait times confusion. And I think where that also showed up a lot in the customer experience is that as you watch their employees, instead of being focused on us as customers, they were focused on their tasks, and that's never a good sign. I think something else that people understand is that this space has just gotten a lot more competitive.

(04:08):

It's gotten more competitive, other coffee companies, but not just coffee companies. You've got companies like Dutch Bros that, yeah, they have coffee, but they're also focused on energy drinks. You've got companies like Swig that are selling new variations on soda. You've got all this boba, and then you've got other coffee companies like let's say Dunkin, that are delivering a good product at a lower price. Starbucks is a premium priced product. So these are all really interesting challenges for them that I candidly though, I think that, and this isn't going to be a surprise that you think that this is what I'm focused on. I think a lot of their issues are being driven by the dissatisfaction of their employees. I mean, that's in the numbers too. Starbucks saw a really significant increase in the number of baristas who were quitting in the first 90 days. It was something like 25% beginning in around 2022, which was much, much higher than they were experiencing before the pandemic.

Daniel Blaser (05:17):

Interesting. Yeah. My understanding is, and you can maybe jump in here, prior to that 2022 pre pandemic world, Starbucks had much lower attrition on average than a lot of QSRs. Is that a fair thing to say? I think I remember reading that.

Jeff Weinstein (05:37):

It is. It was a lot lower. And I think that candidly, I think one of the things that they got away from is something that they historically have done really, really well. Starbucks has always operated on what I think of as a servant leadership model, where the purpose of the multi-unit operators and the functional leaders in the organization is really to serve the folks who are on the front lines in the restaurants, in the stores with the idea that if we take care of them, if we set them up for success, if we provide them with the tools that they need to do their jobs, then they in turn are going to deliver a great experience for their customers. And I think that it happens in organizations in this case, I think they got away from that for a little bit, and fortunately, part of what they're talking about doing now is getting back to that kind of mindset.

Daniel Blaser (06:37):

Yeah. Well, cool. So one of the biggest changes is that Starbucks brought in a new CEO, Brian Nichol, who was formerly the CEO of Chipotle and had a lot of success there. And so this is kind of his big change or his big move as the new CEO is called back to Starbucks, and hopefully the goal here was to resolve most of the challenges and the problems that you would just highlighted. Do you want to summarize what are the main points of this back to Starbucks plan?

Jeff Weinstein (07:15):

Yeah, this caught a lot of people off guard initially when it was announced because the prior CEO had really not been with the company for very long. And I think this was a really interesting and smart move. Brian Nichol really understands the restaurant business from his time most recently at Chipotle, but before that at Taco Bell, and in some ways, the restaurant, restaurant business is not rocket science. If you focus on the basics, that's where you're going to get most of your results, and that's what he's doing. He's focusing on the basics. He's kind of refocusing the company on quality coffee and premium beverages. He's streamlining the operations. There's a number of different things that he's doing to streamline the operations, but one of them is to really go through some very thoughtful menu reductions. They're talking about as much as 30% of that menu disappearing by the end of the year in order to make things simpler and easier for the baristas to operate is also, you're going to hear about this doubling of marketing spend.

(08:31):

And we all, I think, saw one of the advertisements at the Super Bowl, which is something we've never seen before from Starbucks. But I think one of the more interesting parts of that is that, and you probably will recognize this from Chipotle, the marketing is going to be less discount focused than it is focused on the and what the brand on the value of the brand and less on trying to entice people to come in with discounted product. And then lastly, there's a real focus, and here I think we'll probably spend a lot of our time today sort of refocusing on the tools they're providing to their baristas and the investment that they're making in the professional development of their employees.

Daniel Blaser (09:19):

Yeah, yeah, very interesting. Indeed. Jeff and I were talking about that Super Bowl ad a second ago and was, I mean, from someone in marketing, I thought it was just a great ad in general, but definitely it was a little bit of, I think a surprise from just not seeing Starbucks be very heavy into marketing and really trying to make sure people understand what they're trying to do with this back to Starbucks strategy and paying 8 million plus dollars for that opportunity, the cost of a Super Bowl ad. So it was obviously something very important to the strategy. Okay. We're going kind of go into learnings in just a second, but I think there's one other major change that they're making and that is kind of an attempt to better balance technology and human connection, customer service, the in-store experience. From my perspective, Starbucks was leading the way probably with a lot of the mobile ordering, and their app was ahead of a lot of competitors. I don't know, was that 10, 15 years ago even when you started to see that grow in popularity, but now they're kind of trying to get maybe a better balance. Maybe they got a little bit too off in the technology side. Can you talk a little bit more about that, Jeff?

Jeff Weinstein (10:37):

Yeah, I think I want to go back to talking about the Super Bowl ad again, to answer that question. Yeah, let's do it. You don't really see a focus on technology in that ad. And the other interesting thing is that even though that ad was directed at 150 million plus customers of Starbucks or potential customers, the real focus of the ad was on the barista. I read that ad as an $8 million love letter to their employees. Interesting. And what they were doing was they were bringing back, they used some very kind of fun, inspiring, energetic music. They used a CDC to kick it off, and they showed the process of opening up the cafe in the morning and they made it fun. They made it kind of inspiring, and it is what the coffee house experience used to be for employees. I can tell you from personal experience opening up a Pete's coffee in the morning, you're up before everybody else.

(11:47):

There's something kind of fun and even empowering about it. And they brought back that energy that have not seen in a very long time. And it really runs counter, I think, to the experience that people have had in recent years in Starbucks. So it was almost like a resetting, and I'd say a recentering in a lot of ways of the business around the barista and making that a role that someone can take pride in. If you watched some of the details, there was an emphasis on putting on that green apron in the morning and they want to communicate a sense of pride in putting on that apron. So I thought that that was really cool. Now it does then in turn kind of get us back to this more focus on the human touch and the business. And there's been a lot of talk about the writing on the cups of names.

(12:43):

Maybe a little bit too much emphasis on the names itself, because I think what they're trying to do is really, it's more of a mindset shift. It's not about the names on the cups, it's about a return to connecting with your customers. It's also about putting a little bit more touch in the hands of the customers themselves. I don't know about you, but I found it very, very frustrating not to be able to put condiments on my own beverages at Starbucks. And so they're bringing that back. And then the other thing that I used to remember in the, let's say five, six years ago about Starbucks was that it was a really comfortable place to hang out and sit and either relax and enjoy a cup or work in a comfortable way. And they have really gotten away from that in recent years, and there's really a commitment to invest back in their lobbies and make it a more enjoyable place to be.

Daniel Blaser (13:46):

Yeah. Yeah, I think with a lot of what you're saying, it kind of seems like ultimately the whole goal is sort of a return to your roots, go back to the good old days in a way and kind of rediscover the brand by returning to what made it special in the first place. So I think this is all good context, and I think we've pretty much covered the broad strokes of what back to Starbucks is. So now it's kind of time to go into the, well, I don't think we have anyone here from Starbucks, maybe we do, but the attendees here probably represent a variety of different QSR brands. Maybe there's some coffee focus, drink focus, but maybe there's not. So what can more generally QSR operators and managers take away from this? Because I think it's important to emphasize Brian Nichol impressive track record. There's a lot of data that's going into these decisions as well. It's not just kind of a whim or a hunch that's leading to all these things. So it seems like a great learning opportunity. Jeff, what's maybe the first big takeaway that stuck out to you as you were kind of learning more about their efforts?

Jeff Weinstein (15:06):

A lot of it, I think the first most important thing is the way that they're streamlining their operations, which has repercussions throughout their entire business. There are some technology changes that they're making that I want to touch on. But even before you get to the technology part, there are a couple of really key things that are actually quite simple that they can make a really significant difference. We talked about this 30% reduction in menu items. When you remove menu items, you can remove ingredients, you can eliminate certain smallwares. In some cases you can eliminate certain pieces of equipment. And what that enables you to do is it enables you to move things that you might have to do while you're producing a food item or a beverage and you can move that stuff to prep.

(16:06):

So they have a system, and again, I'm not at Starbucks today so I don't want to go into too much detail here, but they have a siren system where through the combination of removing items and then introducing simple pieces of equipment that move production from making the product to preparing for the product, it makes the whole process much more efficient. When you make it more efficient, you make it much easier for your employees to make things and make them faster. You reduce the number of not only steps they take in producing a beverage, but literally the number of steps they have to take around their workspace. And it enables them to focus less on the tasks and focus more on the customer and then deliver that beverage to the customer faster. And none of that is even technology related, but they are making a really important technology change, which is in their mobile ordering.

(17:14):

It's a little bit puzzling, and there are probably good reasons why they haven't done it previously, but mobile ordering systems have the ability to sequence your orders, and they have the ability to throttle your orders so that you can slot orders into a particular timeframe that you know can deliver on. And I think the experience that a lot of us have had previously at Starbucks has been that we've waited a very long time. We're not always sure when our order's going to come up. We feel like we're competing with, if we come into the store, we feel like we're competing with the people who place mobile orders and we're competing with the people who are in the drive-through. So I think a really important thing that they're investing in now using technology is sequencing of those orders to reduce the wait time and also reduce the confusion and it's confusion not only for us as customers, but also confusion for the employees.

(18:14):

And maybe one last thought about that, Daniel, is that I think that this has potentially a very direct effect on the experience for those employees. Nobody comes to work every day wanting friction, wanting to focus on people's frustration. So when those employees can see that their customers are more relaxed, they're happier, they're going to look forward more to going to work every day because they know it's going to be a better work environment for everybody. So I think this is a big win potentially for both the customers and for the partners they call their employees partners.

Daniel Blaser (19:04):

That makes a lot of sense what you're saying with employee satisfaction, obviously that has ramifications when it comes to retention, which in turn there can be that spiral, right? And decreased retention equals lower customer service customer satisfaction and kind of get into that death spiral sometimes. So it makes sense that simplifying the operations could literally impact every customer down the line. The other thought that came to my mind as you were talking about that is it has to just make it so much easier to train new employees as well and get them up to speed and productive and feeling good about their job a lot faster when you have 30% less menu items to worry about and all of the fewer ingredients and like you were saying, all those other things, it's just got to make it a lot easier to get them up to speed.

Jeff Weinstein (19:58):

You're really getting into that second takeaway I think for the day today, Daniel, which is finding this balance between tech and the human touch or even using tech to enable the human touch. And we see this in the customer experience and mobile ordering at Starbucks, but this is something that can affect every part of your business. I think there's so much time in something as simple as the hiring process where you're making calls back and forth and trying to schedule interviews. And if you can simplify those kinds of things that a manager of a unit needs to do, if you can simplify the hiring process with technology, with text communication, with AI assistance, and you can reduce the amount of time it takes to do that before you actually get down to a real interview, that is time freed up that I can now invest in training my people.

(21:01):

And if I can use technology to more effectively train my people, training in this environment is a lot of tellhow do, right? If I can use technology to do some of the showing before I actually have somebody do the work, then that accelerates the effectiveness of the training and then makes all of us, gives all us more time to focus on the customer experience. So tech here, I think sometimes we need to make sure not to think about tech as something that replaces people, but something that actually improves the interactions with people and improves the experience again for customers and for employees.

Daniel Blaser (21:42):

Yeah. Yeah, I definitely think that lands with me. One question I wanted to ask, and we can talk more about tech. I'm sure those watching this when we're talking about simplifying operations and there's a lot of ways to do it. We talked about reducing the menu offerings, probably no one here can send an email and reduce their menu offerings and by 30%, that's just not an option. So what are some recommendations that you would make where maybe the menu can't change, but what else can you do to actually kind of simplify operations and get some of those benefits that you've already touched on a second

Jeff Weinstein (22:23):

Ago? Yeah, I have a really, really fresh story. I was at a round table yesterday of in-person of HR professionals and one of the things that really struck me was how much time we spent at the round table talking about handling of paperwork. A lot of people still are using paperwork for hiring, for onboarding, for maintaining employee records, and that in turn creates all this energy and concern about compliance of handling all that paperwork. So I think a really obvious question for people to ask themselves is what technology can I use to help me digitize things that are manual today? And not only to help me manage compliance, but also to help me reduce manual work. So if I, for instance, can onboard people into the same system that I'm using for scheduling and for payroll, I'm streamlining my operations by removing manual activities of moving from one tool to the other or having to handle anything on paper and then sticking it into an actual filing cabinet. I think the end game here to simplify operations is how can I get my business to a place where I actually don't need a filing cabinet any longer?

Daniel Blaser (24:06):

Yeah, I love that example. I'm going to pull in a marketing term. I know everyone's like boo marketing, but there's a term that we throw around a lot in marketing called a unique value proposition, which is basically a company, a business. What is the thing that sets it apart from competitors? What is the thing to really lean into because it's where you deliver the most value. And so I think kind of what you're saying, Jeff, is for a quick service restaurant, whether it's Starbucks or any of the other brands that are represented today on this webinar, your unique value proposition is not paperwork or HR that should not be anywhere close to the thing that matters for a quick service restaurant. And so it kind of seems like what you're saying is those are the best places to start is the places that don't, don't matter.

(24:59):

They're not the unique value prop and that's where you should look to optimize, use technology, automation, all that good stuff. It feels like maybe Starbucks, that's one thing that they're trying to signal with the back to Starbucks campaign is we realized that we messed up what our unique value prop was. We thought it was maybe a good product delivered fast, but we are actually realizing now that a big part of it was that experience, the time with the barista, the in store experience. And so they're kind of returning to their unique value proposition in a way.

Jeff Weinstein (25:39):

I love it. I think I should be interviewing you here, so let's build on that a little bit. I think you're right. I mean, what they're doing is they're improving their employee value proposition. They're also improving their customer value proposition. They've gotten buy in recent years through price increases. And in this very competitive environment, you can see that they're pulling back from some of the complexity so they can make sure that what they are delivering is a really high quality product and a great experience so that their guests when they walk out feel like they've gotten really good value for the price that they paid. And you hear that also in, not explicitly, but you hear it in some of what Brian Nichol is saying about the company's growth. They are slowing down the growth of the company here for a little bit in order to get their four walls. And I think part of that is getting both their employee value proposition and their customer value proposition. And once they do that, then they can start focusing on accelerated growth again.

Daniel Blaser (26:52):

Yeah, I just kind of wanted to zoom into that concept you just talked about of delivering value, because like you said, I think a lot of consumers are very price wary at this point, and it's kind of like, oh man, the prices just keep going up. I went to McDonald's the other day and the prices were not actually that bad. They've kind of gone the discount route coupons stack this and that. And I was like, oh, this is actually not as bad as it felt like it has been. Maybe I'm just acclimated to it, I'm not sure. But the idea of like, well, we're not going to just pull out coupon after coupon after coupon, but we're going to deliver more value in the overall experience for what they are paying. That's like it feels like the other side of the coin versus what some of the other brands have attempted to do. So I think that's really interesting because that's something that's a little bit more in control of everyone here, right?

Jeff Weinstein (27:50):

That's right, that's right. And then they did something. Let's go back to the fact that they're getting away from discounting. What did they do with that Super Bowl had they gave free coffee away on Monday? And I love that strategy. It's expensive, but what I love about it, and I think it's very important when you're selling a premium product is that no, no, don't discount it. Don't reduce the perceived value of it, but be proud enough to be able to give it away and say to people, Hey, remember what you loved about us in the first place? We're so proud of our product that we want you just to enjoy it today. And I think that again, I mean we'll see what the results of that are, but I think that that's a really smart strategy as opposed to discounting for a brand that is a premium brand.

Daniel Blaser (28:45):

Yeah, I agree. One other question I wanted to ask you about the technology side. We talked about, okay, the identifying what your unique value prop where you deliver value and then looking to automate and bring technology into the other things that are not going to interfere with where you're delivering value. Now, I think for those, watching this for the day-to-day hourly worker working in a quick service restaurant, it's like they're probably having to reconcile these mobile orders coming in, delivery orders, coming in with guests walking in the door. Do you have any thoughts or recommendations of just day-to-day operations you can't ignore the mobile orders or the delivery orders? What can you do to maybe strike a better balance?

Jeff Weinstein (29:37):

I think that what you can do in order to put more of your time and attention on the front of your house, which is the customer experience, your lobbies, your POS stations, is to simplify much of as much as possible your back of house. And that's where you want to look at technology tools that help you manage your ordering and your inventory to control your food costs. You want to focus on technology, it helps you manage your labor, and that's everything from hiring and scheduling to payroll and compliance around all of that. Because a lot of the extra unnecessary costs in our business is penalties and extra costs associated with things like meal breaks and overtime. You want to make sure you're doing those things correctly. So look, in our environment, those are your two biggest costs. So I would say that using technology to simplify and to manage most accurately your cost of goods, your food costs and your labor costs are the two most obvious places to invest in technology to simplify as much as you can. And obviously there are some really great options out there to do that.

Daniel Blaser (30:59):

Cool, great. Recommendations. Alright. What is kind of the final takeaway that you wanted to call out from this back to Starbucks strategy?

Jeff Weinstein (31:12):

In some ways, this is my favorite part. So there's a refocusing on not only training effectively, but also on investing in the professional development and growth of their partners, of their employees. And I have a really interesting memory of my short time at Starbucks. It was at my first annual leadership meeting for the region and I was a district manager at the time. I think you can tell a lot about a company by what they reward. And what stood out to me is that I watched someone be rewarded. There were rewards for sales, there were rewards for profitability, but one of the biggest and most important awards was for the district manager who had developed the most people over the course of the year into leadership positions. And these would be shift supervisors who were promoted to assistant manager, assistant store managers, promoted to manager managers, promoted to district manager or district managers, even promoted into other functional functional roles.

(32:25):

I remember his name, his name was Mark Hel. And Mark Pelle that year had promoted, sort of developed 18 people into management roles in his district. And that to me was the signal that, oh, this is important and I want to be up on that stage being recognized for that next year. I think that Starbucks is getting back into that mindset of that being what's important, right? Because you invest in your employees, they will not only perform better, but you will retain them and they will be the next generation of talent in your organization. I used my experience at Starbucks as a guide for how I viewed team member training and development at my company, vital Intelligence. And what that enabled us to do is that 90% or more of the field leaders in our organization were folks who we developed internally. It's great for them. And guess what? It also has the benefit for us that we spend less time on bringing new people in and training them and more time developing the people who we already have and who are sort of growing and who ultimately become the top performers in the organization.

Daniel Blaser (33:48):

Yeah, I really love that example because like you said, that's usually not something that is getting recognized at that level. It's maybe just happening in the background as far as people getting promoted and moving up and really investing, turning a job into a career. Those are huge wins. And like you said, that does have a really big impact on the strength of a company and the customer service down the line. That is an interesting indicator for the health of a restaurant, I guess. So I really like that example. Cool. Well, we have a little bit of time for some questions. I have one question already for you, Jeff, but I'll just one final reminder, if you've been meaning to send off one other question for Jeff, now's the time to do it. I'll be watching those and I did get one question that came in about getting a recording of today's conversation, and we will send that out.

(34:49):

You should have that. It's Thursday, I'll say no later than Monday, might not get it in before the weekend, but we'll definitely get a recording out so that you can rewatch a part of this or share it with a colleague or whatnot. So keep an eye on your email inbox for that. And let's see, got one comment from Megan that just says, thanks so much for your experience, Jeff. So glad people are enjoying it. The one question that I did want to send your way is do you think that all these efforts are going to pay off based on your experience?

Jeff Weinstein (35:28):

Yeah, this is the heavy lift. Starbucks got away. I think what made them great, I think that the CEO who proceeded Brian Nichol, very, very strong leader, very deep and experienced with a lot of success in the CPG business, but there was a red flag I think when he came to Starbucks, and I'll sort of start here to answer your question. And the red flag was that they had him spend six months working in the stores as a way to sort of learn the business. And Brian Nichol comes in with a real advantage. He already understands restaurant operations. And I think that if your leader needs six months to really understand some of those basics, you're starting at a deficit. Well, look, he's coming in with very deep experience. He knows what makes a difference and it's not one thing, it's a lot of things, but they're basic things. It's operations, it's menu, it's menu innovation, it's the guest experience, it's getting your marketing right. And I think that when you're starting with the brand as strong as Starbucks is that if you refocus on those things, there's a very, very high likelihood of success.

(37:17):

What I would say, and this is more from an investor perspective than from an operations perspective, Starbucks is going to be fine, right? Starbucks is, tarbucks is again, strong brand, very good unit level margins, right? They're going to be fine. I think the question is five years from now, are we going to think about Starbucks like a growth company in the way we used to, where they're opening up 1200 stores plus a year and continuing to expand around the world, or are we going to think about them more as a blue chip company with moderate reliable growth? I think that's more the question, Daniel, is what kind of company is Starbucks going to be over the next five to 10 years? Not whether or not they're going to be successful, they're going to be just fine.

Daniel Blaser (38:07):

Yeah. Interesting. Well, I think that take sounds good to me and I think we'll all be kind of watching now. Every time one of us drives up to a Starbucks to get a coffee, maybe we'll think about it a little bit more of what the future will look like, but cool. Well, Jeff, thank you so much Once again, I personally have learned a lot and really enjoyed this conversation. It sounds like all those that are on here have as well. Thanks so much for sharing your knowledge and your expertise with us today.

Jeff Weinstein (38:37):

You got it, Daniel. Let's do it again.