New Starbucks Concept Has Walk Up Window

The newest concept out of Starbucks echoes the movie Back to The Future: a retro shop that offers coffee to go. Only. Order online if you want, walk up to one window, or drive up to another.It’s a 2024 construction Starbucks on a 10-year lease, 3.5 miles from Syracuse University in New York State. Prime location, easy access from an interstate, 10% rent increases every five years and throughout option periods, according to the broker, Avison-Young.This is far from the days when Starbucks and its founder Howard Schultz talked about the “third-place” vision. A location that wasn’t home or work, where people could drop in to sit and get something done or sit with others and talk.Starbucks began talking about modernizing the concept in 2022. Customers were ordering more cold drinks year-round and noting “requests for customizations have risen dramatically in recent years with two in three drinks now being customized by adding more espresso shots, flavors and customers increasingly choosing plant-based milks or cold foam.”But there are other business reasons as well. “Based on the pandemic and cell phones, their online orders jumped considerably,” Jonathan Hipp, head of the U.S. Net Lease Group at Avison Young, tells GlobeSt.com. “And there are all these other concepts, small little boutique coffee shops, that have to be gaining market share from Starbucks. Some of those concepts are rolling out really fast. There are three or four all over the net lease market. People are looking for convenience today and not everybody wants to sit and wait.”“Our financial results were very disappointing, and it is clear we need to fundamentally change our strategy to win back customers and return to growth,” Chairman and Chief Operating Officer Brian Niccol said during the company’s October 30, 2024, earnings call. One of the necessary changes is “to make it easier for our customers to get a cup of coffee,” with a goal of delivering walk-in or drive-in customer orders within four minutes and on-time mobile orders. Another is to “cut down our overly complex menu” to “still offer customers great choice but we’ll be focused on fewer, better offerings consistently crafted.”Dutch Bros. is one of the fast-growing coffee chains that is putting pressure on Starbucks. According to data from S&P Global Market Intelligence, the company was founded in 1992 and went public in 2019. At that point, it had 370 total locations between company-owned and franchised. The number hit 831 by the end of 2023. The last 12 months back from September 2024 show revenue of almost $1.2 billion and net income of $30.2 million, up from $1.7 million in 2023.During the Dutch Bros. earning call of November 6, 2024, TD Cowen analyst Andrew Charles said, “We get the question from investors with some concern that your traffic is benefiting near term for your largest coffee shop competitors headwinds and that they’re actively enacting a turnaround.” A clear reference to Starbucks.Dutch Bros. Chief Executive Christine Barone said, “So when I look at what’s happening in the industry right now, it is increasingly going to iced, the importance of customization and personalization and being able to do that very quickly is something that’s also increasing.”Ironically, as Avison-Young’s Hipp noticed, is that pictures of a Dutch Bros. location looked remarkably similar to the original 1994 Starbucks drive-through and walk-up location.This new Starbucks store is 1,625 square feet in size, according to Hipp, with typical Starbucks stores between 1,500 and 2,500 square feet. With no seating, that’s more room for additional equipment and baristas to make the coffee and hand it out.“Dutch Brothers is very hot on the net lease market,” Hipp says. “It seems like Dutch Brothers and some of these others are making it work with no sit-down concepts. It’s like fast casual or QSR. Once you get a taste of it and find out how convenient it is, it doesn’t mean you won’t go sit and eat with people.” But the perceived speed or ability to be in a car working while waiting for a drink can be attractive, depending on the demographics of an area.