Traveling by flight presents a number of challenges, including lengthy waits for upscale lounges, sluggish security lines, the possibility of delays or cancellations, and the airport Starbucks.
Long waits for their Starbucks cappuccinos, cold brews, and egg bits are something that many passengers, flight crews, and even airport staff have experienced at some point.
Earlier this month, Coresa Barrino, a Starbucks customer at New York’s LaGuardia Airport Terminal B, stated that she had been waiting for her coffee for ten minutes and counting. She remarked, “They need to have a better system.” The nursing assistant, who was flying back to Charlotte, North Carolina, stated that she has to wait around two minutes to get her coffee at a Charlotte Starbucks.
The coffee chain’s new CEO, Brian Niccol, who joined Starbucks from Chipotle in September, has taken notice of the lengthy wait times and promised to bring the company’s sales back to normal.
Niccol informed investors that he believes the company’s strategy of “getting back to Starbucks” is appealing to licensed locations, such those found inside Target stores or airports.
On the company’s quarterly conference call on October 30, Niccol stated, “I think there’s such a huge opportunity for us to simplify some of the execution there so that we get people the great throughput that they want so they can get on their way.”
This week, amid arguably of the busiest travel days of the year, Starbucks’ airport location employees and corporate technology will be put to the test. Over 3 million individuals will be inspected at U.S. airports on Sunday, December 1, which might be the biggest day of the year, according to the Transportation Security Administration, which predicted a record number of travelers throughout Thanksgiving week.
Airlines and the federal government are working to address the congestion in airport security lines, lounges, and gates caused by the increase in flight travel, particularly during busy periods like Thanksgiving. For the airline sector, airport Starbucks bottlenecks are merely another indication of high demand and congested airports.
According to the U.S. Department of Transportation, a record 1.05 billion individuals boarded aircraft traveling to, from, or between U.S. airports in 2023, just surpassing the number in 2019 prior to the pandemic.
Challenges and new methods
Starbucks has been having trouble lately. In the quarter that ended on September 30, its sales declined for the third consecutive quarter as customers resisted price increases and disregarded marketing campaigns like energy drinks and discounts meant to attract new customers. In the United States, same-store sales fell 6% from the previous year.
Niccol announced plans in late October to enhance customer satisfaction and boost revenue. These proposals included reducing the menu, removing fees for dairy substitutes, and reintroducing condiment bars.
One of his main objectives is to reduce wait times. He hopes to get service times down to four minutes, which will shorten wait times and enhance the clientele’s experience.
Additionally, even though Starbucks began offering mobile order and pay at its airport facilities in 2022, the shift occasionally makes things more confusing and chaotic at the cafe counter rather than better. Additionally, some tourists may not be frequent Starbucks users who have the app installed.
At a time when the company most needs it, improving the coffee chain’s airport locations might increase sales and improve the brand’s reputation. Even Starbucks’ lost consumers may stop by an airport outlet while on the road.
Following the epidemic, a large number of passengers returned, which presents an opportunity for Starbucks and other restaurant chains to increase sales.
According to the most recent Federal Aviation Administration data, concessions make up around 4% of airport income in the United States each year, but they are a crucial component for many travelers who have little time—and sometimes little energy—to refuel before a flight.
Jennifer Simkins, assistant vice president of concessions at Dallas Fort Worth International Airport, stated that the airport’s food and beverage outlets’ income is increasing at a quicker rate than the number of passengers. According to Airports Council International, the airport rose from 10th place in 2019 to become the third busiest in the world.
Additionally, airlines are using bigger planes in certain instances and putting more seats on their aircraft.
Ursula Cassinerio, an associate vice president at Moody’s Ratings who focuses on airports, stated that when there are more passengers on a plane, restaurants may get packed during peak hours, with more patrons waiting to be served and less space.
She pointed out that a lot of airports have been building new terminals or doing significant renovations. According to her, having greater square footage for restaurants and shops implies “more opportunities for revenue.”
According to statistics from market research firm Technomic, travelers may choose from an average of 80 food and beverage brands at the 25 largest airports in the United States.
Licensing model
The fact that licensees, not Starbucks, run its airport outlets presents a problem for the company.
In 1991, Starbucks built its first airport outlet at Seattle-Tacoma International Airport, which serves Starbucks’ hometown, in collaboration with licensee HMSHost.
For over three decades, HMSHost ran the chain’s airport outlets under an exclusive contract with Starbucks and progressively increased its airport footprint to around 400 outposts.
However, HMSHost terminated the agreement in 2020, allowing the operator to provide airports with more coffee alternatives.
The vast majority of Starbucks’ airport cafes are still run by HMSHost, although other operators have recently tried their hand at it, including Paradies Lagardere and OTG. Requests for comment for this article were not answered by OTG, Paradies Lagardere, or HMSHost.
According to Mark Kalinowski, restaurant analyst and CEO of Kalinowski Equity Research, “airport locations are tricky because they can make good money, but operationally, at times, they can be very challenging.”
Starbucks avoids the difficulties of running an airport business, including personnel issues, expensive rent, and security checks, by licensing its locations. Additionally, the spike in demand at an airport can be even more unpredictable, even if the coffee chain is accustomed to dealing with a surge of undercaffeinated consumers in the mornings.
Kevin Schimpf, director of industry analysis at Technomic, stated, “A plane lands, and suddenly there are a hundred people when there were zero people before.”
Starbucks loses revenue from those locations with licenses as a result.
As of September 24, the corporation operated more than 16,300 stores across the United States. However, it only owns and operates around 60% of those cafes; the others are handled by licensees. According to Starbucks, the figure includes its cafés at 47 of the 50 busiest airports in the United States. The business did not tell CNBC how many airport stores it now operates.
Starbucks’ licensed outlets generated $4.51 billion, or 12%, of its total sales in fiscal 2024. According to business papers, Starbucks only receives licensing fees from those locations, a portion of monthly sales through royalties, and compensation for providing licensees with its coffee, tea, and food.
Sara Senatore, an analyst at Bank of America, believes that Starbucks makes around 7 cents for every dollar spent in a licensed location before interest, taxes, depreciation, and amortization. In a September research report, Senatore stated that company-owned retailers earn around 23 cents for every dollar spent.
Starbucks stated in the risk factors section of its most recent annual filing that its brand might suffer if its business partners and outside suppliers take a break.
According to Kalinowski, “the great majority of customers don’t know whether that is a company-owned Starbucks or a licensed Starbucks.” “All they want is their Starbucks.” They want it made correctly. They want it fast. Additionally, they are under a lot of stress as they attempt to reach their gate.
To speed up lines, airports have begun implementing more technology in their dining establishments. For instance, labor issues have resulted in an increase of kiosks and tablets within airport eateries.
“Any front-of-house savings that you can make by having customers order on kiosks or tablets or whatever, that really, really helps,” Schimpf said, adding that staffing many of these eateries is becoming more and more difficult.
According to Laurie Noyes, Tampa International Airport’s vice president of concessions and commercial parking, “sometimes the airports are a little bit behind the street.” However, she noted that the airport has advanced in providing more digital alternatives, and that passengers can now use Uber Eats to order meals in advance and pick it up at airport eateries.
Travelers may place advance meal orders using Dallas Fort Worth’s DFWOrderNow website and platform, which is accessible at digital kiosks. According to Simkins, Starbucks patrons would be sent to their own platform via the airport’s network. The Starbucks website states that there are over 170,000 drink orders available. Simkins stated, “We simply saw the benefit of maintaining the familiarity for their customers.”
According to Simkins, in an effort to expedite service, the airport is creating robotic delivery technology. In order to help travelers “no longer have to plan their route for multiple stops” in an airport, it is also testing the provision of food and shopping bundles from airport eateries and retailers, she added.
Simkins stated that Ampersand, a local coffee firm located in Fort Worth, Texas, intends to install a robotic barista at DFW’s Terminal C. In order to accommodate flight crews coming during off-peak hours, it will be accessible around-the-clock.
According to Simkins, popular chains continue to attract customers. “People will wait in line for certain brands,” she stated. Starbucks is one of such businesses, according to Barrino, who was at LaGuardia waiting for her coffee.
