Customers wait in a long line at a Starbucks cafe in a terminal at Miami International Airport, in Miami, December 12, 2022.
Jeff Greenberg | Universal Image Group | Getty Images
Air travelers face many problems during their journey: slow security lines, long wait times for luxurious lounges, the threat of delays or cancellations – and the airport Starbucks.
Many travelers, airline crews, and even airport workers have at some point had to deal with long wait times for their Starbucks cappuccinos, cold brews, and egg snacks.
“They need a better system,” said Coresa Barrino, a Starbucks patron at New York's LaGuardia Airport Terminal B earlier this month, who said she waited 10 minutes and counted for her coffee. The nursing assistant, who took a flight back to Charlotte, North Carolina, said the wait when she buys her coffee at a Starbucks in Charlotte is about two minutes.
The long wait has caught the attention of the coffee chain's new CEO, Brian Niccol, who joined Starbucks Chipotle in September, promising to win back customers and reverse the company's revenue decline.
Niccol told investors he thinks locations will be licensed like the one inside Goal stores or airports, are interested in following the company's strategy of 'returning to Starbucks'.
“When I think about the airports and things like that, there's a huge opportunity for us to simplify some of the execution there so that we get people the high throughput that they want so they can get on their way,” Niccol said in the company's quarterly figures. conference call October 30.
Starbucks' airport location staff – and the company's technology – will be put to the test this week during some of the busiest travel days of the year. The Transportation Security Administration forecast record numbers of travelers during the Thanksgiving week and said Sunday, Dec. 1, could be the busiest day of the year, with more than 3 million people screened at U.S. airports.
The increase in air travel, especially during peak hours such as Thanksgiving, has led to congestion at airport security lines, lounges and gates – problems that airlines and the federal government are trying to solve. For the airline industry, Starbucks airport bottlenecks are just a sign of rising demand and overcrowded airports.
According to the U.S. Department of Transportation, a record 1.05 billion people boarded planes going to, from or between U.S. airports in 2023, narrowly surpassing the total from 2019, before the pandemic.
Struggle and new approaches
Starbucks has been having a tough time lately. Sales fell for the third quarter in a row in the period ended September 30, as consumers resisted higher prices and ignored initiatives such as discounts and energy drinks aimed at bringing back customers. Same-store sales in the US fell 6% from a year earlier.
In late October, Niccol unveiled plans to improve the customer experience and revive the company's sales, from bringing back condiment bars to eliminating surcharges for dairy alternatives and downsizing its menu.
Reducing wait times is a key goal: He wants to reduce service times to four minutes, which would reduce long lines and improve the customer experience.
And while Starbucks began rolling out mobile ordering and payment at its airport locations in 2022, the change can sometimes add to the confusion and chaos at the cafe counter instead of solving it. Additionally, some travelers may not be regular Starbucks customers who have already downloaded the app.
Improving the coffee chain's airport stations could boost both sales and the brand's reputation at a time when the coffee chain needs them most. Even the customers Starbucks has lost may be visiting an airport location while traveling.
As travelers return in droves after the pandemic, this gives Starbucks and other restaurant chains an opportunity to boost sales.
Concessions contribute about 4% of U.S. airport revenue annually, according to the most recent data from the Federal Aviation Administration, but they are an important feature for many passengers, who have little 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 become the third busiest in the world in terms of passengers, up from tenth in 2019.
Airlines are also packing more seats on their planes and, in some cases, flying larger planes.
More passengers per plane means restaurants can become crowded during peak hours as more customers wait to be served and space is limited, said Ursula Cassinerio, assistant vice president at Moody's Ratings, responsible for airports.
She noted that many airports have undergone major renovations, or even built new terminals. That means “more revenue opportunities when you have more square footage for retail and dining,” she said.
According to data from market research firm Technomic, the 25 busiest airports in the U.S. have an average of 80 food and beverage brands as options for travelers.
Licensing model
A challenge for Starbucks is that licensees – not Starbucks itself – operate its airport locations.
Starbucks opened its first airport location in 1991 with licensee HMSHost at Seattle-Tacoma International Airport, which serves Starbucks' hometown.
For nearly three decades, HMSHost operated the chain's airport locations through an exclusive deal with Starbucks, gradually growing its airport footprint 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, more operators, such as Paradies Lagardere and OTG, have since tried their hand at it.
HMSHost, Paradies Lagardere and OTG did not respond to requests for comment on this story.
“Airport locations are tough because they can make good money, but operationally they can be very challenging at times,” 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
By licensing its stores, Starbucks avoids the hassles associated with operating in an airport, such as staffing issues, high rents and security checks. And while the coffee chain is used to dealing with a wave of under-caffeinated customers in the morning, the increase in demand at an airport can be even more erratic.
“A plane lands and suddenly there are a hundred people, where before there were zero people,” says Kevin Schimpf, director of industrial research at Technomic.
The downside is that Starbucks makes less money from those licensed restaurants.
The company has more than 16,300 locations in the US as of September 24. But only 60% of those cafes operate the business themselves; licensees operate the rest. That number includes cafes at 47 of the 50 busiest airports in the U.S., according to Starbucks. The company did not disclose the current number of airport stores to CNBC.
In fiscal 2024, licensed locations accounted for 12% of Starbucks' revenue, or $4.51 billion. From those stores, Starbucks only collects licensing fees, a percentage of monthly sales through royalties and payments for supplying coffee, tea and food to licensees, company documents show.
For every dollar spent at a licensed store, Starbucks generates about 7 cents in earnings before interest, taxes, depreciation and amortization, according to estimates from Bank of America analyst Sara Senatore. Company-owned stores earn about 23 cents per dollar spent, Senatore wrote in a research note in September.
If business partners and third-party suppliers go easy, the Starbucks brand could be damaged, the company said in the risk factors section of its latest annual filing.
“The vast majority of customers don't know if it's a corporate Starbucks or a licensed Starbucks,” Kalinowski said. “They just want their Starbucks. They want it made right. They want it fast. And they're in a situation of increased stress because they're trying to get to their gate.”
Airports themselves have deployed more technology in their restaurants to help the lines move.
For example, challenges in the labor market have led to more kiosks and tablets in airport restaurants.
“It's increasingly difficult to staff a lot of these restaurants, so any savings on the front end that you can make by allowing consumers to order from kiosks or tablets or whatever, that really helps a lot,” Schimpf says.
Laurie Noyes, vice president of concessions and commercial parking at Tampa International Airport, said that “sometimes the airports are a little bit behind the street.” But she said the airport has made progress in offering more digital options and travelers can now order food in advance via Uber Eat and pick it up at airport restaurants.
Dallas Fort Worth offers DFWOrderNow, a website and platform available at digital kiosks so travelers can order food in advance. Simkins said the airport's platform will redirect Starbucks customers to Starbucks' own platform. Starbucks offers more than 170,000 possible drink orders, according to the chain's website. “We just discovered the value in maintaining exposure for their customers,” Simkins said.
Simkins said the airport is developing robotic technology for deliveries to speed up service. It is also experimenting with offering meal and shopping bundles from restaurants and shops at airports, she said, so that passengers “no longer have to plan their route for multiple stops” at an airport.
A local coffee company, Ampersand, based in Fort Worth, Texas, plans to open a robot barista in DFW's Terminal C, Simkins said. It will be available 24/7 for flight crew arriving outside office hours.
Simkins said popular chains still draw crowds.
“There are some brands that people will line up for,” she said.
For Barrino, who waited for her coffee at LaGuardia, Starbucks is one of those companies.
“I just really love the brand,” she said.