Starbucks is once again touring potential locations in New York City

"There are still opportunities to be profitable here, which is great news," says Dan Lewis, Starbucks’ group marketing manager in the Northeast Atlantic region. He wouldn't say where Starbucks is looking to expand, or how many new New York City stores it's planning to open, but a retail broker says that, following a couple of quiet months, Starbucks is once again busy touring potential locations. || Read "Starbucks to add city locations; tall order includes Manhattan spots"

Comments

[Coffee Mistress]

Yet, my store is still on the chopping block with no date announced yet. How much does it cost to open a new store vs. operate an existing location? This seems so backwards to me!

[FLA SM]

It's all about the rent. My store will close (although God forbid we should be told when!) My store sales are higher than several other stores in my district, but our rent is so outrageous, we still lose money. My rent is roughly three times the rent of our next nearest store, which is roughly three times the size of mine.
As I understand it, at least in this area, until recently the people in charge of signing leases got their bonus based on how many leases they signed. Not how good the lease was. They didn't care how much it would cost to keep a store in a given location. As long as a contract was signed, they got closer to their bonus. The vast majority of the 600+ closing stores were losing money due to overhead expenses. The new stores that will continue to open will actually have some oversight in the real estate process and should be profitable.
At least that's what I've been led to believe.

[Coffee Mistress]

It just frustrates me because my store is outselling the neighboring DISTRICT in all of the promos. Gold Card, Holiday Trio, Christmas blend... You name it. Our little store is beating an entire district's goals but we're not profitable enough to stay open? How about renegotiating our lease to a more reasonable rate? If that's even the reason we're closing. I find it odd that we haven't been given a specific reason at all. If we knew why, maybe we could work together to find a solution. After all, we're shareholders, too.

[when will they learn?]

Does RECESSION mean anything? Once again Starbucks proves that they are SO removed from reality. The Real Estate division has to justify their existence. The "Build it & they'll come" mentality is what got them into trouble to begin with. They will BURY themselves for good. No sympathy!!!!!!

[Melody]

@when will they learn:
Starbucks is also still struggling to learn lessons about store cannibalization and brand dilution! (in addition to what you said).

[Charlie B]

"Does RECESSION mean anything?"

Only if you assume that the entire US is in a recession. There are states in the US where unemployment is still well below 5%.

The winners will be those institutions that position themselves now to take advantage of the eventual post-recession recovery.

[beantheredonethat]

I can understand getting into new real estate now, even though i was laid off and had to see so many stores close and other partners lose their jobs.

My problem is that the leaders in the real estate team are the same SOBs that were there years ago and got us into the mess we are in in the first place.

Want to bet and see if they make the same mistakes again???

[inopethflames]

hopefully starbucks does a ton of research into where new stores should go. if they open 50 new ones in new york and close 30-50 exisiting ones with bad rent or situations like that, then it should be a good thing for sbux, or any company.

[LOL]

It sounds like homecoming for Sopkin and the boys. I am sure they can find 30-50 locations to open new stores in 2009 and then close them in 2010.

[when will they learn?]

Only if you assume that the entire US is in a recession. There are states in the US where unemployment is still well below 5%.

The winners will be those institutions that position themselves now to take advantage of the eventual post-recession recovery.

Charlie B you are fooling yourself- 2009 is going to be a very tough year for ALL Americans. The first thing to be eliminated from "most" peoples budget will be over priced simple pleasures (example: SBUX coffee). Starbucks refuses to acknowledge this & REALLY believe they are recession proof. Have you looked at their stock lately (well below $8.75 a share). Opening new locations in NOT the answer to increase sales. Boosting morale, tightening up CURRENT spending and mending a BROKEN brand image is a start. The company continues to run with their heads cut off. This evident with attitudes of both "partners" and Wall Street.

[Jim C]

"Touring Locations" does NOT mean "Leasing Locations"! Remember, there is an analyst conference going on in NYC over the past 2 days, and the stock still looks bad from a P/E perspective. So, what better than to break out the smoke and mirrors and go on a "market tour" wit the press and analysts in tow? This is a distraction to have them not pay attention to the other problems.

Analysts in NYC - "Hey Starbucks is taking a tour of the market to look for more locations"

Starbucks to Analysts - "Yes...we are looking at growth! We are not Krispy Kreme, we will emerge from this correction in the market..."

Ugh!

[Venti Urnex Latte]

The NYC market is different from the market anywhere else. Endless pedestrian traffic. Lines out the door all morning long, nonstop. No drive-thrus. Starbucks usually has 5 year leases with a 5 year option to renew, if I recall correctly, so maybe they want to lock in low rents now. There's a lot of new residential construction in gentrifying neighborhoods, and therefore there is demand to have a nearby Starbucks.

But a lot of the city locations suck. The layouts suck and the infrastructure is a disaster. There are stores where the mop sink and sanitizer machine are downstairs! So you are supposed to fill the bucket with mop water and carry it up 20 narrow steps! And bring all your dirty dishes up and down, up and down.

Often the supply room is in some filthy basement space one flight down. To take the trash out you have to go into a neighboring building and into an elevator to a Dumpster in someone else's basement. Or else you have to haul your trash up from the basement to the street. You get a sanitation ticket if the trash is out on the street too early in the day. There are big labor costs involved in NYC, and they pick their stores really badly.

[Frappagyna]

Okay, couldn't see an open thread this week to post this question, so I'll do it here...sorry!

We had a discussion today at our store about refils. We have recently been tightening up on the people who walk into the store with a cup from hours earlier and demand refills. We politly remind them that refills are available if you have stayed in the store for a few hours, and then do a just say yes if it's the first time. If it's not the first time we charge for a full price coffee, less cup discount if they reuse the cup. The question is free refils with a registered starbucks card.

Do you only get free refills with a registered card if you have stayed in the store, or can you just head back into the store a few hours later in the same day and get a free refill with your registered card?

I can just see everyone waiting to give me their opinion....

Frappagyna.

[CounterBean]

Jim C i right. Looking is free. There ws not an announcement that one single new lease was signed anywhere.

Just a dog and pony show to change the conversation from the sinking of the Starbucks ship.

This is what the guy Schultz is bringing back (name starts with 'r') said his strategy was going to be: Move to smaller locations in downtown areas of large cities, didn't he?

Hey, get out of the suburbs and desert the drive-throughs so some good start-ups
can have one or two for a change instead of writing them out of leases in their own hometowns.

There are only two reasons I hear people say they go to this co. for anymore:
Convenience (huge)
Consistency (drinks are the same in Florida or CA)

Okay I understand they are only "touring" not actually opening these stores, but with the economy the way it is and with the recent cuts in labor and NC, should we even be thinking about opening more stores? Why not continue to close "underperforming" stores. I'm sure there are more than 600 stores we could close. It is unnecessary to have two or more stores within walking distance to each other.

My town has too many stores in it. They cannibalize on sales. Get rid of one store and sales will increase at the others.

Speaking of the smaller stores located in cities:
I honestly believe Starbucks should get out of the drive-thru business. I have been saying this for the past four years. Drive-thrus have hurt our "culture" and have turned us into another fast food joint.

Sure they are a huge money maker, but it's the same principle as these labor cuts. The numbers look good on paper. But the reality of the situation, well....

[Holden Caufiled]

I would like to suggest to Howard Schultz to look into smaller locations inside some of the boroughs where there are more affluent people spending money. Specifically one on Kingshighway in Brooklyn, NY 11230

I want a Starbucks in Midwood on Kingshighway so I do not have to drive several miles to the nearest Starbucks. There are 5 Dunkin Donuts in the 10 block radius of a major train station which serves other neighborhoods such as Marine Park, Sheepshead Bay, besides Midwood.

I've worked for the company in a few stores in NYC and have found that they tend to take a chance on locations that they think will perform well and sometimes get burned. I do not believe you will get burned at this location.

In Brooklyn, NY Starbucks opened up a store with what I believe one of the first partial menu's not in english in NYC. The menu's are in english but there is a huge Russian language translation of each drink offered by Starbucks. This store is hugely popular and I would guess very profitable. The same population is expanding to an area called Midwood. This might be an idea or possibly highlighting the Kosher offerings of Starbucks. There are a lot of young, trendy, hip teenagers and 20 & 30 somethings who have alot of expendable income here.

There was a possibility of a store on Kingshighway previously , however the landlord wanted too much money for rent. I'd like to challenge Howard to bring a store to Kingshighway and realize that he will make more money here than in Bayridge where they over saturated the market and had to close a new store within 1 year of opening it.

If Starbucks doesn't open quick, we will just have to continue to drive to Park Slope and frequent many of the independant coffee shops.