Looking At Starbucks (SBUX) Quality By Store, 24/7 Road-Trip

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It has been one year since 24/7 Wall St. looked at over 40 Starbucks (NASDAQ: SBUX) from Texas to New York.

Since then, the company has replaced its CEO with the company’s founder, Howard Schultz. The share price of SBUX has dropped from almost $32 to just above $17. The big coffee house company has gone so far as to close it 7,100 stores for a period of re-training staff. There are also plans for adding new coffee-brewing machines in each location.

Starbucks has gone so far as to release a new flagship brand product–Pike Place Roast. The company has put together a relationship with Apple (NASDAQ: AAPL) for marketing iTunes. It has formed a partnership with AT&T (NYSE: T) for free WiFi in Starbucks stores.

Some on Wall St. would argue that all of these alterations are too much to change in too short a period of time–a kind of corporate panic. With McDonald’s (NYSE: MCD) and Dunkin’ Donuts both aggressively moving into the premium coffee business, Starbucks problems are more than internal. Its market share is under withering pressure.

Recently, 24/7 Wall St. went back to look at many of the 43 stores we visited a year ago, and a dozen new ones. We visited a number of locations in NYC from Time Square to Union Square to the Upper East Side. We also looked at outlets in Oakland Country, Michigan, Palm Beach, Florida, Houston, Fairfield, Connecticut and Westchester Country, NY. We stopped by several shops in San Francisco.

We rated locations on the same seven variables as last year: waiting time, cleanliness, bathrooms, seating, inventory, staff, and ambiance. On each of these, a store got a "1" to "3" rating, "3" being the best score.

Here is a detailed look at ten of the locations:

1. Starbucks Memorial, Houston, is located in a relatively new strip center, but it is located in a swarm of Memorial Drive traffic situated on the inbound traffic side of the street where thousands of Houstonians drive into downtown.   It might also be dubbed as the Jogger’s Starbucks because it’s so close to Memorial Park where thousands of joggers convene daily. The staff here is friendly and fast and they have been keeping the place much cleaner than in the past from the condiments area to the bathroom.  There is still this issue of stocking store merchandise haphazardly around the store with no real flow.  Newspapers are located too far from the register. The inside seating area is a bit small for the location, although the outside patio may seat more people than the inside.  There was a huge difference from last year to this year as the store seems to kept much cleaner.

Ratings 1-3 (3 being the best): Wait – 3; Cleanliness – 3; Toilet – 3; Space – 2; Personnel – 3; Inventory – 3; Ambiance – 2.

2. Starbucks River Oaks South, Houston is location is located near a SBUX store which has a frequently busy drive-thru window.  Everything at the location is an acceptable "2 rating", with not very much wrong.  The staff is actually very friendly here.  The one thing that the company did right here is that as you walk into the store, literally every bit of extra merchandise from newspapers, to mugs, and the rest is within grasp or within two extra steps on the way to the register.  The only issue with the seating is that there is a bit of a bottleneck at the back. While the inside is somewhat small, they have made the best use of seating inside and it has a decent sized outside patio.

Rating 1-3 (3 being the best) Wait – 2; Cleanliness – 2; Toilet – 2; Space – 2; Personnel – 3; Inventory – 2; Ambiance – 2.

3. Starbucks River Oak North, Houston is probably the better of the two dueling locations at this intersection.  This location is busy and the drive-thru does well.  The staff here has always been one of the more pleasant groups of employees at area Starbucks. The store is set up so that people coming in from one of the main entrances miss all of the merchandise.  The flip side is that if you come in through the main door you literally walk past just about every bit of merchandise the store sells.  The ambiance here is nice and there is more than enough seating.  The one complaint would be that the main floor area has too many old newspapers just lying around cluttering up the center of the store

Rating (1 to 3, 3 being best)   Wait Time – 3, Cleanliness – 2, Bathrooms – 2, Space – 3, Personnel – 3, Inventory – 2, Ambiance – 3.

4. Starbucks Galleria, Houston is perhaps the largest Starbucks in Houston and has to be larger than 99% of all other stores in the country. Last year 24/7 noted many improvements that could be made and the issues are the same or worse.  On the positive side this is one of the cooler locations because it is enormous inside, the flow is good for most merchandise, there is lots of seating around. The lay-out is almost a Halo-shaped It would be a chore to keep this place clean as it is busy like a gas station on a major interstate.  It might even take one dedicated person whose only purpose is cleaning. This location is dirty from the condiment area, to the floors, the cloth seats inside the Halo are enough to turn anyone with OCD’s to go to the doctor, and the bathroom is old, rickety, and just filthy.  Waiting in line can be a fairly long process with only one register being used.  For such a flagship location, it is amazing that the staff is so ‘blah’ and there are not enough people when you consider the amount of traffic.  If Mr. Schultz ever went here he would be embarrassed.

Rating (1 to 3, 3 being best)  Wait -1, Cleanliness – 1-2, Toilet – 1, Space – 3, Personnel – 1, Inventory – 2, Ambiance – 3.

5. Starbucks Ridgefield, CT is one of the better stores 24/7 has looked at in the Northeast. The staff is friendlier and better trained than at most stores. Food, coffee and merchandise availability are fine. The store has good seating, indoor and out. The store and bathroom are clean, not just compared to other Starbucks but to most good restaurants.

Rating (1 to 3, 3 being best) Wait-3, Cleanliness-2, Toilet-3, Space-2, Personnel-3, Inventory-3, Ambiance-3.

6. Starbucks Westport, Route 1, CT. This location is Starbucks hell. Odd, because it is in an affluent area without a huge amount of traffic.  The staff looks though people at some horizon not visible to patrons. The bathroom was filthy. The location is dark and the atmosphere is cold. The inventory and seating are reasonable, but no one in his right mind would want to stay more than a few minutes. The store has gotten much worse over the last year.

Rating (1 to 3, 3 being best) Wait-2, Cleanliness-2, Toilet-1, Space-2, Personnel-1, Inventory-3, Ambiance-1.

7 Starbucks Darien, CT. Another location where service should benefit from modest traffic and wealthy patrons. This Starbucks take no advantage of that. One nice touch was that the toilets were dirty compounded by the fact that one did no flush. Always a good sign at a food establishment. The help was pleasant, but unenthusiastic. The location was able to get people in and out fairly fast, but there was not much foot traffic during our stay.  The seating was a nice touch with plenty of tables outside. This store was much better off when we stopped by a few times late last year.

Rating (1 to 3, 3 being best) Wait-2, Cleanliness-2, Toilet-1, Space-2, Personnel-1. Inventory-3, Ambiance-2.

8. Starbucks Greenwich, CT. It is hard to find a small store where three people can hardly do the work of two, but this location seems to prize that odd capacity in its workers. One-and-a-half people spent their time doing nothing. Consequently what could have been a modest crowded of customers turned into a group of patrons unhappy about waiting for what they had ordered. While this may sound like a broken record, the store and bathroom were not clean. This location has one advantage. The building is beautiful and so are the views. Seating has been set up to take advantage of that. The store’s quality has dropped off.

Rating (1-3, 3 being best) Wait-1, Cleanliness-1, Toilet-2, Space-3, Personnel-2, Inventory-3, Ambiance-3.

9. Starbucks Mt. Kisco, NY. This location is well located with entrances from the street and a side door from the shopping area behind it. It has more light than most locations, with large windows and excellent seating. The staff is pleasant to one another but disengaged from the customers. The store is dirty. This Starbucks does appear to sell almost everything conceivable, so if goodies are important, please stop by.

Rating (1-3, 3 being best) Wait-2, Cleanliness-1, Toilet-2, Space-3, Personnel-3, Inventory-3, Ambiance-2.
10.

Starbucks Fairfield, CT. If anyone at Starbucks bothers to benchmark stores and bring in managers to see what works, this location would have to be near the head of the class. The store is one two floors. The seating area is bright and airy. The staff is engaging and quick. The location is clean as a whistle. Even the inside of the bathroom is decorated and pleasant. It offered better seating than the regular tables at some of the Starbucks 24/7 looked at over the last week. Someone did something very right here.

Rating (1-3, 3 being best) Wait-3, Cleanliness-3, Toilet-3, Space-3, Personnel-3, Inventory-2, Ambiance-3.

How Starbucks Has Changed In A Year.

We talked to several store managers. As one in Connecticut told us, most customers have not noticed that changes which management has tried to make at the stores at all. The new brand of coffee, The results of training. Employees take the idea of making changes seriously but that does not seem to be reflected in the customer’s reactions.

The things which changed the least were ambiance, seating, and inventory. Most stores with cramped seating or too few seats did not change. This may be a sign of management overlooking something which is not related to coffee but is important to customers. Inventory at most stores is still very good. Starbucks is almost never out of anything, a critical key for success at retailers of any sort.

Waiting time is down at about two-thirds of the stores. This has to be bad news. Workers at Starbucks are supposed to spend more time on making drinks and not less. Management has made it clear that careful brewing of each drink is critical to the "Starbucks" experience. Perhaps that is not happening at the store level. The other explanation is that there are fewer customers. That would hardly be ideal, but could certainly account for less waiting time.

Gauging the attitude of staff is clearly subjective. But, at almost all stores, it appears that employees take the company’s issues seriously, believe that the new training reminded them of how they should go about their jobs, and are trying harder to make the customer experience as good as possible.

The biggest of the problems which Starbucks can control and has not is cleanliness at stores. Nearly half of the store we visited ranked no better than "2" on this measurement, and about 20% rated only "1".The same holds true of the store bathrooms. If Starbucks is a neighborhood place to have coffee and a snack, bring kids, and have small meetings, clean stores must be absolutely critical to keeping people coming back.

Starbucks is, to a large extent, focusing on the wrong things. A new brand of coffee and new brewing machines are not going to do anything for the company’s issues if Starbucks cannot even maintain a pristine environment.

Starbucks comeback is in trouble. 24/7 Wall St. has attached a short memo to CEO Howard Schultz. He may not read it, but his competition might.

Douglas A. McIntyre