Starbucks doesn’t want to be on every street in New York and Los Angeles anymore

By Nathaniel Meyersohn, CNN

New York (CNN) — Starbucks spent years trying to become an inescapable storefront on the streets of New York, Los Angeles and other big cities in America. Now that’s coming to an end.

Its expansion once seemed limitless. It was even a joke. In 1998, an Onion headline read “New Starbucks Opens In Rest Room Of Existing Starbucks.” A few years later, comedian Lewis Black riffed that he’d gone to the “end of the universe” in Houston, where he saw one Starbucks directly across the street from another.

But Starbucks is now struggling, and its strategy of saturating urban areas to draw coffee drinkers on their way to work in the morning has backfired amid competition, the rise of remote work and rising costs.

So CEO Brian Niccol, hired last year from Chipotle to revive Starbucks, no longer wants its stores to be right next to each other. Starbucks is closing roughly 400 stores nationwide that are concentrated in large metro areas as part of its $1 billion restructuring plan.

Starbucks closed 42 locations in New York, or 12% of its total in the city. It recently lost its top spot as the largest chain in Manhattan to Dunkin’, according to Center for an Urban Future, a New York City think tank that tracks chain openings and closings.

Starbucks also reportedly closed more than 20 locations in Los Angeles this year; 15 in Chicago; seven in San Francisco; six in Minneapolis; five in Baltimore; and dozens more in other cities.

Niccol is trying to reposition Starbucks again as a “third place” between home and work.

The chain reviewed its more than 18,000 stores in the United States and Canada, and “closed locations that were underperforming or unable to meet our brand standards,” a Starbucks spokesperson said in an email. The company plans to open stores and remodel others in 2026, including in major metros like New York and Los Angeles, “featuring refreshed designs and elevated experiences that reflect the Starbucks brand.”

Victim of its success

In many ways, Starbucks pioneered the business model that’s now responsible for its struggles.

Before Starbucks, people couldn’t fathom paying more than two bucks for a cup of coffee, let alone have any concept of a latte.

But now Starbucks is closing urban locations in part because it’s been swamped by competition from niche coffee shops, smaller chains such as Gregory’s and Joe’s Coffee, and a wave of smoothie, bubble tea and other beverage shops.

“Urban America has seen a dramatic increase in competitive coffee shop openings that eat away at the store’s volume,” said Arthur Rubinfeld, the mastermind of Starbucks’ real estate and design strategies alongside CEO Howard Schultz during the 1990s and again from 2008 to 2016. Rubinfeld now runs Airvision, a consultancy for consumer brands.

Starbucks’ sales have stagnated in recent years, and closing a lagging cafe can also juice sales at another one nearby that’s “larger, more accommodating and close enough for the loyal customer,” Rubinfeld said.

Starbucks, which started in a hip part of Seattle, is now in its 50s and sees more room to grow and profit in the suburbs, analysts say. It’s expanding drive-through stores in suburbia, where labor, rent and other operating costs are lower than the most expensive cities in the country.

Remote work and homelessness

Other pressures have also led Starbucks to shutter cafes in cities.

New York City, Chicago, Los Angeles and San Francisco lost population after the pandemic in 2020, reducing their market sizes, although these cities have started to reverse losses since 2023.

And remote work has dealt a permanent blow to Starbucks in many central business districts that relied on huge numbers of office workers commuting every day, with the company closing locations in the ground floors of several downtown office buildings in Los Angeles as a result, said Catherine Yeh, the director of market analytics at CoStar Group.

And the company has also grown weary of being the public restroom provider of choice for many American cities.

“The mental health crisis in the country is severe,” former CEO Schultz said in 2022. “There is an issue of safety in our stores, in terms of people coming in who use our stores as a public restroom.”

Starbucks ended its policy this year that let anyone hang out at its stores or use the bathroom without making a purchase, and it posted signs outside stores banning panhandling, consuming alcohol and vaping.

‘Tougher slog’

The closures are part of Niccol’s attempts to revitalize Starbucks following years of slumping sales, strategy missteps and a revolving door of chief executives.

The chain is trying to win back customers looking to sit down for a cup of coffee by renovating 1,000 stores — 10% of its company-owned US locations — with chairs, couches, tables and power outlets over the next year.

But the turnaround under Niccol is taking longer than some investors hoped. Shares of Starbucks (SBUX) have dropped around 6% this year.

Remodels may help Starbucks’ turnaround, but improving operations in stores is a bigger hurdle for the company, said Sharon Zackfia, an analyst at William Blair.

Starbucks is serving customized drinks at the same place to two different sets of customers — people who want to grab their coffee and go and others who want to sit down and linger — and it’s struggling to satisfy these competing demands.

“It’s not an easy thing to fix,” Zackfia said. “It’s been a tougher slog than many expected.”

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