Starbucks delivered record first-quarter revenue of $8.1 billion, representing 19% growth over last year, yet the Wall Street Journal reported that more than 240 Starbucks stores have filed union election petitions. The progressive company Howard Schultz built, offering the most generous pay package and employee policies in the industry, is having union problems. One can imagine Schultz brooding at night with scotch in hand: “All I’ve done for my employees and they want a %$#^ union?”
What happened is Starbucks morphed from the cozy coffee bar in hipster neighborhoods, where employees longed to work, to one of a high-volume, suburban automat: a Raising Canes of lattes. It works great financially, but it’s taxing the staff.
Starbucks is so proficient at marketing and selling their products via the omni-channel that my guess is many employees feel they’ve gone from thinking they had the coolest job on the planet to that of a third-shift factory worker. Old-timers might recall the I Love Lucy show where Lucy Ricardo and Ethel Mertz eat the chocolates on the conveyor belt because they can’t handle the pace of the production line.
Wall Street veteran and frequent Starbuck’s customer Roger Lipton predicted there would be employee trouble five years ago, when he argued the Starbucks business model was moving away from a relationship-driven enterprise.
“The employed ‘people person’ who was the star of the previous model is not going to be as easily satisfied, because most of the employees, for most of their time, are busy pumping out product,” wrote Lipton.
Perhaps it’s just noise. Perhaps it’s the same generation that says they like socialism or that wants to be part of a union, too. Or perhaps the Starbucks barista job, a prime target for union activity, has lost its aura.
Baristas once had time to chat up customers and write their names on cups, often with a smiley face. Once mini-celebrities in a bistro setting, they became line workers once the omni-channel took hold.
Drive-thru windows are in more than 60% of Starbucks’ U.S. locations. Delivery alone was up 30% in the first quarter. The drive-thru and digital business are selling off the charts. Both now account for approximately 70% of sales. More than half of the sales in U.S. company stores came from Starbucks Rewards members—26.4 million were active in the quarter, with digital orders accounting for 38% of sales in the first quarter, a record.
As Starbucks marketing became more precise and technology increased the throughput, a job at Starbucks became less about bragging to your friends where you worked and more about busting your butt. A friend of mine, who pulls a few shifts each week at a Starbucks, told me he’s often exhausted after working a three-hour shift running the oven.
One store that voted for a union was in St. Paul, Minn., and that drive-thru was so busy the city required off-duty police officers for traffic control. On a recent trip to St. Louis, I noticed a suburban Starbucks so overloaded that drive-thru traffic backed up onto a busy road, forcing non-customers to enter the shopping center parking lot from a different entrance. No longer a cozy coffee bistro.
Starbucks says its working to reduce complexity by eliminating manual routines and implementing more technology and automation. Doesn’t that speed up the throughput, too, making the job even more stressful?
Some say it’s difficult to organize a restaurant business, what with high turnover. Sure, union membership has declined in manufacturing as many of the jobs were off-shored. Service jobs, such as those in restaurants and retail, can’t be sent elsewhere. Post-pandemic, however, restaurant workers have regained their bargaining power. Many restaurant chains, previously reluctant to support a $15 minimum wage, would gladly pay that rate to fully staff their stores. And, as wages rise, employees are seeking new ways to influence the work rules. It also is political.
Union organizing activity at Starbucks locations is led by Workers United, an affiliate of the Service Employee International (SEIU). The SEIU funds organizations such as the Restaurant Opportunities Center (ROC) and Fight for $15. Both have organized strikes against restaurant chains before. Plus, these organizations feel emboldened to ramp up union organizing activity because the National Labor Relations Board (NLRB) is controlled by Biden appointees, most of whom have union backgrounds.
Restaurant consultant Larry Reinstein thinks Starbucks employees have little to lose by voting for a union. “Many Starbucks employees, can easily find another job in this environment if it doesn’t work out,” said Reinstein.
It’s not just Starbucks: McDonald’s and Chipotle also are union targets. Recently, workers struck a Jack in the Box and Burger King, both owned by franchisees. Greenberg Traurig labor attorney Jon Sack told a recent webinar audience that this latest bout of union activity is about employees wanting a seat at the table.
Schultz has a plan. He’s stopped all share buybacks and will give employees not already in unions an immediate pay raise.
“We do not have the same freedom to make these improvements at locations that have a union or where union organizing is underway,” he told a conference call audience last month, sending a message to employees who want to unionize.
Schultz also recognizes the workplace isn’t the same as it was before omni-channel and needs more hospitality.
“We must reintroduce joy in the customer and emotional connection back into the partner experience,” said Schultz.
Restaurant operators take heed: How do you reintroduce joy in a drive-thru and digital world?