Key Points

Lee and Doug analyze the disappointing performance of Starbucks (Nasdaq: SBUX), questioning why the company didn’t address its operational issues sooner. They discuss the high cost of Starbucks’ offerings compared to other fast food options and the severe service problems, such as long wait times caused by the morning rush of in-store and app orders. They note that Starbucks has recently implemented new systems to speed up service, but they wonder why these changes weren’t made earlier. The conversation also touches on the increasing competition Starbucks faces, particularly on the East Coast and in the South, from chains like Dunkin’ Donuts and Pete’s.

Transcript:

Let’s look at Starbucks for a second.

Another disappointment, as most CEOs do, we’re going to do better.

They have a multitude of problems.

Their food tends to be much more expensive than it is at the other fast food places.

Number one, they’ve had service problems, severe service problems.

There was a piece that appeared in the business press where somebody said they waited 40 minutes.

Now, I understand that’s anecdotal and who knows why, but what happens in the morning?

Yes.

Well, what happens is you get this collision.

In the morning, you’ve got people walking in, right?

You’ve got other people ordering with their app.

So all of a sudden, there’s a rush to these stores.

And look…

When you start a store, you don’t staff it for the highest moment of traffic.

You can’t afford that.

So, you know, they staff it for, you know, something that’s closer to average for the day.

So you’ve got customers that are very, very upset.

And they said they’ve installed some new system where when a lot of people start to come in, baristas drop everything else they’re doing, cleaning the floors, whatever, they rush to make changes.

And apparently they’re they’re training the people to make the drinks faster.

Got to ask a question.

Why didn’t they do that before?

So what happens to same store sales and revenues at Starbucks for the next quarter or two?

I can’t think they’re going to be anywhere better than flat to down because another thing that has come over the years, I mean, it was the go to place 20 years ago.

I mean, that was the place to go get the coffee.

And, you know, it was before there was the explosion of everything that’s like super sweet and kids drink and stuff like that.

But the one thing I have noticed that there is a lot of competition to Starbucks in the East Coast where you live.

There’s Dunkin’ Donuts is huge.

And it’s in the South as well.

There’s places like Pete’s and places like that in the South that are big.

So there’s a ton of competition.

And especially when the surly barista, you know, write some crazy name on your cup that’s not even close to you so you don’t go up and get it.

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