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The froth is about to go flat on your takeout cup of joe as the coffee shop landscape in Manhattan changes. Crain’s reported this week that the city’s top coffee retailer, Starbucks, is closing around one-fifth of its Midtown stores as it continues to transition to a smaller, pickup model.
Of Starbucks’ 185 locations in Manhattan, the company has closed 46 stores in the past year and an additional 20 are expected to close over the next 12 months as leases end. Though it’s not possible to know exactly which locations are slated to shutter, Midtown is a prime target for the cutbacks. As Crain’s noted, according to the Manhattan Chamber of Commerce, foot traffic is still 60% lower in Midtown than pre-pandemic levels (compared to the citywide average of 36%).
During a second-quarter earnings call, Starbucks CEO Kevin Johnson told investors that profits have bounced back ($659 million versus last year’s $328 million) and said store closures aren’t necessarily a bad thing. In fact, they’re in line with a transformation plan he outlined last summer, which anticipated hundreds of global closures as the company adapts to new store formats that better reflect post-pandemic consumer habits.
“We called this early, and in just nine months we have already completed 70% of the strategic store closures, clearing the way for the development of new, innovative, and more efficient retail store formats over time,” he said. “We are responding to customers’ increased desire for convenience, while also improving the overall profitability of every trade area.”
During the same call, Johnson also revealed that digital sales made up the bulk of Starbucks’ second-quarter sales. That’s why in dense urban areas like Manhattan, the company is pushing Starbucks Pickup locations. These stores are about two-thirds the size of a traditional retail location and designed to facilitate the quick pickup of online orders. There’s already one by Penn Station and another near Grand Central at 125 Park Avenue. Crain’s reported that five more Pickup locations are slated to open in Manhattan over the next year, one of them on the Upper West Side.
Meanwhile, the pickup trend is continuing with IHOP launching grab-and-go stores — with the first location set to debut in New York City this summer.
The 62-year-old pancake brand first announced the new concept, called Flip’d, in 2019. Diners can order at a kiosk or in advance on their phone. There won’t be table service — unlike their 1,600 IHOPs around the states.