Can Starbucks solve long lines at its airport cafes?

Air travelers face a number of travel headaches: slow security lines, long waits to access luxurious lounges, the threat of delays or cancellations… and the airport. starbucks.

Many travelers, flight crews, and even airport employees have at some point faced long wait times for their Starbucks cappuccinos, cold brews, and egg bites.

“They need to have a better system,” said Coresa Barrino, a Starbucks customer in Terminal B at New York's LaGuardia Airport earlier this month, who said she had been waiting 10 minutes and counting to get her coffee. The nursing assistant, who was taking a flight back to Charlotte, North Carolina, said the wait when she buys her coffee at a Starbucks in Charlotte is about two minutes.

The long waits have caught the attention of the coffee chain's new CEO, Brian Niccol, who joined Starbucks from chipotle in September, promising to win back customers and reverse the company's decline in sales.

Niccol told investors he believes licensed locations, such as those within Aim stores or airports, are interested in following the company's “return to Starbucks” strategy.

“When I think about airports and so on, we have a big opportunity to streamline some of the execution there so we can give people the great performance they want so they can get on their way,” Niccol said in the company's quarterly report. conference call on October 30.

Starbucks' airport location staff (and the company's technology) will be put to the test this week during some of the busiest travel days of the year. The Transportation Security Administration forecast a record number of travelers during Thanksgiving week and said Sunday, Dec. 1, could be the busiest day of the year, with more than 3 million people screened at U.S. airports.

The increase in air travel, especially during peak times like Thanksgiving, has caused congestion in airport security lines, lounges and gates, problems that airlines and the government federal are trying to solve. For the aviation industry, bottlenecks at airport Starbucks are just another sign of increased demand and crowded airports.

A record 1.05 billion people boarded planes to, from or between U.S. airports in 2023, narrowly surpassing the total from 2019, before the pandemic, according to the U.S. Department of Transportation.

Starbucks has had problems recently. Its sales fell for the third straight quarter in the period ended Sept. 30 as consumers rejected higher prices and ignored initiatives such as discounts and energy drinks aimed at winning back customers. U.S. same-store sales were down 6% from a year ago.

In late October, Niccol unveiled plans aimed at improving customer experiences and reviving the company's sales, from bringing back condiment bars to eliminating surcharges on dairy alternatives and reducing the menu.

Reducing waiting time is a key goal: it wants to reduce service times to four minutes, which would reduce long queues and improve the customer experience.

And while Starbucks began rolling out mobile ordering and payment at its airport locations in 2022, the change can sometimes add to confusion and chaos at the coffee shop counter instead of solving it. Additionally, some travelers may not be regular Starbucks customers who have already downloaded the app.

Improving the coffee chain's airport facilities could boost both sales and brand reputation at a time when it needs it most. Even customers Starbucks has lost could visit an airport while traveling.

The return of travelers en masse after the pandemic gives Starbucks and other restaurant chains a chance to boost sales.

Concessions contribute about 4% of U.S. airports' annual revenue, according to the latest available data from the Federal Aviation Administration, but they are an important feature for many passengers, who have limited time (and often , energy) to refuel before a flight.

At Dallas Fort Worth International Airport, revenue from food and beverage establishments is growing faster than passenger numbers, said Jennifer Simkins, the airport's assistant vice president of concessions. The airport has become the third busiest in the world for passengers, up from 10th in 2019, according to the Airports Council International.

Airlines are also filling more seats on their planes and, in some cases, flying larger planes.

More passengers per plane means restaurants can fill up during peak hours, with more customers waiting to be served and limited space, said Ursula Cassinerio, an associate vice president at Moody's Ratings who covers airports.

He noted that many airports have undergone major renovations, if not construction of new terminals. That means “more revenue opportunities if you have more square footage for retail and restaurants,” he said.

The 25 busiest U.S. airports have an average of 80 food and beverage brands as options for travelers, according to data from market research firm Technomic.

One challenge for Starbucks is that licensees, not Starbucks itself, operate its airport locations.

Starbucks opened its first airport location with licensee HMSHost in 1991 at Seattle-Tacoma International Airport, serving Starbucks' hometown.

For nearly three decades, HMSHost operated the chain's airport locations through an exclusive agreement with Starbucks and gradually grew its airport presence to approximately 400 outposts.

But in 2020, HMSHost ended the agreement, giving the operator flexibility to offer more coffee options to airports.

While HMSHost still operates the overwhelming majority of Starbucks airport cafes, more operators, such as Paradies Lagardere and OTG, have since stepped up.

HMSHost, Paradies Lagardere and OTG did not respond to requests for comment for this story.

“Airport locations are tricky because they can generate good revenue, but operationally they can sometimes be very challenging,” said Mark Kalinowski, restaurant analyst and CEO of Kalinowski Equity Research.

Licensing its stores saves Starbucks the hassles of operating inside an airport, such as staffing issues, high rents and security checks. And while the coffee chain is used to handling a rush of low-caffeine customers in the mornings, the surge in demand at an airport can be even more erratic.

“A plane lands and all of a sudden there are a hundred people when before there were no people there,” said Kevin Schimpf, director of industrial research at Technomic.

The tradeoff is that Starbucks makes less money from those licensed restaurants.

The company has more than 16,300 locations in the U.S. as of September 24. But it only manages about 60% of those cafes; licensees operate the rest. That figure includes its coffee shops in 47 of the 50 busiest airports in the U.S., according to Starbucks. The company did not disclose its current airport store count to CNBC.

In fiscal 2024, licensed locations accounted for 12% of Starbucks revenue, or $4.51 billion. From those stores, Starbucks collects only licensing fees, a percentage of monthly sales through royalties and payments for supplying its coffee, tea and food to licensees, according to company documents.

For every dollar spent at an authorized store, Starbucks generates about 7 cents in earnings before interest, taxes, depreciation and amortization, according to estimates by Bank of America analyst Sara Senatore. Company-owned stores earn about 23 cents per dollar spent, Senatore wrote in a research note in September.

If its business partners and third-party suppliers slack off, the Starbucks brand could be damaged, the company said in the risk factors section of its latest annual presentation.

“The vast majority of customers don't know if it's a company-owned Starbucks or a licensed Starbucks,” Kalinowski said. “They just want their Starbucks. They want it done right. They want it fast. And they're in a higher stress situation because they're trying to get to their door.”

Airports themselves have been adopting more technology in their restaurants to help keep lines moving.

Labor challenges have led to more kiosks and tablets inside airport restaurants, for example.

“It's getting harder and harder to staff a lot of these restaurants, so any savings that can be made by having consumers order on kiosks or tablets or whatever, that really helps,” Schimpf said.

Laurie Noyes, vice president of concessions and commercial parking at Tampa International Airport, said “sometimes the airports are a little bit back from the street.” But he said the airport has come a long way by offering more digital options and now travelers can order food in advance through Uber Eat and pick up at airport restaurants.

Dallas Fort Worth offers DFWOrderNow, a website and platform available on digital kiosks so travelers can order food in advance. Simkins said the airport apron will redirect Starbucks customers to Starbucks' own apron. Starbucks offers more than 170,000 possible drink orders, according to the chain's website. “We just found value in maintaining familiarity with your customers,” Simkins said.

Simkins said the airport is developing robotic delivery technology to speed up service. It is also experimenting with offering food and retail packages at airport restaurants and shops, he said, so that passengers “no longer have to plan their route for multiple stops” at an airport.

A local coffee company, Ampersand, based in Fort Worth, Texas, plans to open a robotic barista in DFW's Terminal C, Simkins said. It will be available 24/7 to accommodate flight crews arriving after hours.

Simkins said popular chains still draw a crowd.

“There are some brands that people will line up for,” he said.

For Barrino, who was waiting for his coffee at LaGuardia, Starbucks is one of those companies.

“I really love the brand,” he said.