Can Starbucks fix long lines at airport cafes?

Air travelers face a host of hassles on their flights: slow security lines, long waits in luxury 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 Starbucks cappuccinos, cold drinks, and egg bites.

“They need a better system,” said Corissa Parrino, a Starbucks customer in Terminal B at LaGuardia Airport in New York earlier this month, who said she was waiting 10 minutes and counting for her coffee. The nursing assistant, who was boarding a plane back to Charlotte, North Carolina, said the wait when she buys her coffee at a Starbucks in Charlotte takes about two minutes.

Long wait times caught the attention of the coffee chain's new CEO, Brian Nicol, who joined Starbucks from Chipotle in September, pledging to win back customers and reverse the company's declining sales.

Nicol told investors he believes the locations are licensed, like the ones inside goal stores or airports, interested in following the company's strategy of “Back to Starbucks.”

“When I think about airports and things like that, there's a huge opportunity for us to streamline some of the fulfillment processes there so that we can provide people with the significant productivity that they want so they can move forward,” Nicol said in the company's quarterly report. Conference call on October 30th.

Starbucks' airport location employees — 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 expected a record number of travelers during Thanksgiving week, and said that Sunday, December 1, could be the busiest day of the year, with more than 3 million people screened at US airports.

The spike in air travel, especially during peak times like Thanksgiving, has led to congestion in airport security lines and in lounges and gates — problems that airlines and the federal government are trying to fix. For the airline industry, bottlenecks at Starbucks are just another sign of high demand and airport congestion.

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

Starbucks has struggled lately. Its sales fell for the third straight quarter in the period ending September 30, as consumers pushed back against higher prices and ignored initiatives such as discounts and energy drinks aimed at bringing back customers. U.S. same-store sales fell 6% compared to the previous year.

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

Reducing wait time is a key goal: He wants to cut service times to four minutes, which will cut down on long lines and improve the customer experience.

And while Starbucks has begun rolling out mobile ordering and payment to its airport locations in 2022, change can sometimes add to the confusion and chaos at the coffee shop table rather than solve it. Additionally, some travelers may not be regular Starbucks customers who have already downloaded the app.

Optimizing your coffee chain's airport outposts can boost sales and brand reputation during the time you need it most. Even customers lost to Starbucks may visit an airport location while they travel.

With travelers returning in droves after the pandemic, it gives Starbucks and other restaurant chains an opportunity to boost sales.

Concessions contribute about 4% of U.S. airport revenue annually, according to the latest available FAA data, but they are an important benefit for many passengers, who have limited time — and often energy — to refuel before a flight.

Revenue from food and beverage outlets at Dallas-Fort Worth International Airport is growing faster than passenger numbers, said Jennifer Simkins, associate vice president of concessions at the airport. The airport has become the third busiest airport in the world with passengers, after it was in tenth place in 2019, according to the Airports Council International.

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

Having more passengers on each plane means restaurants can become crowded during peak times with more customers waiting to be served and space limited, said Ursula Casinrio, an associate vice president at Moody's Ratings, which covers airports.

She noted that many airports have undergone major renovations, if not construction of new terminals. This means “more opportunities for revenue if you have more space dedicated to retail and restaurants,” she said.

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

The challenge Starbucks faces 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 the birthplace of Starbucks.

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

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

While HMSHost still operates the vast majority of Starbucks airport cafes, more operators, such as Paradies Lagardere and OTG, have since turned to it.

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

“Airport locations are tough because they can make good money, but operationally, sometimes, they can 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 problems, high rents and security checkpoints. Although the coffee chain is accustomed to dealing with a surge of insufficiently caffeinated customers in the morning, the swell of demand at the airport can be more volatile.

“A plane lands, and all of a sudden there's a hundred people there, when there wasn't anyone there before,” said Kevin Schimpf, director of industry research at Technomic.

The trade-off is that Starbucks makes less money than those licensed restaurants.

The company has more than 16,300 locations in the United States as of September 24. But it only runs about 60% of those same cafés; Licensees operate the rest. This number includes its cafes in 47 of the 50 busiest airports in the United States, according to Starbucks. The company did not disclose the number of its current stores at the airport to CNBC.

In fiscal year 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 providing coffee, tea and food to licensees, according to company filings.

For every dollar spent at a franchised store, Starbucks generates about 7 cents in earnings before interest, taxes, depreciation and amortization, according to estimates from Bank of America analyst Sarah Senatore. Company-owned stores earn about 23 cents for every dollar spent, Senator wrote in a research note last September.

If its business partners and third-party providers slow down, Starbucks' brand could suffer, the company noted in the risk factors section of its most recent annual filings.

“The vast majority of customers, they don't know if this is a company-owned Starbucks or a franchised Starbucks,” Kalinowski said. “They just want Starbucks. They want it made right. They want it fast. And they're very stressed out because they're trying to get to their gate.”

Airports themselves are adopting more technology in their restaurants to help move lines along.

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

“It's very difficult to staff a lot of these restaurants, so any front-of-house savings you can make by having consumers order from kiosks or tablets or whatever, that really helps,” Schimpf said.

“Sometimes airports are a little behind the street,” said Lori Noyes, vice president of concessions and commercial parking at Tampa International Airport. But she said the airport has made great strides in offering more digital options, and now travelers can order food in advance via… Uber Eat and receive food from airport restaurants.

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

Simkins said the airport is developing robotic delivery technology to speed up service. It is also experimenting with offering meal packages and retail from airport restaurants and stores, so “passengers no longer need to plan their route to several stops” at the airport, it said.

A local coffee company, Fort Worth, Texas-based Ampersand, plans to open a barista machine in Terminal C at DFW Airport, Simkins said. It will be available 24/7 to accommodate flight crews arriving outside business hours.

Simkins said the popular chains still draw crowds.

“There are certain brands that people will line up for,” she said.

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

“I really like the brand,” she said.