Drive-through times as slow as drip coffee could be descending on Starbucks and, with it, the potential consequences of higher costs and pressured profits.
The premium coffee chain said this week it's allowing customers to use their personal cups when ordering in store, in the drive-through, or via its mobile app.
The new scheme goes into effect immediately at all company-operated locations and participating licensed stores in the US and Canada. Starbucks has more than 17,000 stores between the two countries.
About 70% of Starbucks U.S. company-operated stores feature a drive-thru.
Customers using the bring-your-own-cup option (or BYOC, as Wall Street has coined it) will save $0.10 on their order.
It's part of Starbucks' long-running goal to reduce waste by 50% by 2030. But how the process works has all the makings of an operational disaster for a coffee chain still dealing with long wait times amid increasingly complicated drink orders.
In stores and at the drive-through, customers will place their clean cup (minus the lid) in what Starbucks is calling a "contactless vessel" — essentially a holder that keeps the cup clean. Starbucks kindly provides this vessel.
The finished drink will be given back to the customer in the same manner.
Operationally, think this through for a second.
Starbucks is introducing a new vessel its employees will have to clean. There is a risk of overfilling larger cups and losing margin in the process. Handing the vessel back to the customer (through a drive-through window, no less) risks spilling hot coffee on them (and in their car) or spilling it before the handover is made, requiring a new order.
All that would result in lost time and money in a business that requires speed and accuracy.
It could become a nightmare for a company also contending with overworked employees and unionization pushes.
"We find it hard to see how adoption of this additional exchange doesn’t slow down drive-thru and disrupt flow, and/or require another chunk of investment in labor, and we expect some ongoing confusion regarding cup sizes, what constitutes a clean cup, etc.," said veteran restaurant analyst Jon Tower in a client note on Friday.
Continued Tower, "Starbucks notes that this rollout is a direct result of its 'test and learn' process, but we see it raising obvious operational/throughput questions, and at least a period of customer/employee education to internalize the new processes."
From a pure drive-through perspective, the added layer of processes will do Starbucks no favors.
Starbucks doesn't disclose its average drive-through wait time, but reports in recent years have pegged it to be in the three-to-five-minute range.
For perspective, Starbucks rival Dunkin' took home the fourth spot for the fastest drive-through wait time in the latest annual Intouch Insight report. The time: 89.9 seconds, or just over a minute.
The vibe out of Seattle — home of Starbucks HQ — is naturally different around this scheme.
"When we tested personal cup in drive thru in Colorado last spring at 200 stores, wait times were not negatively impacted and prior testing also showed the experience met or exceeded customer expectations. Partners who participated in the Colorado test shared that following when they followed operational processes and procedures for personal cups, it didn’t add any more wait time and really pleased customers, too," a Starbucks spokesperson told Yahoo Finance via email.
Tower found this Starbucks initiative so unsettling he slapped the stock with a 30-day "downside" catalyst call in the aforementioned note. The title of the report: "Expanded Bring Your Own Cup an Additional Risk Amid Shaky Data."
Tower slashed his fiscal year profit estimate on Starbucks to $4.06 from $4.16 a share. For fiscal year 2025, Tower is modeling earnings of $4.78 a share compared to $4.90 previously.
"We see: (1) risk to Street F1Q24 (ended 12/31) top-line numbers given weaker US footfall throughout the quarter, and (2) risks that challenging weather comparisons and throughput disruptions regarding the new bring your own cup platform lead to weakening early F2Q24 high-frequency data and further resets in Street expectations into and out of F1Q earnings," Tower added.
Starbucks shares are down 10% in the past year, underperforming the S&P 500's 23% gain.
Brian Sozzi is Yahoo Finance's Executive Editor. Follow Sozzi on Twitter/X @BrianSozzi and on LinkedIn. Tips on deals, mergers, activist situations, or anything else? Email brian.sozzi@yahoofinance.com.
