When CEO Brian Niccol came to Starbucks almost two years ago, he took over a brand that had lost some of its focus.
The cafe chain had pivoted during the Covid pandemic to a takeout-and-delivery model, dropping long-time CEO Howard Schultz’s vision of the brand as offering a third place between work and home.
Niccol has worked steadily to reestablish Starbucks as a third-place destination.
“What defines Starbucks is going to be a community. It’s going to be the Barista customer experience, and it’s going to be this idea of craft and customization,” he said at the Bernstein 42nd Annual Strategic Decisions Conference.
The CEO noted that while trends, such as the popularity of blue drinks and whether people want hot or cold beverages, will change, the core model for Starbucks won’t.
“When you look at how lonely people say they are. Like despite this idea that supposedly we’re more connected than ever, people say they’re more lonely than ever. And so to have a third place where you can have a great experience with a customized drink the way you want it with food that I think is built for the way you want to eat, that is not a fad. I think that is durability, and I think that is a path for long-term growth,” Niccol added.
He believes that Starbucks, which operates more than 16,000 U.S. locations, making it the nation’s second-largest restaurant chain by unit count behind Subway and ahead of McDonald’s, according to Scrapehero, can add another 10,000 cafes in its home country.
Starbucks plans for a different kind of store
When Niccol took over, he dropped Starbucks’ mobile-order pickup-only locations. Those stores, which were almost entirely in large cities, were designed for on-the-go customers, and while they met a need, they diverged from the idea of serving as a third place.
For its traditional locations, Starbucks follows a formula.
“New Starbucks stores are generally between 1,500 and 2,000 square feet. These stores are often situated on plots of land ranging from 0.50 to 1.00 acres. This size allows for sufficient seating, merchandise displays, and efficient customer service,” according to LoopNet.
Niccol believes his chain can use a new store model to add up to 10,000 new U.S. locations.
“We’ve got clear line of sight on about 5,000. And I think if we’re successful building the afternoon daypart and driving the economics that I think we’re going to drive and then you add in the fact that now we have a build capability to get on a 0.5 acre and also get into small in-line executions to the 600, 800 square feet, you can quickly see how that 5,000 becomes 10,000,” he said.
And although he didn’t mention competitors including Dutch Bros and 7 Brew by name, the sites he’s talking about fit the description of where those drive-thru only brands put many of their stores. The new Starbucks, it should be noted, would be smaller, but would still be full-service cafes with seating.
“I think also what you’re seeing is we weren’t actually competing for those 0.5 acre sites, which is where you would put a smaller cafe with a drive-through. And now we’re going to compete for those sites,” Niccol added.
Starbucks sees value in smaller stores
Using a smaller store format opens up more of the country to Starbucks.
“We have real opportunities if you kind of look from Michigan down to Texas and then Texas over to, call it, Virginia, where with the smaller builds for kind of the suburban execution, tremendous opportunity. And then in these urban environments, to be able to have a small in-line execution presents a huge opportunity for us as well,” he said.
Starbucks, he added, has already been successful with this model.
“We’re already doing it around the world, right? Our license partners outside the United States are already doing these small formats and being very creative. We just haven’t taken that learning and brought it to the states, and now we are. So look, I’m very optimistic for where we can get to,” he added.
What Starbucks looks for in a location
While Starbucks’ willingness to open smaller stores exposes more of the country to the chain, it likely does not change the basic things the company looks for when launching a new location.
“Starbucks typically chooses locations in areas where the median household income is $60,000 or higher. This criterion helps ensure that the local customer base can afford premium coffee products regularly,” according to LoopNet.
The chain also favors locations in employment districts, near other businesses, with multiple access points, on the morning-commute side of the road, and with dedicated parking, added LoopNet.
Daniel Kline/TheStreet
Starbucks faces expansion challenges
While Niccol sounds confident in his plans to add 10,000 new Starbucks locations, the chain will face significant challenges.
“There’s too much supply relative to demand,” GlobalData Managing Director Neil Saunders told Fortune.
As a regular Starbucks customer who has covered retail and restaurants for more than 30 years, I see the chain as having the advantage of scale. I have the Starbucks app on my phone, and when I need coffee, and/or a place to work when traveling, I use that to find the chain’s nearest location.
The chain has a massive digital reach.
“U.S. 90-day active Starbucks Rewards membership reached a record 35.6 million with both rewards member and nonmember transactions growing year-over-year,” Niccol said during the chain’s second-quarter earnings call.
7 Brew does not have an app, while Dutch Bros has 15 million loyalty program members, according to The Motley Fool. In addition, although Dutch Bros operates 1,177 locations across 25 states as of March 31, 2026, according to its website, and 7 Brew has over 750, according to its store locator page, Starbucks has more than 16,000 U.S. cafes.
That makes the chain the default for U.S. coffee shops, and while there are doubts, many analysts don’t scoff at Niccol’s expansion plans.
Starbucks needs to grow away from mornings
Restaurant Business Editor-in-Chief Jonathan Maze believes Starbucks can get there, but noted that the chain would be fighting multiple rivals.
“Dutch Bros and 7 Brew are expanding quickly, as are several smaller brands. Dunkin’ is eyeing the Midwest for growth. The newer entrants in particular are expanding with business models that generate sales all day, rather than with a morning-heavy business. Those concepts are also competing for the same sites,” he wrote on Nation’s Restaurant News.
Starbucks, he added, can meet Niccol’s growth targets, but to achieve them, it has to deliver on some of the CEO’s other promises.
“That makes it vital for Starbucks to build that afternoon business, something the company is doing with a combination of improving operations, more seats, and friendlier in-store environments, and a lot of innovation — particularly with its Refresher beverage platform. That could generate incremental sales and revenue, which makes the return on those smaller locations even better,” he added.
Matthews VP & Associate Director and commercial real estate expert Daniel Gonzalez notes that small-space retail is a strategic response to meet consumer demand amid the rise of online formats.
“A small store can offer a personalized shopping experience that is not seen in big-box locations,” Gonzalez posted. “The limited space forces tenants to be intentional with their product selection, creating a sense of discovery and exclusivity. These features give customers a reason to leave their homes and engage with a brand in a tangible way.”
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