Starbucks Opens Its First Tiny Cafe in New York

(Bloomberg) -- Starbucks Corp.'s newest store type is so small it leaves little room for customers.

The location opening Tuesday in New York's Penn Plaza has just 300 square feet (28 square meters) for customers -- a fraction of a traditional Starbucks dining area and roughly the size of a generous living room. It lacks features like menu boards and a pastry case, and has a discreet, out-of-sight cash register. Customers who order via phone ahead of time can pick up their order when it pops up on a digital board. Walk-in orders are welcome but the space is designed to accommodate digital orders.

The idea is simple for the world's biggest coffee chain: Keep sales humming while paying less in rent and wages. Starbucks plans to “over-invest” in labor initially to get the pickup store started -- hire more workers than needed -- but the company sees the new prototype running with a limited crew.

There are plans to open similar stores in cities such as Boston, Chicago and Los Angeles, Katie Young, vice president of urban markets for Starbucks, said in an interview. The first pickup store will be about 1,000 square feet in total, including the kitchen area, compared with 1,800 for an average U.S. Starbucks.

Starbucks reported sales and revenue that topped analysts' estimates on Wednesday, with its key markets of the U.S. and China both helping results. The coffee giant is focusing on controlling expenses in fiscal 2020 amid slower growth predictions for same-store sales. Starbucks said it's investing in artificial intelligence to help staff its restaurants and save labor costs.

To contact the reporter on this story: Leslie Patton in Chicago at lpatton5@bloomberg.net

To contact the editors responsible for this story: Anne Riley Moffat at ariley17@bloomberg.net, Jonathan Roeder, Rob Golum

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