restaurant closings and Retailers and Economy and Restaurants and Real Estate & Retail

10 local Starbucks will be among 600 nationwide closings

July 21, 2008

At least 10 local Starbucks stores are slated to close by early next year as part of a 600-store nationwide purge.

The chain has named only 50 of the stores it plans to close, including two in Indiana, but it has notified the others. Those include at least six in Indianapolis and stores in Carmel, Greenwood and Beech Grove.

About 200 people in central Indiana could lose their jobs in the move since each location employs about 20. Starbucks has said it hopes to move some affected employees to other stores.

The Indianapolis stores set to close include locations at College Avenue and Fall Creek Parkway and 38th and Meridian streets. Others set to close in Indianapolis include 3855 E. 96th St. in the Precedent office park, 5060 W. 38th St., 5945 Crawfordsville Road, and 3801 S. Keystone Ave.

A Starbucks in Carmel's Merchants Square, which sits across the street from another location, also will close. Greenwood is set to lose a store at U.S. 31 and Fry Road, and Beech Grove will lose one at Albany and 17th streets.

Employees at each of the stores confirmed the pending closures. IBJ compiled its list by calling more than 50 stand-alone Starbucks locations in Marion and surrounding counties. An Atlanta-based spokeswoman for Starbucks, Julianna Bowman, would not confirm the list.

The company has announced two closures so far in Indiana: a store at 3021 W. 16th St. in Indianapolis, and a location in Bluffton.

The chain plans to close stores in stages through March 2009, announcing additional closings each month, Bowman said. The phased closures allow Starbucks to work on lease arrangements with landlords and notify employees.

Nationwide, the closings will eliminate 12,000 jobs. The 600 closed stores represent roughly 8 percent of the chain's more than 7,000 locations.

A slowing economy and high gas prices that are squeezing consumers are factors in the closings, but the brand itself also is in trouble, said Bryant Simon, who directs the American Studies program at Temple University and is writing a book about Starbucks.

"When people bought Starbucks, they were buying this image and status, and willing to pay a premium," he said. "They don't see that anymore."

Simon expects the brand's ubiquity actually will help save the company. Starbucks also is expanding outside the United States, where the name still has strong cachet.

When the chain announced plans to close 600 stores, it acknowledged opening too many too close to one another. Most of the stores to be closed opened in the last two years near other stores.

The real estate Starbucks leaves behind locally should be absorbed quickly by other tenants, since most of the coffee shop's stores are well-located and small in size, and many have a drive-through, said Steve Delaney, a principal with locally based Sitehawk Retail Real Estate.

"One thing Starbucks has done a good job at is getting first-class real estate," he said.

Possible suitors include Qdoba, Panda Express, Noodles & Co., Chipotle or Dunkin Donuts. Delaney expects Starbucks will seek non-coffee users initially, but eventually will have to take what it can get. The chain doesn't own its real estate but controls the lease deals, most of which are for at least 10 years.

The chain has not determined a plan for how to dispose of the closed sites or whether to restrict future uses, said Kyle Hughes, a broker with locally based Veritas Realty LLC who represents Starbucks exclusively in Indiana.

He said future uses for the stores will be determined on a case-by-case basis.

"Certain locations could be more difficult than others, but I think there'll be some demand from food or fast-food-related retailers who want drive-throughs," he said.

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