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UPDATE: Starbucks closings could hit 200 workers

July 18, 2008

At least 12 local Starbucks stores are slated to close by early next year as part of a 600-store nationwide purge.

The chain is closing eight stores in Indianapolis and stores in Carmel, Greenwood, Beech Grove and Plainfield. 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, 9642 Allisonville Road, 5060 W. 38th St., 5945 Crawfordsville Road, 3021 W. 16th St., 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, Beech Grove will lose one at Albany and 17th streets, and Plainfield will lose its Metropolis Mall location, 2499 Futura Parkway.

Employees at each of the stores confirmed the pending closures for a story that will appear in IBJ's July 21 issue. The chain would not confirm the list by IBJ's print deadline, but then announced the final closure list after the newspaper went to press.

The chain plans to close stores in stages through March 2009, 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.

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 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 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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