Starbucks is closing all locations for ’racial-bias education,’ and it could cost the coffee giant more than $10 million

Starbucks is closing all of its US locations for the afternoon of May 29.

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Starbucks is closing all of its US locations for the afternoon of May 29.
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Getty Images/Zhang Peng

  • Starbucks is closing all locations nationwide for the afternoon of May 29 for “racial-bias education” training.
  • Rough calculations indicate the closures will cost Starbucks $12.4 million in lost sales.
  • “I’ve always viewed this and things like this as not an expense, but an investment in our people and our company,” Executive Chairman Howard Schultz said in an interview with CBS.

Starbucks is closing all of its 8,000 locations across the US for the afternoon of May 29 for “racial-bias education” training.

The decision to temporarily close stores comes after two black men were arrested in a Philadelphia Starbucks when they tried to use the bathroom without ordering anything. Footage of the arrests went viral, sparking boycott threats.

Howard Schultz

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Howard Schultz
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Stephen Brashear/Getty

Shuttering all stores for an afternoon can be a costly proposition for a company. In an interview with CBS, Executive Chairman Howard Schultz said that the closures would cost the company “millions.”

“I’ve always viewed this and things like this as not an expense, but an investment in our people and our company,” Schultz said.

Bloomberg calculated that a half-day shutdown would cost the company $16.7 million, based on the assumption that all US stores make $35.5 million per day, adding up to $14 billion in sales in 2017.

However, this calculation doesn’t take into consideration the fact that Starbucks will be closing locations in the afternoon, while Starbucks continues to be busiest in the morning.

In 2010, an executive said that 70% of Starbucks sales come before 2 p.m. – something the company has been trying hard to fix. Success has been mixed, and Starbucks doesn’t break out sales by daypart, so we can estimate a roughly 5% increase on this figure.

A loss of 35% of sales across the US comes out to roughly $12.4 million in lost sales. And, that ignores the cost of paying all employees to come in for a mandatory training in the afternoon – and lost sales due to customer confusion.

While the decision to close stores to train employees on issues of racial discrimination is unprecedented, Starbucks has done something similar once before under Schultz’s leadership – and it sacrificed roughly $6 million.

In February 2008, Starbucks closed all 7,100 of its stores for three and a half hours to train employees. Schultz had recently returned as CEO to turn the company around as it struggled to repair its reputation and grow sales after a period of overexpansion.

The closures cost the company an estimated $6 million, according to Schultz’s 2011 book “Onward: How Starbucks Fought for Its Life without Losing Its Soul.” However, Schultz maintained that it was worth the financial cost and the mockery the company endured to put Starbucks back on the road to recovery.

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