Starbucks, Home of the $4 Latte, is Moving Into Poor Areas

DETROIT (AP) — Starbucks has a point to prove: There's more to the company than selling $4 lattes to rich people.

The Seattle-based coffee giant that has cultivated a reputation for being socially responsible said Thursday it is expanding its effort to put more coffee shops — and create more jobs — in poor neighborhoods.

Starbucks plans to open or remodel 85 stores by 2025 in rural and urban communities across the U.S. Each store will hire local staff, including construction crews and artists, and have community event spaces. The company will also work with local United Way chapters to develop programs at each shop, such as youth job training classes and mentoring.

The effort will bring to 100 the number of "community stores" Starbucks has opened since it announced the program in 2015.

"All of these programs are with the intent of being purposeful and profitable," said John Kelly, Starbucks executive vice president of public affairs and social impact.

Starbucks opened its first community store in Ferguson, Missouri, in 2016, two years after the riots that broke out over the shooting of an unarmed black man by police. It has opened 13 other locations since then, including stores in Baltimore, Chicago, Dallas, New Orleans and Jonesboro, Georgia. Another one will open this spring in Prince George's County, Maryland. Starbucks estimates the shops have created more than 300 jobs.

The project could help the company overcome lingering mistrust in some communities after the furor that erupted in 2018 when two black men waiting to meet someone in a Philadelphia Starbucks were arrested for not ordering anything. Starbucks mandated racial bias training at its 8,000 company-owned stores in response to that incident.

Kelly said the stores reflect Starbucks' core belief in responsible capitalism. The coffee shops are profitable, he said, and have the same menu as regular Starbucks stores.

Prices vary, but not by much. A grande coconut milk latte in Ferguson costs $4.95, according to Starbucks' app. Six miles away, a Starbucks in University City charges $5.25 for the same drink. In Jonesboro, a grande coffee is $2.25. It's $2.45 at a Starbucks in downtown Atlanta.

Employment, community rooms

"This is not charity. These are successful stores," Kelly said, acknowledging neighbors' skepticism.

"We're defying a lot of the stereotypes and we're proud to do so."

Brett Theodos, a senior fellow at the Urban Institute who studies economic development, said he has visited Starbucks' community stores in Chicago and Baltimore. Both were in areas that wouldn't typically attract a Starbucks, he said, and seemed to be providing a service — and, more important, jobs — that those neighborhoods wouldn't otherwise have.

"I can't think either of a retailer, especially one that has more of a discretionary, higher-end purchase, being willing to push into neighborhoods and markets that have less purchasing power," Theodos said. "Starbucks usually appears when a neighborhood has the purchasing power to support it."

He also applauded Starbucks' plan to add community rooms in the stores, since low-income neighborhoods often don't have many places to gather.

But he thinks the impact will be limited. One Starbucks store won't cause a neighborhood to gentrify, he said.

The program is unusual for a big chain. Starbucks has one advantage: Unlike McDonald's, which relies on franchisees, Starbucks owns its standalone U.S. stores and can open them wherever it wants to.

Panera Bread opened a few pay-what-you-can cafes starting in 2010, but all have closed. They weren't profitable.

Starbucks said most of the 85 shops will be new, while some will be existing stores that have been remodeled. The company will consider various factors, including youth unemployment rates and low household income, in deciding where to build them. It will give priority to economically distressed areas.

Starbucks works with the community stores closely to help them succeed. One in Trenton, New Jersey, was struggling to stay open on weekends when there was less traffic from state government. The store manager decided to start an open mic night on Saturdays, which is still going strong 18 months later. The store also draws in customers with events like "Coffee With a Cop."

Starbucks has also learned lessons from previous efforts. In 1998, the company worked with former basketball star Magic Johnson to open stores in urban neighborhoods, but some struggled and closed. Kelly said its new stores are more connected to their communities from the beginning, starting with the hiring local contractors to build them, and are drawing help from local groups like United Way.