Case Study: Starbucks' Bathroom Crisis

An analysis of Starbucks' 2018 reputation crisis from a PR perspective and recommendations for future crisis communications.

Introduction

Every day people use Starbucks as a third place between their home and the office to enjoy a warm cup of coffee and a flaky pastry while conducting business meetings, catching up with friends, and studying for exams amongst many other activities. However, on April 12, 2018, two black men waiting for a business colleague in a Philadelphia Starbucks did not feel so welcomed. One of the men asked to use the bathroom and was told the bathroom is only for paying customers. The men did not want to purchase anything until their colleague arrived and were asked to leave by the manager. When they would not leave the manager called the police who came and arrested them. The arrest was filmed by another customer and posted to her Twitter. The tweet of the video was retweeted nearly 170,000 times leading to the controversy going viral (Kamnetz, 2018). The arrest and the video led to an immense public outcry. The Facebook of the Philadelphia cafe went from zero negative reviews on April 12th to over 1,200 negative reviews just two days later on the 14th (Kamnetz, 2018). The backlash continued with protests outside of the Philadelphia Starbucks, calls to boycott the brand, and an immense amount of negative online word of mouth creating one of the biggest social media crisis of the year.

While the arrest of the two men created a public relations crisis for Starbucks, the event also provided an opportunity for Starbucks to develop, learn, and illustrate the company’s key values with the eyes of the world watching closely. This crisis established an ideal setting for Starbucks to use discourse of renewal theory. Furthermore, examining specifically organizational learning and prospective versus retrospective vision will provide an ideal framework to study

Starbucks’ crisis (Ulmer, Sellnow, & Seeger, 2018). By focusing on the future and not on image repair Starbucks has an opportunity to emerge from this crisis with a stronger culture and foundation.

History and Background

Starbucks Coffee opened its doors for the first time in 1971 in Seattle, Washington. Since Starbucks’ founding, they have set up shop in 76 different countries and have over 7,500 stores and 150,000 employees in the United States alone. In the 2017 fiscal year, Starbucks’ revenue grew to $22.4 billion. The company has secured many loyal customers with 14.9 million active My Starbucks Rewards members (Smith, 2018). According to Starbucks’ chairman Howard Schultz, Starbucks is “a social yet personal environment between one’s house and job” that provides a space for connection between individuals and oneself (​McGregor & Siegel, 2018, para. 10). Starbucks aims to bring this idea of a “third place” to all aspects of its business and its operations. The mission of Starbucks Coffee strives: ​“To inspire and nurture the human spirit – one person, one cup and one neighborhood at a time” (Starbucks Mission, 2015). Starbucks’ mission is further reflected and outlined through its values.

Examining this case through Starbucks’ mission and values illustrates a disconnect between the values and the treatment of the two black men in the Philadelphia location, but also provides a framework for recovery from the crisis using discourse of renewal theory. One of Starbucks main values is to create a “culture of warmth and belonging” in an effort to make all feel welcome​ ​(Starbucks Mission, 2015). The actions of the cafe manager in calling the police and the subsequent arrest of the two men works directly against Starbucks’ values. Furthermore, since the incident was filmed and went viral on social media not only did the two men receive the message that Starbucks is not a safe place to gather, but also the countless number of people who viewed the video received a similar message that not everyone is welcome at Starbucks.

Another disconnect between the Philadelphia event and Starbucks’ values lies in the value to connect with its customers using dignity and respect (Starbucks Mission, 2015). The manager's actions of calling the police on the men without telling them and without just cause was undignified and exemplified a lack of respect for the men. The incident showed that the manager and therefore also Starbucks thought of the men as less than the other patrons in the establishment. After the event, while speaking at the Atlantic Council in Washington, D.C. Schultz stated that he did not want customers to feel that they are being denied bathroom access “because [they] are less than” (Gajanan, 2018, para. 3). This idea of treating the two men as unequal to the other customers has a direct impact on the racial aspect of this controversy. The crisis sparked immense public outcry regarding racial profiling of the two men. Racial disparity and tension within the U.S. is a present and contentious issue. The crisis further brought to light and reminded the nation of this issue we all face. While Starbucks’ values implore dignity and respect, the organization must keep these at the forefront not only when dealing with a crisis such as this, but also in creating a culture and foundation that prevents issues such as these from arising.

Whether it be serving coffee or creating a “third place” for their customers Starbucks aims to provide “the very best in all [they] do” and to hold themselves accountable of the outcomes (Starbucks Mission, 2015). How the manager handled the situation with the two men in Philadelphia was far from the best possible outcome of the situation and from the high-quality service Starbucks pledges to its customers through their values. Starbucks values reflect the idea that “consumers expect top-notch service and respect” when interacting with any organization (Kamnetz, 2018, para. 3). While the promise of this high-quality service fell short due to the manager’s actions, the company has the opportunity to, as they describe in their values, hold themselves accountable for the consequences of their actions and learn and grow from this crisis.

Starbucks’ also promises through its values to act with courage, challenge the status quo, and explore “new ways to grow [the] company and each other” (Starbucks Mission, 2015). The manager’s actions on behalf of Starbucks did not reflect this value that the company claims to hold. The manager was certainly not courageous in handling the situation and she maintained the status quo of racial disparity that exists in our nation. The Center City neighborhood in which the Philadelphia Starbucks was located has an African American population of 3% however, in this area African Americans make up 67% of all police stops (Jan & ​Siegel, 2018)​. In order for an organization or an individual to be able to challenge the status quo, as Starbucks pledges to do one must first examine and understand one’s environment. Furthermore, the process of environmental scanning must be constant and ever-changing. The aspect of the value that calls for growth and learning plays a significant and guiding role in handling the crisis. Discourse of renewal theory provides a framework to examine this crisis that Starbucks faced and illustrate both how Starbucks values were not upheld, but also how to use Starbucks’ existing values as a guideline for the development of the organization.

Main Narrative

Starbucks’ initial response to the crisis came two days after the event, when Starbucks apologized to Donte Robinson and Rashon Nelson, who were arrested, via a press release and a tweet. The press release announced that Starbucks would be investigating the situation further and condemned the event as having a “reprehensible outcome” (Johnson, 2018a, para. 1). The press release, signed by CEO Kevin Johnson, was condemned in the media as lacking strength, being too legalistic, and not connecting strongly enough with the issue of race or with the black community. Later in the day on April 14th, Johnson released a separate statement to employees apologizing for the event and stating that Starbucks will not allow racial profiling or discrimination (McGregor, 2018).

On April 16th, two days after Starbucks released its initial statement protesters began demonstrating outside of the Philadelphia Starbucks. Also, on this day the manager who called the police on the two men resigned from the company (Czarnecki, 2018).

While tensions between the public and Starbucks were high, this tension heightened when a video was released of a California Starbucks denying a black man access to the bathroom and then allowing a white man access to the bathroom when neither had made a purchase. The video went viral and was viewed over 700,000 times on Facebook (Washington Post, 2018). In the video, the man who was denied access, Brandon Ward, can be heard asking the manager, “Is it my skin color?” (Washington Post, 2018, para. 11). The video, especially due to its racial nature, caused further public upset in the form of protests, media coverage, and negative online word of mouth.

The day after the release of the second viral video Starbucks announced that on May 29th it would close its over 8,000 stores for four-hours and conduct racial bias training for its 175,000 employees. ​By Starbucks closing its doors for a day it caused a $16.7 million loss in sales (Czarnecki, 2018). When questioned about whether or not the racial bias training could make a difference or was just a marketing stunt Johnson responded by stating that the training is only a “first step” (​McGregor, 2018). On the same day, Johnson released a video statement regarding the crisis and apologizing to Nelson and Robinson and all affected stakeholders. In the video, Johnson promises to “learn from this and be better for it” and takes personal accountability for fixing and remedying the problem, in order to prevent a similar situation from occurring again (Johnson, 2018b). He continues by explaining he alone is responsible for the incident and not the manager of the Philadelphia Starbucks. Through both, the announcement of the employee training and the video message Starbucks addresses many different stakeholders including Nelson and Robinson, customers, the Philadelphia community affected by the crisis, and employees. Both of these statements communicated with these stakeholders in an effort to establish that Starbucks was listening to their concerns and taking the matter seriously.

On April 18th, the media coverage and public outrage intensified with the release of the 911 call and a woman named Holly Hylton being identified as the manager behind the call. The 911 call confirmed that the manager did not warn the two men that she was calling the police.

Also, Hylton’s past racially insensitive Facebook posts about Spanish-speaking customers were brought to light (​Czarnecki, 2018)​. Furthering the topic of race in media coverage, one of Hylton’s former black employees came forward and described being mistreated by her former employer. The former employee stated that Hylton had demoted her and cut her pay without proper reason. The former employee continued by claiming that Hylton “always found a reason to kick Black people out” of the cafe who had not made a purchase and did not treat white people who had not made a purchase in the same manner (Mitchell & Mayo, 2018). The surfacing of information about Hylton heightened media and stakeholder attention regarding the crisis.

In a further attempt to communicate with stakeholders and illustrate to the public that Starbucks was trying to learn and grow as an organization from this experience the chairman, Howard Schultz appeared on CBS to be interviewed by Gayle King. During the interview Schultz, in reference to the racial bias training, stated that “this will not be a one-day event... we are going to stay with this... and we are going to transform the way we do business” (CBS News). Through Schultz’s interview, Starbucks is trying to communicate to stakeholders including customers, those directly affected, and employees that they plan to use this crisis as an opportunity for learning and to improve the entire company.

Even though Starbucks is continually communicating with the public in an effort to illustrate that they are trying to take responsibility for the incident, public outcry is still significant. On April 19, 100 members of the organization Omega Psi Phi, which Nelson used to be a member of, protested outside of the Philadelphia Starbucks (​Czarnecki, 2018)​. Simultaneously, the hashtags “WaitingWhileBlack” and “BoycottStarbucks” were trending on Twitter. Using the hashtags people tweeted telling others to stop purchasing Starbucks, asking the shareholders and board of directors to take a stand, and stating that the manager needs to make a direct apology (Detrick, 2018). This public outcry in the form of hashtags effects not only Starbucks and its employees, but also Starbucks’ shareholders.

On April 26th, Starbucks’ stock fell 3%. In an attempt to ease shareholders’ fears of the crisis hurting the company financially, Johnson announced on April 26th that even though it is still early the crisis has not impacted sales. Johnson cited a 2% sales increase in the second quarter. However, Johnson’s prediction may have been premature with experts stating the impact of the crisis on sales figures would not show up until next quarter (​Meyersohn & Wiener-Bronner, 2018). In June, two and a half months after the crisis occurred Starbucks announced that it would be closing 150 stores due to poor performance. The closing of the stores is three times the amount that Starbucks has closed in the past (Kamnetz, 2018). Johnson over reassured worried shareholders, resulting in communicating premature and inaccurate information ultimately harming the company further.

On April 30th, Starbucks made the decision to no longer include the Anti-Defamation League (ADL) in their racial bias training. The ADL is an organization that fights anti-semitism. Starbucks announced that the ADL would now only serve in an advisory capacity and not contribute curriculum to the program. Starbucks’ decision came after black lives matter leaders, anti-police terrorism project leaders, and other political organizations criticized the organization for including the ADL. However, Starbucks spokesperson, Jaime Riley, denied the decision was due to political pressures. Riley continued by emphasizing that Starbucks’ progress is ongoing and the ADL would be included in long-term efforts (Hanna, Cadelago, Gerstein, Shafer, Carter, & Blau, 2018). Starbucks’ communications centered on future plans for improvement rather than focusing on the past.

Continuing their efforts for future-facing communication on May 2nd it was revealed that Starbucks offered to pay for Nelson and Robinson’s college tuition. Nelson and Robinson would be allowed to complete their college degrees through Starbucks college achievement plan at ASU online. This plan is also offered to Starbucks employees. The plan pays full tuition at ASU online for employees who work at least 20 hours a week. The agreement between Starbucks and the men also offers the opportunity for Nelson and Robinson to be a part of “the company’s long-term diversity and equity efforts” (Leingang, 2018, para. 8). Starbucks’ efforts illustrate to their stakeholders that they have a commitment to taking responsibility for what happened to Nelson and Robinson in one of their stores and a commitment to bettering the company as a whole by including the men in long-term efforts of organizational learning. Furthermore, the media coverage revolving around the offer of college tuition also highlighted a positive opportunity Starbucks already offers its employees.

On May 18th, Starbucks created a new policy called the “Third Place Policy” (​McGregor & Siegel, 2018). ​The new policy allows all guests to use the cafes, including the bathrooms, regardless of whether or not they have made a purchase. Schultz explained that Starbucks goal is “to make all people feel at home” in its cafes (Gajanan, 2018, para. 2). The policy change aims to communicate with Starbucks stakeholders, specifically their customers that the coffee chain should be welcome and open to everyone. Also, the policy change directly communicates to customers that Starbucks is working to improve and change. However, the announcement of the new policy was met with criticism. Critics feared the cafes would not have room for paying customers and the bathrooms would “turn into homeless shelters and drug havens” (Jargon, 2018, para. 1). In a statement, Schultz ensured customers that cafes would not turn into public restrooms and that employees have detailed instructions on how to proceed if a patron’s behavior is disruptive or dangerous. The employee instructions include having employees confirm with a coworker as to whether or not a behavior is disruptive and only calling the police if the situation becomes unsafe (Jargon, 2018). Also, Schultz emphasized that he wants to make sure Starbucks is always making the right decision to hand the restroom key over to patrons (Gajanan, 2018). Starbucks’ response to the criticism of its new policy acknowledged the concerns of its customers, while also sharing information on how Starbucks plans to ideally implement the policy. Furthermore, Schultz reinforced the message that Starbucks is open to all.

Starbucks closed its 8,000 U.S. stores for racial bias training on May 29th. The employee training was four hours long and featured a video by filmmaker Stanley Nelson ​(​Czarnecki, 2018). Starbucks worked with former Attorney General Eric Holder and Sherrilyn Ifill and the president of the NAACP Legal Defense and Education Fund to develop the curriculum (​Meyersohn & Wiener-Bronner, 2018). The curriculum warned employees that discrimination and bias threaten Starbucks’ foundational idea of the “third place.” Furthermore, the guidebooks used by employees during the session were titled “Starbucks: the third place.” Even though Starbucks is facing a crisis they have also been given an opportunity “to promote their founding missions... when the world is watching [very] closely” (​McGregor & Siegel, 2018, para. 5). The racial bias training allowed Starbucks to not only reaffirm the organization's values within the organization, but also present to the world what Starbucks stands for and how it plans to improve.

Discussion

The crisis provided an opportunity for Starbucks to grow and look toward the future presenting discourse of renewal theory as the ideal lens to analyze the case. A significant aspect of appropriately implementing discourse of renewal theory is having organizational leaders and spokespeople who are focusing on the future (Ulmer, 2018). As the two main spokespeople during the crisis, CEO Kevin Johnson and chairman Howard Schultz focused the communication efforts on learning from the crisis and bettering the organization. Schultz claimed that the crisis was “one of the most important transformational moments in the history of our company” (Schultz, 2018). Both Schultz and Johnson provided the necessary optimistic view that is needed after a crisis in order to focus efforts on the future and not the past. Furthermore, in discourse of renewal, it is imperative that time is not spent placing blame. In Johnson’s video apology he stated that the manager of the cafe is not to blame and took full responsibility for the crisis. In order for discourse of renewal to be successful, leaders must “move the organization and its stakeholders forward” instead of trying to escape blame and focus on the past (Ulmer, 2018, p. 184).

Crisis brings to light the character and ethics of an organization. While one of Starbucks’ core value’s is to be customers’ “third place” the crisis illustrated that the organization does not live up to this promise. However, an important aspect of discourse of renewal is using an organization’s values to combat a crisis (Ulmer, 2018). By implementing a new, inclusive bathroom policy and making the main focus of the racial bias training the idea of the “third place” Starbucks utilized its pre-existing values to guide their decisions in organizational learning and crisis recovery.

Organizational learning must take place for discourse of renewal to be effective in the long-term. The crisis forced Starbucks “to confront its problems or deficiencies” and ignite the opportunity for change within the organization (Ulmer, 2018, p. 185). According to Schultz, the crisis “highlighted for us that we have more work to do as a company” ((Schultz, 2018). In order to communicate the lessons learned by the organization with stakeholders, Starbucks implemented both internal policy change and participated in two-way asymmetrical communication with stakeholders. Starbucks opened communication with Nelson and Robinson by offering the opportunity for them to join their team and have their voices heard in regards to diversity and bias learning. Also, Starbucks’ partnership with organizations with special expertise for their racial bias training curriculum showed stakeholders that the organization is learning. Illustrating to stakeholders that Starbucks is learning from the crisis “give[s] these groups a vision of the post-crisis future to follow” and provides reassurance that the crisis won’t happen again (Ulmer, 2018, p. 191). While Starbucks’ communicates that it will continue to learn and grow from this situation, the organization must continually and actively change in order to avoid a similar crisis in the future.

Conclusion

For Starbucks to fully utilize discourse of renewal theory and prevent a similar crisis from happening again they must employ systematic learning. Systematic learning creates a “renewing crisis response” and allows an organization to learn before a crisis occurs and therefore avoid a crisis (Ulmer, 2018, p. 185). Starbucks’ bathroom crisis highlighted issues within the organization and gave the company the opportunity to begin long-term learning and change management. However, just eight months after the initial crisis a Starbucks barista wrote a racist name on a Filipino-American customer’s drink. In response, Starbucks released an apology to the customer and stated they have a “zero-tolerance policy” in regards to discrimination and are conducting an investigation into the incident (Deabler, 2018, para. 15). While Starbucks spokespeople say that the company is learning from the bathroom crisis, the organization is still struggling with racial issues in its cafes. In order for Starbucks’ promises of growth and the “third place” to be more than a public relations stunt, the company must find actionable solutions to the issues it faces.

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Washington Post. (2018, April 18). A Starbucks in California treats black and white men differently, according to accuser's video. Retrieved from https://www.latimes.com/business/la-fi-starbucks-bathroom-20180418-story.html Welcome to your blog post. Use this space to connect with your readers and potential customers in a way that’s current and interesting. Think of it as an ongoing conversation where you can share updates about business, trends, news, and more.