Starbucks shuts down another San Francisco cafe

Starbucks has pulled the plug on another San Francisco cafe, marking the latest in a string of closures that has stripped the city of more than a dozen locations in just two years.

The shop at 295 California Street, a fixture downtown for nearly two decades, shut its doors Friday, according to the San Francisco Business Times.

It’s at least the sixth Starbucks to close in the city since last September — the fourth to close so far this year. It also comes on top of seven others the coffee chain shuttered in 2023.

The closures reflect a mix of economic pressure, shifting consumer habits and a broader rethink of the company’s store strategy.

Rising labor costs are part of the challenge, especially in San Francisco, where wages are among the highest in the country.

Like other quick service restaurants operating in the Golden State, Starbucks is bound by a new fast food minimum wage law to pay their employees $20 an hour — up from $16.50 an hour before the legislation went into effect on April 1, 2024.

A study published last month by the National Bureau of Economic Research found that the minimum wage hike has cost the state thousands of jobs.

But a spokesperson for California Gov. Gavin Newsom questioned the veracity of the study, saying the findings “have not been peer-reviewed or been subject to the review by the NBER Board of Directors that accompanies official NBER publications.”

Aides to Newsom point to a UC Berkeley study which found “no negative wage or employment effects” as a result of the new law.

San Francisco has experienced a sharp wave of retail closures in the past two years, with national chains, luxury brands and grocery stores citing theft, high operating costs and sluggish downtown recovery as key factors.

Major names including Rolex, Macy’s, Walgreens, Target, Whole Foods and Nordstrom have either shut locations or scaled back operations, often pointing to surging retail theft and safety concerns that have driven up security expenses and deterred customers.

While the city and state have enacted new anti-theft laws and revitalization efforts, the ongoing loss of storefronts underscores the steep challenges in restoring San Francisco’s retail core.

William Blair analyst Sharon Zackfia told the San Francisco Standard that high labor costs and the slow post-pandemic recovery make “some of the economics tough” for Starbucks in the city.

“It’s no secret that labor is just innately more expensive in San Francisco, and the city proper has been lagging in terms of return-to-work and office occupancy,” Zackfia told the Standard.

Some locations were lost when leases expired. Others were cut to maintain what the company calls a “healthy store portfolio,” a move that often means trimming underperforming sites or reducing overlap in areas where shops compete with one another.

That strain is compounded by the city’s slow post-pandemic recovery, with office towers still far from full.

William Blair analyst Sharon Zackfia told the San Francisco Standard that these factors make “some of the economics tough” for Starbucks in the city.

Service has also become a sticking point. Starbucks recently logged its sixth straight quarter of falling same-store sales — a measure of revenue at cafes open for at least a year — and saw transaction sizes shrink.

Zackfia told the Standard that slower service times have frustrated customers.

“When speed and service suffer, people start to question why they’re spending as much as they are on their beverage,” she said.

In San Francisco, the coffee giant is also abandoning its pickup-only model, where customers order through an app rather than at the counter.

Starbucks CEO Brian Niccol announced the company will scrap the format nationwide by 2026, describing it as “overly transactional and lacking the warmth and human connection” Starbucks wants to deliver.

Between 80 and 90 such locations across the US will either close or be converted to traditional cafes. One of those could be the Drumm Street shop near the Embarcadero, though Starbucks has not confirmed its fate.

Some longtime customers see the closures as a sign of overexpansion.

Real estate experts have noted that Starbucks, like other major retailers, opened too many stores clustered closely together, according to the Standard.

That led to an eventual need for consolidation, with the hope that remaining cafes could absorb business from those that shut down.

The trend isn’t unique to Starbucks. Drugstore chains like CVS and Walgreens, which also once expanded rapidly in San Francisco, have closed dozens of locations in recent years.

The city now has 40% fewer pharmacies than it did a decade ago.

Still, the Starbucks pullback is striking. In October 2023, the company operated 59 company-owned locations in San Francisco. By August 2025, that number had fallen to between 35 and 37, not counting outlets inside other retailers like Target or Safeway, which are licensed rather than company-run.

That means the city has lost roughly half its Starbucks in ten years and about 13 to 15 in just the past two.

For customers, the changes have been bittersweet.

Mike, a regular at the California Street cafe, called the closures a revenue-driven decision.

“You have to minimize liabilities,” he told the Standard, adding that younger generations might also be steering away from large corporate chains in favor of independent coffee shops.

Competition from local favorites also plays a role. One customer suggested the Financial District’s options, like Devil’s Teeth Baking Company, may be drawing people away from Starbucks.

Another speculated that new owners of certain buildings, including the California Street property, might have plans to overhaul the retail space.

Whether the closures will stop anytime soon remains unclear. The company still has 37 storefronts across the city, but with more pickup-only cafes likely to close or convert, the total could drop further.

Niccol has said the company is working to improve speed and service by hiring more staff, but in high-cost, slow-to-recover cities like San Francisco, even that strategy may have limits.

The Post has sought comment from Starbucks, the San Francisco mayor’s office and Newsom’s office.