I just read that McDonald's just overtook Starbucks' near decade-long run as the world's most valuable restaurant brand. According to a report by the global marketing consultant firm Brand Finance, McDonald's brand value rose 7 percent in 2025 to US$40 billion, while Starbucks brand value declined 36 percent to US$38 billion. Jason Aten, writing for Inc. magazine (see "McDonald's just got big news in its decades-long battle with Starbucks"), McDonald's has been playing the long game by investing heavily in its McCafé brand by improving the quality of its coffee and adding free WiFi. He writes, "In doing so, McDonald's made a bold move: it started positioning itself as a viable third place."
Let's go back in time to talk about what Aten meant when he referred to McDonald's as a third place. Several years ago, I happened to be speaking at the Risky Business Patient Safety Conference in London at the same time that my sister and her family were touring England. We decided to meet up and see some of the sights together. We had a fantastic time! There's even a picture somewhere of all of us recreating the Beatles' famous Abbey Road album cover. We had planned to meet at a specific location (I can't remember the exact location), and we had to travel separately via the Tube in order to meet ("Mind the Gap"). Apparently my youngest nephew was just a little too late jumping on to the train at the last minute, and so the rest of my sister's family inadvertently left him at the station and went on without him. He was already in high school at this point, but his mobile phone didn't have an international plan. He went to a Starbucks close by and used the free WiFi there to text my sister and find out where they could meet. Very resourceful!
Starbucks used to be a place to hang out and work while enjoying a great cup of coffee. The company actually encouraged customers to come and spend free time in their stores and had done so almost from the beginning. There's a well-known story of how former CEO Howard Schultz wanted to re-create the ambience and experience of a European coffeehouse. Starbucks was originally founded in 1971 by Gerald Baldwin, Gordon Bowker, and Ziev Siegl, primarily as a small coffee shop in Seattle's Pike Place Market. The store specialized in selling whole arabica coffee beans to a niche market. Schultz joined the marketing team in 1982, and during a business trip to Europe, he became fascinated with Italy's coffee culture, particularly the important role that neighborhood espresso bars played in the everyday lives of the individuals living there. When Schultz returned to Seattle, he was excited to recreate the same environment at Starbucks. The small company set up an espresso bar in downtown Seattle, which would serve as the prototype for what Schultz envisioned was the future of the company.
Schultz described his vision, saying, "The idea was to create a chain of coffeehouses that would become America's third place. At the time, most Americans had two places in their lives - home and work. But I believed that people needed another place, a place where they could go to relax and enjoy others, or just be by themselves. I envisioned a place that would be separate from home or work, a place that would mean different things to different people."
The three founders didn't want to become a restaurant business, so Schultz left the company to start his own company, Il Giornale (apparently the Italian word for newspaper). His coffee shop quickly became popular, and to close the circle, Schultz eventually purchased Starbucks from its original founders. Over the next several years, he built Starbucks into what it is today - a global brand developed around the concept of a third place.
Schultz served as Chair and CEO at Starbucks from 1986-2000, 2008-2017, and again as Interim CEO from 2022-2023. Over the years, Starbucks has occasionally lost its way by de-emphasizing the third place concept. Schultz famously came out of retirement in 2008 to resurrect the brand and the company by returning to its roots as a third place for people who love coffee. Schultz famously wrote an open letter to all of the company's partners (what Starbucks calls its employees) in 2018, "Great coffee and our stores will always be catalysts for community. Now more than ever the world needs places to come together with compassion and with love. Providing the world with a warm and welcoming third place may just be our most important role and responsibility, today and always."
As it turns out, always doesn't always mean forever. Over the last several years, Starbucks, under new executive leadership, began to prioritize goals like efficiency and volume over the customer experience. The legendary (often mythical) third place was de-emphasized. As B. Joseph Pine II and Louis-Etienne Dubois write in an online article for Harvard Business Review (see "How Starbucks Devalued Its Own Brand"), "Starbucks is in trouble again...Going to Starbucks isn't what it used to be, and the brand itself isn't what it used to mean. The fundamental problem: Starbucks has been commoditizing itself."
The meteoric rise of Starbucks as a company has been covered in a number of Harvard Business School case studies, articles, and books (see in particular "Starbucks Coffee Company: Transformation and Renewal" by Nancy Koehn and colleagues, as well as Schultz's book, Onward: How Starbucks Fought For Its Life Without Losing Its Soul). What is remarkable is the fact that prior to Schultz and the third place, coffee met almost every definition of a commodity. Any business person in their right mind wouldn't have predicted a company built around specialty coffee would become one of the world's best known brands. The secret recipe for the success of Starbucks really comes down to the third place concept. As Schultz himself suggested in an open letter on LinkedIn to the company leadership, Starbucks has lost its soul. Starbucks, as Vetha Varshini Kavya Alam writes on Medium, has become just another coffee shop. As a result, McDonald's has taken over as the world's most valuable restaurant brand.
Daniel Kline writes (see "Starbucks CEO sounds the alarm on coffee chain's problems") that "Starbucks seems to bounce between two types of CEOs: those who care about coffee and atmosphere and those who worry about efficiency and operations...Laxman Narasimhan and Kevin Johnson, both of whom followed Schultz in the top spot, always seemed more concerned about operations than coffee." Starbucks' new CEO, Brian Niccol, who was CEO of Chipotle prior to becoming CEO at Starbucks on September 9, 2024, appears to be a hybrid of the two. He wrote in an open letter shortly after taking over the company, "We're refocusing on what has always set Starbucks apart - a welcoming coffeehouse where people gather, and where we serve the finest coffee, handcrafted by our skilled baristas."
Time will only tell whether Niccol can keep operations smooth and efficient, while at the same time emphasizing the quality of the customer experience. It's a position (and predicament) that many leaders in health care know all too well! At least for the moment, however, it seems that Starbucks can no longer claim to be the third place.