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Dutch Bros’ Barone on Driving Strong Sales Gains · Choppin’ It Up by Bloomberg Intelligence

• 0:13
  Speaker 1: Welcome to Chopping It Up.
• 0:15
  Speaker 2: I'm Mike Hale, the Senior Restaurant and Food Service Analyst
• 0:18
  Speaker 2: at Bloomberg Intelligence. Today, we're joined by Dutch Bros CEO,
• 0:22
  Speaker 2: Christine Barone. Dutch Bros, which trades under the ticker BROS,
• 0:27
  Speaker 2: specializes in coffee and energy drinks and is one of
• 0:30
  Speaker 2: the fastest growing beverage chains in the U.S.
• 0:33
  Speaker 1: Thanks for doing this, Christine.
• 0:35
  Speaker 3: Mike, thanks so much for having me.
• 0:37
  Speaker 2: Yeah, I've been looking forward to chatting with you. Our
• 0:40
  Speaker 2: mutual friend, Lauren Bailey, told me I needed to meet
• 0:43
  Speaker 2: you back in your True Foods Kitchen days.
• 0:46
  Speaker 1: So this is a long time coming.
• 0:49
  Speaker 3: Wonderful. Well, she is a great friend and a great restaurateur.
• 0:53
  Speaker 1: Yeah, Lauren's the best. And before we jump in.
• 0:57
  Speaker 2: I'd like to give a shout out to my former intern,
• 0:59
  Speaker 2: Kaya Nyack, her summer project, like I told you, was
• 1:02
  Speaker 2: on Dutch Bros. And she gave me some great suggestions
• 1:05
  Speaker 2: for this discussion since... My associate Amir and I don't
• 1:08
  Speaker 2: cover the company just yet. So, you know, Dutch Bros
• 1:12
  Speaker 2: earnings beat the sell sides to Q estimates on the
• 1:15
  Speaker 2: top and bottom line. And you raised 2026 guidance, but
• 1:19
  Speaker 2: apparently missed the buy sides bogey causing the stock to
• 1:22
  Speaker 2: sell off. What would you say investors are most concerned
• 1:26
  Speaker 2: about following the report?
• 1:28
  Speaker 3: Yeah, so as we look forward, we had a wonderful 2Q.
• 1:32
  Speaker 3: We really beat our metrics across the board. We're growing
• 1:36
  Speaker 3: revenue at 32%. You know, we saw a 28% increase
• 1:41
  Speaker 3: in our EBITDA, so really awesome growth. Our same-shop sales
• 1:45
  Speaker 3: came in at 5.8%, which was above our estimates. And
• 1:49
  Speaker 3: in addition to that great growth, we were also able
• 1:52
  Speaker 3: to raise guidance for the rest of the year. And
• 1:56
  Speaker 3: so as we look at that, we really had a
• 1:57
  Speaker 3: fabulous quarter. I think that as we look ahead, investors
• 2:00
  Speaker 3: are looking at lots of different pieces of our business
• 2:03
  Speaker 3: as they analyze what we're doing. I think over the
• 2:06
  Speaker 3: long term, what we're really focused on is continuing to
• 2:10
  Speaker 3: grow our shop growth at a very healthy rate. Our
• 2:14
  Speaker 3: long-term algorithm is at that mid-teens percentage for that growth.
• 2:19
  Speaker 3: And I think our investors are pleased with how we're
• 2:21
  Speaker 3: doing on that path and on that growth. And we
• 2:25
  Speaker 3: also want our customers to continue to love us and
• 2:27
  Speaker 3: come back to us. And so as we grow, we're
• 2:29
  Speaker 3: always looking for that healthy same shop sales growth as well.
• 2:34
  Speaker 3: And we've had a number of initiatives as we go
• 2:37
  Speaker 3: forward to really focus on that. And I think when
• 2:40
  Speaker 3: you look throughout the year, really what's happening is we
• 2:42
  Speaker 3: had an incredible Q3 and Q4 in 2025. We've had
• 2:48
  Speaker 3: eight consecutive positive transaction quarters. We've had 13 consecutive quarters
• 2:54
  Speaker 3: of positive same shop sales. And so, you know, that
• 2:57
  Speaker 3: plane just gets steeper as we go throughout the year.
• 3:00
  Speaker 1: Yeah.
• 3:01
  Speaker 2: And that's enough to have some hedge funds sell the
• 3:03
  Speaker 2: stock if they see tougher comps coming on the horizon.
• 3:07
  Speaker 1: So that's really good color.
• 3:09
  Speaker 3: Yeah, I think the important thing that we keep seeing is,
• 3:11
  Speaker 3: you know, our long-term investors are really focused on that
• 3:14
  Speaker 3: incredible TAM that we have in front of us and
• 3:16
  Speaker 3: how much growth we still have. And doing that in
• 3:20
  Speaker 3: such a healthy way with such strong customer sentiment is
• 3:23
  Speaker 3: really what's going to matter over the long term.
• 3:26
  Speaker 1: Yeah, for sure.
• 3:27
  Speaker 2: And we'll dig into that same-store sales and net unit
• 3:30
  Speaker 2: growth a little bit further into the pod.
• 3:33
  Speaker 1: But yeah, You know.
• 3:35
  Speaker 2: How do you plan to respond to greater competition from Starbucks? And,
• 3:39
  Speaker 2: you know, energy drinks are popping up everywhere right now.
• 3:42
  Speaker 2: So how are you looking to respond to that?
• 3:46
  Speaker 3: Yeah, so we've been around since 1992. And so we
• 3:50
  Speaker 3: were founded in Grants Pass, Oregon, back in 1992 in
• 3:54
  Speaker 3: the Pacific Northwest, which has always been such a competitive
• 3:58
  Speaker 3: space for the coffee business. And so I think one
• 4:02
  Speaker 3: of the things about competition that, you know, with the
• 4:06
  Speaker 3: longevity of that we have been competing in the beverage markets,
• 4:10
  Speaker 3: we're really at an advantage where we've seen all different
• 4:13
  Speaker 3: types of things. So We've seen larger players come in
• 4:17
  Speaker 3: and enter specialty beverage. We've seen different brands come and go. And,
• 4:22
  Speaker 3: you know, as I think about what the future looks like,
• 4:26
  Speaker 3: that the overall market is really evolving. Oftentimes it's that
• 4:29
  Speaker 3: newest generations coming into the market. So we see Gen
• 4:32
  Speaker 3: Z coming into the market now. They really start to
• 4:36
  Speaker 3: shape beverage trends for the next decade or more to come.
• 4:41
  Speaker 3: And what we're seeing is Gen Z is coming into
• 4:43
  Speaker 3: this market Definitely a lot of iced. They're drinking more energy.
• 4:48
  Speaker 3: They want it customized. They really want to make it
• 4:51
  Speaker 3: their own. And we are so well positioned to compete
• 4:55
  Speaker 3: in this long-term market as evolves in that way. We
• 4:58
  Speaker 3: are the category creator of customized energy. Our ability to
• 5:03
  Speaker 3: customize across our platform is really unparalleled. So our shop
• 5:08
  Speaker 3: is just set up in the right way to do that.
• 5:11
  Speaker 3: Our beverages were 90% or so iced. So really, really
• 5:15
  Speaker 3: high across both our coffee beverages, our energy beverages, and
• 5:19
  Speaker 3: our other platform like teas and sodas and other beverages.
• 5:23
  Speaker 3: So really excited about where we are and our ability
• 5:26
  Speaker 3: to compete in this market and really grow share and
• 5:29
  Speaker 3: continue to take share in this market.
• 5:31
  Speaker 2: Yeah, I don't think it's in any accident that, you know,
• 5:33
  Speaker 2: Dutch Bros and Starbucks and Pete's Coffee and all these
• 5:36
  Speaker 2: great brands started out West.
• 5:39
  Speaker 3: Yeah.
• 5:40
  Speaker 2: Is there one KPI you think investors maybe are paying
• 5:43
  Speaker 2: too much attention to right now and maybe another that
• 5:45
  Speaker 2: you think they're underappreciating?
• 5:47
  Speaker 3: Yeah, you know, I think that as we are growing,
• 5:50
  Speaker 3: it is really important to look at how we are
• 5:53
  Speaker 3: building things for the long term. And so, you know,
• 5:57
  Speaker 3: I think as far as KPIs go, we look a
• 5:59
  Speaker 3: lot at our overall revenue growth and then our ability
• 6:03
  Speaker 3: to do that profitably. So our EBITDA growth. And the
• 6:06
  Speaker 3: reason why those two metrics are quite important to us
• 6:10
  Speaker 3: is that as we grow, we really are taking share. Like,
• 6:14
  Speaker 3: as you look at what we are being valued on
• 6:17
  Speaker 3: ultimately is we're going to continue to get larger. We'll
• 6:20
  Speaker 3: continue to take beverage share. And I think, you know,
• 6:23
  Speaker 3: I think in the short term, and it makes a
• 6:25
  Speaker 3: lot of sense that there's a lot of focus on
• 6:28
  Speaker 3: the same shop sales. We've also done really well with
• 6:31
  Speaker 3: those metrics too. But I do think that overall revenue growth,
• 6:35
  Speaker 3: which encompasses both our same shop sales and our shop growth,
• 6:40
  Speaker 3: is really an indicator of what we're trying to do
• 6:42
  Speaker 3: over time.
• 6:44
  Speaker 1: And Dutch Rose has a unique culture.
• 6:46
  Speaker 2: So can you talk a little bit about that culture
• 6:48
  Speaker 2: and how you've tried to impact it during your tenure here?
• 6:52
  Speaker 3: Yeah, so our culture is absolutely wonderful. Certainly the reason
• 6:56
  Speaker 3: that I wanted to come on board and join TRAV
• 6:59
  Speaker 3: and be a part of this wonderful story. So when
• 7:04
  Speaker 3: I look at our culture, I think, you know, at
• 7:06
  Speaker 3: our core, we are helping our team become the best
• 7:09
  Speaker 3: versions of themselves. That's across our shops. It's across HQ.
• 7:15
  Speaker 3: And I think ultimately every day that we fulfill that
• 7:17
  Speaker 3: promise of helping each other become the best versions of ourselves.
• 7:22
  Speaker 3: that that's a really neat place to be in. And
• 7:25
  Speaker 3: so as I've come on board with the culture, I
• 7:28
  Speaker 3: think a number of things I think is making sure
• 7:30
  Speaker 3: that that strength of culture that we've always had in
• 7:33
  Speaker 3: our shops, that we're also matching that in HQ. And
• 7:38
  Speaker 3: so we've done a lot of work. One of the
• 7:40
  Speaker 3: things I first did when I came on board was
• 7:43
  Speaker 3: have the leadership team pass their flow check, which is
• 7:47
  Speaker 3: our test to really make sure you know how to
• 7:49
  Speaker 3: do all of your drinks, to spend a lot of
• 7:51
  Speaker 3: time in our shops, so that we all are starting
• 7:55
  Speaker 3: with every decision with our broistas in mind. And how
• 7:59
  Speaker 3: would this feel for them? How does this impact them?
• 8:01
  Speaker 3: Does this make it easier to serve a customer? And
• 8:04
  Speaker 3: I think that that's one of the things that's been
• 8:07
  Speaker 3: really important on my journey is ensuring that we've got
• 8:10
  Speaker 3: more connectivity and that from an HQ perspective, we are very,
• 8:15
  Speaker 3: very focused just on serving our shops well.
• 8:18
  Speaker 1: Yeah, that's cool. You have the executives working as baristas.
• 8:21
  Speaker 2: I mean, you know, it reminds me of Domino's and
• 8:24
  Speaker 2: their working store in the basement of their HQ.
• 8:26
  Speaker 1: That's good stuff.
• 8:28
  Speaker 2: You know, and you kind of hinted towards it, but,
• 8:30
  Speaker 2: you know, I think your customers skew younger, which is
• 8:32
  Speaker 2: an enviable position to be in as it tends to
• 8:35
  Speaker 2: drive stronger traffic in the restaurant industry. Can you give
• 8:38
  Speaker 2: some color on the demographics of your customers?
• 8:41
  Speaker 3: Yeah, so as we look across demographics, we actually serve
• 8:44
  Speaker 3: customers across all age groups and all income levels. If
• 8:48
  Speaker 3: there is a little bit of a skew, we do
• 8:51
  Speaker 3: tend to skew a little bit younger. But overall, we
• 8:55
  Speaker 3: largely match the overall demographics of the markets we serve
• 8:58
  Speaker 3: with that slight younger skew.
• 9:00
  Speaker 2: Cool. And the missed energy drinks– You know, those I
• 9:07
  Speaker 2: guess a couple of questions.
• 9:08
  Speaker 1: Number one, I.
• 9:11
  Speaker 2: Guess what makes them a little bit different than than
• 9:14
  Speaker 2: than other energy drinks we're seeing on the market and
• 9:17
  Speaker 2: being launched by some, you know, quick service chains and
• 9:20
  Speaker 2: the like? Yeah.
• 9:21
  Speaker 3: So as we look across our energy platform, it really
• 9:24
  Speaker 3: is now quite complete.
• 9:26
  Speaker 2: So.
• 9:27
  Speaker 3: We have our proprietary Rebel energy platform, which is super strong.
• 9:31
  Speaker 3: We have that iced. We have it blended. We can
• 9:33
  Speaker 3: flavor it in all different ways. We could add a
• 9:36
  Speaker 3: flavor float even if you want. And mist is an
• 9:40
  Speaker 3: add to that energy category. And so what we see
• 9:43
  Speaker 3: is across energy need states, there are times when you
• 9:47
  Speaker 3: want to just like get ready for that exam, get
• 9:50
  Speaker 3: ready for that, you know, really tough like, night that
• 9:54
  Speaker 3: you're going to have because you've got a long shift
• 9:56
  Speaker 3: and you want that energy that's going to amp you up.
• 9:59
  Speaker 3: And then there's times where you want an energy like, hey,
• 10:02
  Speaker 3: I just want a little pick me up for the afternoon.
• 10:04
  Speaker 3: I want something that's going to be super refreshing and
• 10:08
  Speaker 3: have antioxidants and electrolytes and things that are going to
• 10:11
  Speaker 3: get me ready for that afternoon. And that's really what
• 10:13
  Speaker 3: MIST is. And so as we look at the broader
• 10:16
  Speaker 3: energy market, you know, we We look around at what's
• 10:19
  Speaker 3: happening in CPG. We look at what our customers are drinking,
• 10:22
  Speaker 3: what they're sharing as feedback to us and saw this
• 10:26
  Speaker 3: real opportunity to go in with this kind of pick-me-up-in-the-afternoon
• 10:30
  Speaker 3: type energy or even pick-me-up-in-the-morning because we're also seeing a
• 10:33
  Speaker 3: lot of morning occasions with Mist as well. You know,
• 10:37
  Speaker 3: customers coming into the market who really prefer that underlying
• 10:41
  Speaker 3: taste of the energy drinks and want to start their
• 10:45
  Speaker 3: day in that way.
• 10:45
  Speaker 1: Yeah.
• 10:47
  Speaker 2: Some of the healthy additions to the drink, like you
• 10:49
  Speaker 2: mentioned antioxidants and stuff like that was what kind of
• 10:52
  Speaker 2: piqued our interest. And they were launched as an LTO
• 10:55
  Speaker 2: in 2Q, but after a strong performance, the team made
• 10:59
  Speaker 2: it a permanent menu item in August. So what motivated
• 11:02
  Speaker 2: that decision? And how often does an LTO get added
• 11:06
  Speaker 2: to the permanent menu?
• 11:07
  Speaker 3: Yeah. So that was something we certainly had it in
• 11:10
  Speaker 3: the back of our mind as we were developing this.
• 11:12
  Speaker 3: It was It's actually been a two-year journey, I think,
• 11:14
  Speaker 3: developing a product kind of with that right mix, doing
• 11:17
  Speaker 3: all of the taste testing, all of the market testing.
• 11:20
  Speaker 3: But we'll typically launch new even platforms that we have
• 11:24
  Speaker 3: as LTOs just to make sure that everything we saw
• 11:27
  Speaker 3: is what we continue to see as we go through
• 11:29
  Speaker 3: a national launch. And we saw everything we thought we'd
• 11:32
  Speaker 3: saw and even more. And so really excited by that,
• 11:35
  Speaker 3: which is what allowed us to really understand that that
• 11:38
  Speaker 3: should be a platform rather than an LTO environment. very
• 11:41
  Speaker 3: similar to our launch at the beginning of 24 of Protein.
• 11:46
  Speaker 3: So we were the first to market with a protein latte.
• 11:51
  Speaker 3: And I think our history and heritage as dairy farmers
• 11:56
  Speaker 3: in the brand really helped with that. But what we
• 11:59
  Speaker 3: tend to look for, you know, both with Protein and
• 12:02
  Speaker 3: with Myst, is what we're looking for is that as
• 12:05
  Speaker 3: customers come in and try those beverages, that we see
• 12:09
  Speaker 3: a different pattern of trial and repeat for something that
• 12:12
  Speaker 3: we believe can be a platform. And so LTOs, a
• 12:15
  Speaker 3: lot of time those really flavor-forward ones, there's a lot
• 12:19
  Speaker 3: of trial and excitement and I want to try the
• 12:21
  Speaker 3: new thing, but we see a little bit of a
• 12:23
  Speaker 3: tail as that time frame goes on. And for things
• 12:28
  Speaker 3: that we look at to become platforms, it's really that
• 12:31
  Speaker 3: steadiness of it launches really well. And it actually stays
• 12:35
  Speaker 3: and oftentimes even grows as we get trial across it.
• 12:40
  Speaker 3: The other thing that we always are looking for is
• 12:43
  Speaker 3: how are our teams using our different platforms? And so,
• 12:47
  Speaker 3: you know, we're watching like when we launch protein and
• 12:50
  Speaker 3: how our broistas are watching it or when we launch
• 12:53
  Speaker 3: mist and that love from our broistas for it. And
• 12:56
  Speaker 3: it's really something that's additive. So lots of different indicators.
• 13:00
  Speaker 3: But we'll typically have a pretty good idea of which
• 13:03
  Speaker 3: things we might want to keep on the menu for longer.
• 13:05
  Speaker 1: Cool.
• 13:06
  Speaker 2: And are you seeing new customers come in for MIST
• 13:10
  Speaker 2: or is it primarily giving existing customers another reason to visit?
• 13:14
  Speaker 3: Yeah, so we're definitely seeing both. So we are seeing
• 13:17
  Speaker 3: an increase in frequency from existing customers and really adding
• 13:22
  Speaker 3: that additional occasion. So they're still having their rebel occasion
• 13:28
  Speaker 3: or their coffee occasion, but now coming back for Mist.
• 13:32
  Speaker 3: And then we're also seeing, you know, the beginnings of
• 13:34
  Speaker 3: some new customer growth in Mist as well. I think that,
• 13:38
  Speaker 3: and this is pretty typical of what we see for anything,
• 13:41
  Speaker 3: is that when we first launch something, It's our existing
• 13:44
  Speaker 3: customers that are trying it first and building a new
• 13:48
  Speaker 3: occasion first. And then as it grows and it's on
• 13:52
  Speaker 3: the market for longer is when we start to see
• 13:55
  Speaker 3: newer customers coming in.
• 13:58
  Speaker 1: And the new food program is being rolled out.
• 14:00
  Speaker 2: Have you given any color to the street on the
• 14:02
  Speaker 2: expected impact to sales and margins?
• 14:04
  Speaker 1: Yeah.
• 14:05
  Speaker 3: So as we look at the food program, we've actually
• 14:07
  Speaker 3: seen pretty consistent performance from our market test to our rollout.
• 14:13
  Speaker 3: So a couple of things is overall, we see about
• 14:16
  Speaker 3: a 4% lift when we roll out the full new
• 14:19
  Speaker 3: food program into a shop. And that has been quite
• 14:23
  Speaker 3: consistent as we've rolled it out. We started a food
• 14:26
  Speaker 3: program with four SKUs. So that 4% is on top
• 14:29
  Speaker 3: of the four SKUs we've already had. And now we're
• 14:33
  Speaker 3: at nine SKUs. So pretty minimal add of the number
• 14:37
  Speaker 3: of SKUs. But a big add in terms of capability,
• 14:40
  Speaker 3: because what we have added into our shops with the
• 14:42
  Speaker 3: warm food platform is we've added warming capabilities and we've
• 14:46
  Speaker 3: added ovens into our shops. And so that really is
• 14:49
  Speaker 3: making a difference for our customers.
• 14:52
  Speaker 1: Great.
• 14:52
  Speaker 2: You know, has there been a lot of training necessary
• 14:55
  Speaker 2: in terms of getting ready for the food rollout?
• 14:57
  Speaker 3: Yeah, we have done a lot of training with the
• 15:00
  Speaker 3: food rollout. I think part of it in keeping it
• 15:02
  Speaker 3: simple with nine SKUs, we've also rolled out a food
• 15:06
  Speaker 3: benefit to our broistas. And so they are trying everything
• 15:10
  Speaker 3: across the platform, which is really great. And it's something
• 15:13
  Speaker 3: our customers were asking for. You know, I think in
• 15:15
  Speaker 3: our industry, typically the great ideas are things that your
• 15:19
  Speaker 3: customers and teams are already asking for. And so we
• 15:23
  Speaker 3: just saw this opportunity. We had customers sharing with us that,
• 15:26
  Speaker 3: I love your beverages the most, but I will sometimes
• 15:29
  Speaker 3: go somewhere else because I really want a breakfast sandwich
• 15:32
  Speaker 3: on a Thursday morning or a Friday morning. And can
• 15:35
  Speaker 3: you please offer that so I can have my favorite
• 15:37
  Speaker 3: beverage alongside a breakfast sandwich? And so I think that
• 15:41
  Speaker 3: in seeing that need coming from our customers, those are
• 15:45
  Speaker 3: almost always the best ideas.
• 15:47
  Speaker 2: Yeah, and I think it's smart to keep that menu small.
• 15:50
  Speaker 2: Will the pace and cadence of LTOs change with the
• 15:52
  Speaker 2: new food program?
• 15:53
  Speaker 3: Well, so as we look at our LTO platforms, we
• 15:57
  Speaker 3: are very, we're in the early innings of building this
• 16:00
  Speaker 3: brand nationwide. You know, we were founded in 92, but
• 16:03
  Speaker 3: we were focused on the West Coast for, you know,
• 16:06
  Speaker 3: the first couple of decades of our growth. And now
• 16:10
  Speaker 3: that we're going nationwide, I think it's super important that
• 16:13
  Speaker 3: we stay focused on what our core is. And that
• 16:16
  Speaker 3: is that core beverage business. So those espresso-based beverages, the
• 16:21
  Speaker 3: energy category, So I do think there's more opportunities for
• 16:25
  Speaker 3: food and for LTOs there. But there's incredible opportunities on
• 16:29
  Speaker 3: the beverage side as well. And, you know, food, I
• 16:32
  Speaker 3: think of in our business, it's the accessory. So what
• 16:35
  Speaker 3: is that beverage I want? And then let me grab
• 16:37
  Speaker 3: that food to go alongside it. Great.
• 16:40
  Speaker 1: You know, the unit growth has been very impressive.
• 16:42
  Speaker 2: You know, most companies I speak to mention that their
• 16:45
  Speaker 2: talent pipeline is the most important governor for new store development.
• 16:50
  Speaker 1: How does your GM pipeline currently stack up?
• 16:53
  Speaker 3: Yeah, so like others, our people are our governor on growth.
• 16:58
  Speaker 3: And we're in incredible shape with our people pipeline. So
• 17:03
  Speaker 3: our level that sits just above shop is called operators.
• 17:07
  Speaker 3: And so they operate a number of shops. They're the
• 17:11
  Speaker 3: ones who are moving to new markets, introducing Dutch Bros
• 17:14
  Speaker 3: to new communities. We have an operator pipeline of over
• 17:18
  Speaker 3: 500 candidates that are sitting in that pipeline. They have
• 17:21
  Speaker 3: an average tenure of eight years with Dutch Bros. So really,
• 17:25
  Speaker 3: really invested in the culture, really invested in building their teams.
• 17:31
  Speaker 3: And I think, you know, when you look across the
• 17:34
  Speaker 3: food and beverage industry, our pipeline is really enviable and
• 17:40
  Speaker 3: what we can do. So all of our growth has
• 17:42
  Speaker 3: been from within. So all of the shop growth that
• 17:45
  Speaker 3: has happened over the last couple of years, the 185
• 17:49
  Speaker 3: plus shops that we'll add this year, is all with
• 17:52
  Speaker 3: growth from within.
• 17:53
  Speaker 2: That's great. And hearing about the tenure, that's fantastic. It's
• 17:58
  Speaker 2: an enviable position to be in. Can you please discuss
• 18:01
  Speaker 2: the speed and cost advantages of prefabricated stores and maybe
• 18:06
  Speaker 2: any other benefits you see from that?
• 18:09
  Speaker 1: Using that model?
• 18:10
  Speaker 3: So we're actually, so we're actually building our, our shops.
• 18:14
  Speaker 3: So we are not using many prefabs. We do use
• 18:17
  Speaker 3: them from time to time. Um, but you know, mark
• 18:20
  Speaker 3: markets are different in kind of the weather needs of
• 18:23
  Speaker 3: different markets are, are different. And again, we've been building
• 18:26
  Speaker 3: this brand since 1992. We're building shops that are going
• 18:29
  Speaker 3: to last, uh, for very long times. And, uh, so
• 18:33
  Speaker 3: really pleased with the developers that we're partnering with and the,
• 18:37
  Speaker 3: the quality of construction that they're building.
• 18:41
  Speaker 2: Great. And, you know, would you like to comment on
• 18:45
  Speaker 2: the Salad & Go unit acquisitions?
• 18:48
  Speaker 3: So Salad & Go is, so I would say, you know,
• 18:52
  Speaker 3: I think maybe taking a step back more broadly what
• 18:54
  Speaker 3: we're trying to do from a real estate perspective. So
• 18:56
  Speaker 3: there are a lot of sites across the country. We
• 19:00
  Speaker 3: are just at the beginning of our growth. Back in
• 19:02
  Speaker 3: our investor day, we shared that our We believe our
• 19:06
  Speaker 3: addressable market is about 7,000 shops in the U.S. We're
• 19:09
  Speaker 3: right around 1,250 today. So have a very long way
• 19:13
  Speaker 3: to go from a unit growth perspective. And the way
• 19:16
  Speaker 3: that we look at that unit growth is most of
• 19:19
  Speaker 3: our builds are refining a great site and we're constructing
• 19:23
  Speaker 3: a Dutch Bros. We also are always looking at opportunistically
• 19:27
  Speaker 3: at where we can convert shops. So both, you know,
• 19:32
  Speaker 3: one-off conversions where there's another brand that maybe has too
• 19:35
  Speaker 3: many in a market and we can pick up a
• 19:36
  Speaker 3: site that way, or conversions where we can be opportunistic
• 19:41
  Speaker 3: and have a number at the same time. We did
• 19:44
  Speaker 3: that earlier in this year with a concept called Clutch
• 19:47
  Speaker 3: Coffee in North and South Carolina. And and have gotten
• 19:50
  Speaker 3: those shops open. So one of the things that allows
• 19:53
  Speaker 3: us to do is pretty rapidly open those shops. And
• 19:56
  Speaker 3: so there was an opportunity across a couple of markets
• 20:00
  Speaker 3: with Salad & Go. Same kind of thought is that, hey,
• 20:03
  Speaker 3: as we know where all the openings are in our
• 20:06
  Speaker 3: real estate, across the country. And so if there is
• 20:10
  Speaker 3: an opportunity, this one's a little unique. It's a bankruptcy process,
• 20:13
  Speaker 3: so it unfolds every day. But we are always looking
• 20:18
  Speaker 3: at those opportunistic ways where we can find great sites.
• 20:22
  Speaker 1: Well, it made a lot of sense.
• 20:23
  Speaker 2: I mean, Salad and Go was also a drive-through concept, right?
• 20:27
  Speaker 2: Didn't have indoor seating. And conversions have gone really well
• 20:31
  Speaker 2: for chains like Kava. So Yeah, it makes a lot
• 20:34
  Speaker 2: of sense.
• 20:34
  Speaker 3: We actually converted a number of salad and goes already
• 20:37
  Speaker 3: in Texas. So as they were looking at sites, so
• 20:42
  Speaker 3: we have a lot of experience now already, too, with
• 20:46
  Speaker 3: converting all different types of brands into a Dutch Bros.
• 20:49
  Speaker 3: And so that is just another example of that.
• 20:52
  Speaker 2: So going back to the new builds, what are the
• 20:54
  Speaker 2: targeted unit economics for those?
• 20:57
  Speaker 3: Yeah, so, you know, when we look over the long term,
• 21:00
  Speaker 3: we shared a bunch of statistics that during our investor day.
• 21:04
  Speaker 3: So our targeted kind of year two AUV is 1.8 million.
• 21:09
  Speaker 3: We're actually trending quite a bit above that right now.
• 21:13
  Speaker 3: Part of that reason is, you know, when I first
• 21:16
  Speaker 3: came in, we were really building out our market planning efforts.
• 21:21
  Speaker 3: I think we have some of the most sophisticated market
• 21:23
  Speaker 3: planning really in the industry. And as we should, we're
• 21:26
  Speaker 3: growing really quickly and we're adding a lot of shops.
• 21:29
  Speaker 3: And so one of the things we did is we
• 21:31
  Speaker 3: were I think catching up our marketing engine to really
• 21:34
  Speaker 3: rapidly build brand awareness and that customer love in new markets.
• 21:39
  Speaker 3: We did some culling of our pipeline back a couple
• 21:41
  Speaker 3: of years ago. And so one of the results of
• 21:44
  Speaker 3: that is we did a pretty good job of figuring
• 21:46
  Speaker 3: out which sites were going to outperform and maybe a
• 21:48
  Speaker 3: little bit too good of a job. I said, you know,
• 21:50
  Speaker 3: hindsight in this industry, if it's when it's 2020, we
• 21:53
  Speaker 3: probably if we had known we would have done as
• 21:55
  Speaker 3: well as we have over the last couple of years,
• 21:57
  Speaker 3: we might have culled a few less out of that.
• 22:00
  Speaker 1: For sure.
• 22:01
  Speaker 2: Yeah, growing AUV tends to make your opportunity, market opportunity grow,
• 22:06
  Speaker 2: that's for sure. What's the split in 2026 and maybe 2027,
• 22:12
  Speaker 2: if you're willing to talk about it, between new stores
• 22:15
  Speaker 2: and new markets versus units that are filling out existing ones?
• 22:18
  Speaker 3: Yeah, so that continues to evolve. We don't share that statistic,
• 22:23
  Speaker 3: but what we're always trying to do is our ultimate
• 22:26
  Speaker 3: goal is to become part of your everyday routine. And
• 22:30
  Speaker 3: so what that means is we have a strategy of
• 22:32
  Speaker 3: going into a market and being close enough to where
• 22:35
  Speaker 3: you live and work that we can become part of
• 22:38
  Speaker 3: that everyday routine. And so that means we will be
• 22:41
  Speaker 3: opening new markets, but as we open those new markets,
• 22:44
  Speaker 3: we always have a plan for what does that ultimately
• 22:47
  Speaker 3: look like as we build out that whole market to
• 22:50
  Speaker 3: be close to you. And so that mix over time
• 22:54
  Speaker 3: is always going to be a mix of opening new
• 22:56
  Speaker 3: markets but continuing to densify in the markets that we're
• 23:00
  Speaker 3: in and doing that at a pace that really balances
• 23:03
  Speaker 3: that brand growth. So, you know, one of the things
• 23:06
  Speaker 3: that we see is when we go into a brand
• 23:09
  Speaker 3: new market, sometimes we will just have very long lines
• 23:11
  Speaker 3: and incredible customer demand. We just shared like our Chicago
• 23:16
  Speaker 3: opening in Melrose Park, you know, opened on track to
• 23:20
  Speaker 3: do over 7 million. That's actually not our goal, right?
• 23:23
  Speaker 3: Our goal is 180.
• 23:25
  Speaker 1: Seven million is hard to operate, I'm sure.
• 23:27
  Speaker 3: Yeah. Well, and I think, too, you know, when you
• 23:31
  Speaker 3: become part of someone's everyday routine, it's fun to have
• 23:34
  Speaker 3: lines because it draws a lot of attention to who
• 23:36
  Speaker 3: you are. But every morning on your way to work,
• 23:41
  Speaker 3: you might not want to wait in a long line.
• 23:43
  Speaker 3: And so part of our strategy really is building out
• 23:46
  Speaker 3: those shops. So our goal is to actually take that
• 23:50
  Speaker 3: volume down. and open as many shops right around Melrose
• 23:53
  Speaker 3: Park as we can so that our customers can have
• 23:56
  Speaker 3: that shorter line.
• 23:57
  Speaker 1: Yeah, that was my next question.
• 23:59
  Speaker 2: If you had any markets that you were purposely looking
• 24:02
  Speaker 2: to cannibalize, you know, some shops because they're capacity constrained.
• 24:06
  Speaker 3: Well, we're trying to do that in most of our
• 24:09
  Speaker 3: markets right now. So, you know, as we go through,
• 24:12
  Speaker 3: we are still at the early stages of this brand.
• 24:15
  Speaker 3: And so always trying to And I think there's this
• 24:18
  Speaker 3: delicate balance that you're always trying to hit of where
• 24:21
  Speaker 3: are you trying to get closer to your customers, but
• 24:23
  Speaker 3: at the same time, grow demand around each shop. So,
• 24:27
  Speaker 3: you know, you have some customers that move to another
• 24:30
  Speaker 3: shop as you grow, but you have newer customers now
• 24:34
  Speaker 3: who see, oh, the line's a little shorter. Let me
• 24:36
  Speaker 3: get in that line now. And I think it is
• 24:38
  Speaker 3: this balance that you're trying to do is really balance
• 24:40
  Speaker 3: the brand awareness, your growth across occasions with your overall
• 24:45
  Speaker 3: growth in that market. and kind of get that pacing
• 24:48
  Speaker 3: just right.
• 24:49
  Speaker 1: Very cool.
• 24:51
  Speaker 2: You know, and you mentioned, it sounds like, you know,
• 24:54
  Speaker 2: new markets are honeymooning. You know, I guess, you know,
• 24:59
  Speaker 2: what does it run the gamut, you know, like in
• 25:01
  Speaker 2: terms of fill-in stores versus new markets, you know, is
• 25:05
  Speaker 2: there a big difference in terms of honeymooning or building
• 25:09
  Speaker 2: up to, you know, full sales volumes. I guess if
• 25:13
  Speaker 2: you could just give a little color about the first
• 25:16
  Speaker 2: year performance of some of these units in different types
• 25:19
  Speaker 2: of markets.
• 25:20
  Speaker 3: Yeah. And so we do see different patterns. You know,
• 25:23
  Speaker 3: I would say in general, like when we're first to
• 25:26
  Speaker 3: a brand new market where there's not, you know, any
• 25:30
  Speaker 3: convenient locations, we often see very long lines and very
• 25:34
  Speaker 3: high volumes in those markets. As we infill we start
• 25:40
  Speaker 3: to go closer to that system average that we see overall. And,
• 25:45
  Speaker 3: you know, I think that, again, it is that balance
• 25:48
  Speaker 3: that having a plan to infill really quickly in those
• 25:52
  Speaker 3: markets where we see those high volumes. But I do
• 25:55
  Speaker 3: think it's pretty rare, right? We're at over 1,200 shops
• 25:58
  Speaker 3: to be able to open a new market with that
• 26:01
  Speaker 3: level of demand. I think it just really speaks to
• 26:04
  Speaker 3: the overall health of what we're doing from a brand perspective.
• 26:09
  Speaker 1: For sure.
• 26:10
  Speaker 2: You know, you recently launched the VibeCheck scorecard. What are
• 26:13
  Speaker 2: you measuring and is there anything that you're now capturing
• 26:17
  Speaker 2: that maybe you weren't measuring before the rollout?
• 26:19
  Speaker 3: Yeah. So the VibeCheck scorecard is really what's important to
• 26:23
  Speaker 3: our business. Well, it starts with our people, right? And
• 26:26
  Speaker 3: so how are our broistas feeling? So we're looking at
• 26:29
  Speaker 3: things like turnover metrics first. And so if our teams
• 26:32
  Speaker 3: are happy, that allows them to serve our customers, which
• 26:34
  Speaker 3: serves the business. And so the next category that we're
• 26:38
  Speaker 3: looking at from a VibeCheck perspective is really customers. And
• 26:42
  Speaker 3: what's really unique with Dutch Bros is we have so
• 26:45
  Speaker 3: many of our transactions that go through our Dutch Rewards program.
• 26:48
  Speaker 3: So about 73% of our transactions we capture because our
• 26:52
  Speaker 3: customers coming in saying, I'm part of your rewards program
• 26:55
  Speaker 3: and they're getting their points and they're telling us who
• 26:57
  Speaker 3: they are. And we can actually measure a lot of
• 27:00
  Speaker 3: things with that. So we send out surveys to our
• 27:04
  Speaker 3: customers Through that Dutch Rewards program, we've used it really
• 27:07
  Speaker 3: successfully with mobile order to ask our customers, was your
• 27:11
  Speaker 3: order ready when you arrived? We're also using it successfully
• 27:16
  Speaker 3: now to understand, how was your overall experience? Because Arbro
• 27:20
  Speaker 3: East does want to serve our customers really well, and
• 27:23
  Speaker 3: to have that constant feedback loop of where we're doing
• 27:26
  Speaker 3: that well, we're even starting to be able to look
• 27:28
  Speaker 3: at kind of How are we serving our customers by
• 27:31
  Speaker 3: day part and by day of week? And do we
• 27:33
  Speaker 3: have opportunities to make sure that we have that shop
• 27:36
  Speaker 3: staff just the right way? And then finally, our business metrics.
• 27:39
  Speaker 3: So I think if your team is happy, your customers
• 27:42
  Speaker 3: are happy, typically those business metrics follow. But we are
• 27:46
  Speaker 3: keeping track of important business metrics. And so the VibeCheck scorecard,
• 27:51
  Speaker 3: most of it is things we already had, but making
• 27:53
  Speaker 3: it easy and accessible and something that you can C
• 27:57
  Speaker 3: is something that is new for our teams all in
• 28:00
  Speaker 3: one place, which is a big thing. And then also
• 28:03
  Speaker 3: some of those customer metrics that we're using are brand new.
• 28:07
  Speaker 3: So as we continue to make that, to invest in
• 28:10
  Speaker 3: Dutch Rewards and things that we can, you know, survey
• 28:13
  Speaker 3: and pulse there, those are new great metrics for our teams.
• 28:16
  Speaker 2: So what's one decision you're making at Dutch Bros today
• 28:20
  Speaker 2: that investors might not fully understand or appreciate for a
• 28:23
  Speaker 2: couple of years?
• 28:24
  Speaker 3: You know, I think all of our decisions are really
• 28:27
  Speaker 3: made with that very long term in mind and thinking out.
• 28:32
  Speaker 3: And I think that the planfulness of how we open
• 28:36
  Speaker 3: new markets. So we may open a new shop at,
• 28:40
  Speaker 3: you know, a 7 million or 6 million AUV. But
• 28:43
  Speaker 3: what we underwrote that at was actually, you know, at
• 28:46
  Speaker 3: that system average or really at that new shop year
• 28:49
  Speaker 3: one expectation. And so I think that the planfulness of
• 28:54
  Speaker 3: which we make decisions and building a brand for the
• 28:59
  Speaker 3: very long term and how every time we open a shop,
• 29:02
  Speaker 3: we actually know how that shop is going to look,
• 29:06
  Speaker 3: you know, 10 or 15 years from now with all
• 29:08
  Speaker 3: of the shops around that. Of course, some markets will
• 29:11
  Speaker 3: change and we'll keep track of that. But I do
• 29:14
  Speaker 3: think the longevity of which we make decisions is actually
• 29:17
  Speaker 3: unique here. And I think part of it is that
• 29:20
  Speaker 3: long history and having made these decisions since 1992 and
• 29:25
  Speaker 3: really planfully going into markets.
• 29:28
  Speaker 2: Yeah, that's the way you should be running a business,
• 29:30
  Speaker 2: trying to manage it quarter to quarter. It tends not
• 29:33
  Speaker 2: to work so well in the restaurant business.
• 29:36
  Speaker 1: All right, great. What's your favorite order?
• 29:37
  Speaker 3: My favorite order? Well, what I'm drinking this morning is
• 29:41
  Speaker 3: my usual. So I do an iced protein milk latte
• 29:45
  Speaker 3: with a splash of chocolate milk. Our chocolate milk is
• 29:49
  Speaker 3: one of the most amazing things on this planet. And
• 29:53
  Speaker 3: so some mornings I take an extra splash and sometimes
• 29:55
  Speaker 3: I take a little splash, but I always like to
• 29:58
  Speaker 3: have that little bit of chocolate milk. And it reminds
• 30:01
  Speaker 3: me of part of our founding story. So one of
• 30:03
  Speaker 3: the things that Trav and Dane worked on a lot
• 30:06
  Speaker 3: was our mocha when they launched the business. And I loved,
• 30:10
  Speaker 3: as I was coming on board, listening to the podcast
• 30:13
  Speaker 3: that Trav had put out there and kind of how
• 30:18
  Speaker 3: the process of testing that chocolate milk and just getting
• 30:21
  Speaker 3: it perfect. And I do think that in this, it's
• 30:25
  Speaker 3: a reminder for me, not only of how much I
• 30:27
  Speaker 3: love it and how much I love this beverage, But
• 30:30
  Speaker 3: I think in this industry, it is so much about
• 30:32
  Speaker 3: every single detail and the thoughtfulness that goes into it.
• 30:37
  Speaker 3: And a reminder that although it seems simple, the thought
• 30:41
  Speaker 3: and perfection to get it to perfect actually is a
• 30:45
  Speaker 3: long journey and is a long time. And making sure
• 30:48
  Speaker 3: that even on simple things, when they need to be perfect,
• 30:52
  Speaker 3: how are we always making sure they're there? So I
• 30:54
  Speaker 3: love it both because I just love the taste of
• 30:56
  Speaker 3: it and how it makes me feel in the morning.
• 30:59
  Speaker 3: But I also love it because of what it represents.
• 31:02
  Speaker 1: That's great.
• 31:02
  Speaker 2: People notice that attention to detail, though, and chocolate and
• 31:06
  Speaker 2: coffee go together like peanut butter and jelly.
• 31:08
  Speaker 1: So I'm a big chocolate fan. I'm going to have
• 31:11
  Speaker 1: to give that a try.
• 31:12
  Speaker 3: You will love it. I promise.
• 31:14
  Speaker 1: All right. Good stuff. Thanks for doing this, Christine.
• 31:17
  Speaker 3: Thank you so much, Mike.
• 31:18
  Speaker 1: Yeah, it was fun.
• 31:20
  Speaker 2: I also want to thank the audience for tuning in.
• 31:22
  Speaker 2: If you liked our discussion, please share it with your
• 31:25
  Speaker 2: friends and colleagues. Check back soon for another interview on
• 31:28
  Speaker 2: Chopping It Up.