Ricci believes the chain has white space for 4,000 units, which should take Dutch Bros into the next 10 to 15 years. The plan is to fill existing markets like California and capture new ones like Kansas City and Nashville.
The company’s expansion opportunities are centered around its inner circles. Starting in 2008, Dutch Bros only awarded franchises to those already in the system. In 2017, the chain decided to stop franchising and moved to a company-operated strategy with all operators recruited from within the system. Franchise partners continue to open new shops in their high-demand areas, but most growth will come from corporate units. The current pipeline comprises more than 200 operators prepared to build out new markets.
“We are a people system that we plug real estate into,” Ricci says. “We are not a real estate system that plugs people into it. The forecast of our leaders and the potential of our leaders is really what's driving our real estate development, and we have a responsibility to those people who have been with us and make that commitment to Dutch Bros. And our goal will be to continue to open up new opportunities for those people as we continue to expand.”
“And not just expand East, but also we have a tremendous amount of infill to do just within our existing markets,” he continues. “A lot of modeling we've done, we're probably 30 percent developed in California and have some big opportunities there, as well. We will always match our expansion plans off of our people, and making sure that we have people ready and excited to go in and represent the company as we build into new markets or infill into existing markets.”
Dutch Bros has Class A, B, C, and D stock, with Class A having one vote per share, Class B and C having three votes per share, and Class D having 10 votes per share.Travis Boersma holds all Class B shares and TSG holds all Class C shares. A host of other investors hold Class D shares. In total, Boersma controls 74 percent of stock while TSG garners roughly 22 percent. The company intends to use net proceeds from the initial public offering to purchase additional shares, pay off $198.8 million in outstanding borrowings, and donate 1 percent to charitable causes over the next 10 years.
The brand is the second restaurant to enter the stock market this year, following Krispy Kreme, which began its second stint as a publicly traded company in July. The doughnut chain priced its IPO at $17 per share, raising $500 million and valuing the company at $2.7 billion. Sweetgreen and Portillo’s have also announced plans to go public.
Dutch Bros sees opportunity to gain market share in a $36 billion coffee category, but Ricci says there is no goal to go head-to-head with industry leader Starbucks, which has more than 15,000 U.S. locations.
But as the CEO points out, Dutch Bros has performed well alongside Starbucks, a fellow Northwest brand, for nearly 30 years. His guess is there’s a Starbucks virtually everywhere the company exists, yet the brand has still thrived and found room for growth.
The move to the public sphere won't change the strategy—Dutch Bros is focused on itself, not the competition, Ricci notes.
“We're just playing in the game of beverage and focused on our relationships and our customization, and if we do that really well, we like our chances,” he says.