COVID pushed several operators to implement an online ordering platform to satisfy the rush of off-premises customers.

But not Dutch Bros.

The beverage chain doesn’t have online ordering through its website or mobile app. Customers must walk up to a window or cruise through the drive-thru to place an order. But guests are now asking for convenience, and Dutch Bros isn’t one to turn away from what the consumer wants.

In response, the brand began operational testing of app-based mobile ordering in the Arizona market. The expectation is to roll out the functionality to a majority of shops by the end of 2024.

“Pending the results, we would expect to conduct a multi-shop test as part of our innovation stage-gate process,” CEO Christine Barone said during the brand’s Q4 earnings call. “We recognized this could be a big opportunity for us and also understand the importance of getting this right, delivering on our core values of speed, quality, and service.”

Dutch Bros will look to install digital ordering without creating an extra burden on employees. Despite not having order-ahead capabilities, individual shops take in a lot of volume. The brand earned a record $1.97 million AUV in 2023, which is high for a beverage concept of its size (831 shops nationwide). The most apt comparison would be 700-unit Scooter’s Coffee, which has an AUV under $1 million. That’s why Dutch Bros uses a fortressing strategy to quickly infill markets and spread out drive-thru traffic.

During this test in Arizona, the brand will focus on balancing digital ordering with the 1:1 relationship between “broistas” and customers. It will also think through how it will impact drive-thru speed of service and walk-up foot traffic. Some of the newer shops are built for digital occasions; these stores have escape lanes in which an employee can run a drink to a customer waiting in line and that person can pull out of the parking lot without disrupting the queue.

“We also look across the industry and understand how important this type of technology is for customers across the industry,” Barone said. “We don’t believe that it will be material to our 2024 numbers. However, we do think it’s really a big opportunity. We do believe also that it’s something that has the potential to bring in new customers and has the potential to introduce new occasions. So if you’re in a hurry, and you remember that we had a really long line one day, if you mobile order, you can adjust your timing and help you get to wherever you are [going] on time.”

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The mobile app is already popular among customers. Sixty-five percent of transactions in Q4 came from rewards members, and that’s with 35 percent of shops systemwide being open less than two years. Meaning, Dutch Bros is able to establish customer connections quickly in whatever market it enters. The chain is continuing to increase the sophistication of its offers, messaging, and capabilities via its Dutch Rewards platform, including a more tailored approach to promotions.

Some recent promotional examples: On Black Friday, the company’s highest sales day on record, stores provided customers with shoe charms with the purchase of any two drinks. Also during November, shops gave away friendship bracelets when customers bought two beverages.

The rewards program is helping Dutch Bros understand what types of promotions work. Loyalty points debuted in 2021, so Barone believes the brand is “in the second inning, moving into the third” on what the platform is truly capable of.

“All of that is giving us data on how do our customers react to the types of things we’re doing,” Barone said. “Then we combine this with looking at how are new customers coming in the brand, so bringing in some external research as well, and looking at that all together to really map out a calendar for the year. That drives the new customers, drives new occasions. And so we’re feeling good about the path that we’re on in the way that we’re able to use data.”

With skyrocketing unit growth, the company is reaching more guests each day. Last year, Dutch Bros unveiled a record 159 new stores. In Q4, the chain opened 37 new shops, marking its 10th consecutive quarter of 30 or more new store openings.

This year, the company has the potential to surpass its previous mark with a projection of 150-165 new restaurant openings. If it achieves this, Dutch Bros could reach over 1,000 locations by 2025, making it the third U.S.-based chain to surpass this milestone after Starbucks and Dunkin’. The beverage leader has a pipeline of 350-plus operator candidates with an average tenure of seven years. The expectation is that these restaurateurs oversee three to seven shops on average. In the past two years, Dutch Bros has promoted more than 60 candidates to the position of operator.

The next major market on the horizon is Florida. A unit will soon open in Orlando.

Systemwide, Dutch Bros will primarily expand with its single drive-thru prototype featuring 8,000 to 1,000 square feet of space. In certain locations, where the brand thinks it can infill a market, it will open 1,200-square-foot endcap drive-thrus that are cheaper since they share development costs with other co-tenants. These locations may have a lobby with a walk-up window but no seating.

To boost expansion, the brand is adding a second support center in Arizona. Roughly 40 percent of operations staff—positions focused on driving the strategic direction of the company and assisting day-to-day operations in the field—will be in Phoenix by January 2025. Dutch Bros will keep a significant presence in Southern Oregon where roasting, accounting, and other functions are still based.

Same-store sales lifted 5 percent in Q4 year-over-year, inclusive of the impact of the fortressing strategy, which results in sales being transferred from existing shops to new ones. For full-year 2023, comps grew 2.8 percent.