Dutch Bros CEO Christine Barone has been in her role for about a year. Her main objective has been not to change what already works. Just enhance it.
The brand’s growth aspirations are a good example. For years, Dutch Bros has internally promoted hourly employees to become operators of three to four shops. The chain has a pipeline of about 400 workers waiting to take on a new store.
Dutch Bros plans to open at least 160 stores in 2025, including No. 1,000 next month in Orlando. For perspective, the beverage chain had nearly 500 units when it went public in September 2021, meaning the chain has more than doubled its footprint in fewer than three and a half years.
“We’re growing with our people,” said CEO Christine Barone at the ICR Conference earlier this month. “The second piece is we’re growing our shop base very rapidly … We have a very long runway in front of us and are really just getting started with our growth.”
This is where the enhancement portion comes into play.
The company looks at each state and determines where it wants to be 10 or 15 years from now. For instance, Dutch Bros knows it will someday have a high store count in Orlando, but the key is pacing that growth over time. The chain is learning from its development in Texas, where it went from zero units to about 200 in four years.
READ MORE:
Why 2025 Promises Even Bigger Things for Dutch Bros
How Dutch Bros is Driving Guest Loyalty and Growth Through Mobile Ordering
Dutch Bros Prioritizes High AUV Shops as it Nears 1,000 Locations
Dutch Bros wants to take a different approach. Quickly fortressing a market helped build brand awareness and lower drive-thru wait times but it also led to sales transfer and lower revenue per unit. Going forward, the brand wants to focus on higher AUV shops, which means a higher rate of new stores opening in new markets and less infilling.
The strategy shift sacrifices built-in brand awareness. The chain is combatting that with paid media investment and quickly embracing a community to form partnerships with local high schools, colleges, and organizations.
“How do we actually really refine the timing of when we open, so allowing that first shop to build up and to really build within its community and then coming to open another shop and then build up within that unique community,” Barone said. “And we’ve learned a lot about where customers will drive from to come see us, what their patterns look like, and how do we build those and incorporate that into our real estate strategy. I think the other thing we’ve done a lot of work on too is in these states, we’re brand new. And although a lot of 22-year-olds in Florida have probably heard of us, there is so much more of the community that we need to meet and introduce ourselves to.”
The other goal is to hand these shops off to operators but in an economical way. Over the past several years, Dutch Bros used ground leases to have more control over construction during inflationary periods. That cost about $1.9 million for a 900 to 1,000-square-foot standalone drive-thru.
The brand has recently shifted to build-to-suit leases, which are around $700,000 to $800,000. Dutch Bros is pairing those costs with $1.7 million to $1.8 million in targeted new shop AUVs and 30 percent shop-level margins by year two.
“We think about the flow through, the cash on that—it’s certainly stronger on a build-to-suit lease, but we see great returns overall in both cases,” said CFO Josh Guenser. “It’s taken us some time to shift to the build-to-suit, but we’re certainly making some progress in that way.”
Additionally, Dutch Bros listens to customers about how to improve their experience. One big request was a mobile ordering program, which the chain established last year in partnership with Olo. Q4 marked the first full quarter of the platform being available systemwide. So far, Dutch Bros has seen a 5 percent lift in frequency after the first mobile. The company also saw its highest growth in the Dutch Rewards program in Q3, and for many of them, their first transaction was a mobile order.
Digital innovation also helps with throughput. Previously, 90 percent of guests ordered via drive-thru and 10 percent via walk-up window. Dutch Bros finds that more mobile order guests walk up to the window to pick up their drinks. That means shorter wait times and room for more cars to join the line—especially guests who otherwise would’ve turned down the visit because they didn’t have time.
Customers have also asked for food to pair with their drinks. One-third of Dutch Bros’ business comes in the morning, which is different from the broader beverage market that sees nearly half of its business in the morning. The chain believes higher-quality food options could encourage more guests to visit in the early daypart. The brand is testing eight products, doubling what it already has with three muffins and a granola bar. Dutch Bros wants to ensure the throughput of food is quicker than beverages and that both items can be ready simultaneously.
“The way that we think about food is actually there’s probably a beverage occasion that we’re missing in the morning,” Barone said. “And so we are a beverage company, we will always be a beverage company and so the goal with food is really to capture that extra beverage occasion. Because in the morning, a lot of us don’t want to go to two places as we’re on our way to work and so in thinking through how to capture that beverage opportunity, that’s really what the food opportunity is.”
Even with mobile ordering and additional items coming through the drive-thru, Dutch Bros is adamant about keeping its hospitality-first culture. The chain views every order—mobile or not—as an opportunity to have a connection and conversation with customers.
Barone certainly doesn’t intend to change that.
“I think there are so few experiences that we have throughout our day that truly make us a little bit happier, a little more upbeat after,” Barone said. “After we leave those experiences and that’s what we’re incredibly focused on.”