Since Dutch Bros went public in September 2021, eclipsing unit development goals has been one of its greatest achievements.

From then until now, the coffee chain has nearly doubled in size to 912 restaurants. Dutch Bros opened 81 locations in the first half of the year, extending its streak to 12 straight quarters of 30 or more unit openings. The brand expects to reach the lower end of its 150 to 165 store opening projection for 2024, meaning it will likely end the year just shy of 1,000 shops systemwide.

Dutch Bros grows primarily through company-owned outlets. It has a pipeline of over 400 internal operators—with an average tenure of seven years—ready to lead a market.

“When these new operators get the call, we invest in their success and the success of the market by assuming our experienced opening team,” CEO Christine Barone said during the chain’s Q2 earnings call. “These teams work alongside our new operators to lay a strong cultural foundation and ensure our new [broistas] are empowered to be highly successful. This powerful combination of experience, energy, and teamwork helps us consistently deliver an exceptional customer experience focused on speed, quality, and service. We continue to be pleased with our shop-level turnover indicators, which are in line with our expectations. Our best people are staying and growing with us.”

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Much of the expansion has come in Texas. Dutch Bros has nearly 200 locations in the Lone Star State after debuting a little over three years ago. The brand has learned a lot from fortressing locations in the state. The benefit of blitzing a market with several stores is improving brand awareness and lowering drive-thru wait times. The downside is sales transfer and lower revenue at each unit.

Dutch Bros chose to switch up its growth strategy by focusing on higher AUV shops. This involves a higher percentage of new market openings and slower infill rates. It also led to the removal of locations in the pipeline that don’t meet the chain’s updated investment criteria, resulting in stronger new shop performance.

AUV in Q2 was $2 million, matching the record set in the first quarter. That’s much higher than the leading beverage chains in America. Starbucks had a U.S. AUV around $1.8 million in 2023, and Dunkin’ had an AUV of $1.3 million. Granted, those two brands have thousands more shops across the country.

“As we enter big new markets like Florida, we are using all of that data to really refine our approach so that we can bring up the average AUV of a unit,” Barone said. “That’s the goal of that process.

“We have a very refined real estate process now where we’re looking site by site at each site, what all of those impacts look like, and feel like we have a higher level of confidence in what our AUVs will look like as we open in new markets,” she added. “And so, what that leads to is us feeling that going forward, we’re excited about the pipeline that we’re building right now because of that increased confidence in the estimates that we have as we go forward.”

The company is also attempting to rebalance its pipeline toward more capital-efficient lease arrangements and reduce per-unit development costs. This means more build-to-suite leases instead of ground leases, which are more expensive.

“It will take time for these refinements to make their way through the real estate pipeline and we will likely begin seeing an impact in 2025,” Barone said. “That said, we are encouraged by the improvements in new shop productivity, which are beginning to be felt now.”

Along with these new insights, Dutch Bros is using an improved marketing plan to drive better revenue in new shops—releasing menu innovation, ramping up paid advertising, investing in the rewards program, and developing mobile ordering. Thanks to these initiatives, same-store sales rose 4.1 percent in Q2, despite the increasingly promotional competition and a tough Q2 2023 lap.

Earlier in 2024, the brand launched boba and protein milk. Both products were so successful that the chain added them to the permanent menu. Strawberry Boba was in such high demand that stores experienced product outages in much of April and May. By June, supply was restored across most of the system. Additionally, Dutch Bros is starting to see the impact of increased paid advertisement, especially in newer markets. The trade areas receiving this greater attention are seeing sequential traffic growth that’s outpacing the system. Since results are above expectations, Dutch Bros decided to make further investments.

The brand’s rewards program, which is responsible for 67 percent of transactions, helps greatly with guest engagement and targeted promotions. This bodes well for Dutch Bros’ expansion of mobile ordering. The chain expanded the test to about 40 shops in Arizona, California, and Texas as of June 30 and rolled it out even further to about 200 shops by the end of July. Dutch Bros is optimistic that it will be in all stores before the year is over.

The company has never had an order-ahead option, but it has a drive-thru model built for it.

“Many of our shops have double drive-thru setups that include an escape lane, which could be utilized for mobile order,” Barone explained. “After checking in, our mobile order customers can be directed to the right-hand lane, where a runner can bring their drink if it is ready before the customer reaches the window. The customer can then escape using that open lane to their right, eliminating a potential bottleneck at the window. We already use this operational tactic in many of our locations.”

Mobile ordering could also be beneficial to Dutch Bros’ walk-up business, which mixes 10 percent. Early data shows most digital customers choose to use this ordering method. The brand is also aware that allowing mobile ordering will likely lead to an influx of traffic and much-needed planning around capacity.

“We intend to throttle orders where necessary to maintain high levels of customer service across our channels. That said, we believe many of our shops are capable of significantly higher throughput given the volume of some of our most productive shops,” Barone said. “These high throughput shops have the same footprint as our standard prototype, which makes up much of our existing portfolio. We are excited to continue learning from this rollout and we look forward to sharing feedback on adoption and potential incrementality as we observe customer behavior over a longer period of time.”

During Q2, Dutch Bros’ revenue increased 30 percent year-over-year to $325 million and adjusted EBITDA lifted 34 percent to $65 million.