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Financing

Dutch Bros Coffee is reportedly considering an IPO

The company, backed by the private equity group TSG Consumer Partners, called a Bloomberg report of a potential offering this year “pure speculation.”
Photograph: Shutterstock

Dutch Bros Coffee is considering an initial public offering by the end of the year, according to a Bloomberg report this week that cited multiple sources.

The report said the company, which received a minority investment in 2018 from the private equity group TSG Consumer Partners, is talking with advisors and is seeking a valuation of $3 billion.

A representative for the fast-growing coffee chain, however, called the report “pure speculation.” But the representative also noted there are “several ways” a private equity can exit its investment—not just an IPO.

Still, the report is the latest indication that the IPO markets have warmed up to the restaurant industry after a years-long drought—while more private equity groups are considering such options as part of their exit strategy.

In March, for instance, reports indicated that the fast-casual taco chain Torchy’s Tacos had hired bankers to explore an IPO.

Meanwhile, about a half-dozen special purpose acquisition companies, or SPACs, are potentially eyeing restaurant chains in a bid to take them public. SPACs are shell companies that raise funds from public investors and use them to buy a private company.

The potential IPOs of Torchy’s or Dutch Bros could make the public markets more open for growth chains. Strong performance by a number of publicly traded restaurants in recent years could make investors more amenable to such companies than they’ve been in years.

Only one company, Kura Sushi USA, has gone public since 2015. The revolving sushi chain’s stock is close to its all-time high and is trading close to 40% higher than its pre-pandemic highs.

Dutch Bros operates more than 400 locations and generates $584 million a year in system sales, according to data from Restaurant Business sister company Technomic. Despite just 3% system sales growth last year it easily bested its larger coffee rivals including Dunkin’, Starbucks, Tim Hortons, Caribou and Peet’s, all of which reported steep declines in sales last year.

Dutch Bros President Joth Ricci was on the Restaurant Business podcast “A Deeper Dive” in February.

Private equity groups typically seek to exit their investment within five years, usually by selling to another entity or taking a company public—though a reverse merger through a SPAC is another potential option.

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