Whatever affliction is ailing much of the fast-food world has apparently not hit Dutch Bros yet.
The drive-thru beverage chain on Wednesday reported its latest in a string of strong earnings reports. Its same-store sales increased 4.7%. Traffic increased more than 1%. Those numbers were notable, given that the chain was comparing itself to 10% growth a year earlier, meaning that on a two-year stacked basis its same-store sales were up nearly 15%.
The company said its revenues increased 29% and then said that it expected its sales and earnings for the full year were trending toward the “high end” of its expectations. It expects tariffs to have a minimal impact on its costs. The chain just opened its 1,000th location, and new stores are opening to strong volumes.
“We’re really seeing strength across the brand,” CEO Christine Barone said. “We are just rooted in an excellent value proposition right now. The brand is resonating with customers.”
All of which gives the company confidence that it can weather whatever storm appears to be heading the industry’s way.
Much of Dutch Bros’s fellow publicly traded restaurant chains cannot say the same thing. Outside of a few key names like Taco Bell and Chili’s much of the industry has reported substandard results and then explained to investors exactly how they planned to get customers back—usually with some form of discount.
That includes Dutch Bros’s much larger rival Starbucks, whose sudden weakness entered its second year when it reported its fifth straight quarter of negative same-store sales, a streak longer than any that chain had experienced since the Great Recession.
Driving much of Dutch Bros’s recent success has been its order ahead function and the popularity of its loyalty program.
Nearly three quarters of the chain’s transactions last quarter came from members of its loyalty program, a five-point improvement over the same period a year ago. That has enabled the chain to personalize offers and incentivize additional visits.
“Dutch Rewards serves as a highly effective, direct line of communication with our customers,” Barone said.
It’s also helping to fuel order ahead, the company’s mobile-order platform that has helped drive sales more recently. That now represents 11% of the chain’s transactions.
That’s also helping to bring new customers into the brand. Some stores in the chain’s newer markets are generating twice that rate of transactions from mobile orders. That also helps offset the chain’s challenges with long lines.
New markets are also working well, thanks to the chain’s new marketing approach aimed at building awareness. The company recently opened its 1,000th shop in Florida, a country away from the chain’s headquarters in Grants Pass, Oregon.
Dutch Bros plans to get a lot bigger than that, too. The chain plans to have at least 2,029 shops by 2029, and believes it ultimately has room for 7,000 locations. The company says it has 450 operator candidates who can step in and run the company’s new stores, a key ingredient for a chain that promotes from within as a way to bring its culture to new shops.
As for future sales drivers, a big one is food. The company is expanding a test of a broader food menu to 32 stores, from eight, with the belief that a more robust food offering could bring in customers that want a bite to eat with their morning latte. Only 2% of the chain’s sales come from food, while many of the company’s competitors get 10% or more.
But the company doesn’t want to ruin operations with food, either.
“It’s really to create additional beverage opportunities,” Barone said. “So what is the least amount of complexity required to capture those beverage opportunities? We’re thinking about this limited sku count that’s going to help us manage throughput, manage the complexity of our business, but still provide some of those important hot proteins in the morning that drive those routinized beverage” visits.
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