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Five things to know about Dutch Bros Coffee

The drive-thru coffee chain, which is planning to go public, has grown quickly but not as quick as you’d think, says RB’s The Bottom Line.
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The Bottom Line

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Dutch Bros Coffee said this week that it has confidentially filed documents for an initial public offering, making it at least the second restaurant chain to do so this year following the May IPO registration by the doughnut chain Krispy Kreme.

An IPO, assuming it happens, will introduce Dutch Bros to a much larger audience in the form of public equity investors.

Here are five things to know about Dutch Bros, its growth and what makes the chain tick.

It was founded by brothers

Dane and Travis Boersma, brothers of Dutch descent, founded the chain in Grants Pass, Ore., in 1992. Their family was in the dairy business, and they were looking for a way out. They bought an espresso machine and began making coffee.

“They built a coffee stand in Grants Pass, Ore., and started serving coffee,” company President Joth Ricci told the Restaurant Business podcast “A Deeper Dive” in February. “They did everything through the lens of service. From Day One this business was about fun, about culture, about experience.”

The company has focused on service ever since, even though it is a drive-thru concept. “We’re a beverage business, but really we are grounded in how we treat the customer,” Ricci said. “We’re in the people business.”

The chain has quietly grown quickly

Dutch Bros added 72 new locations in 2020 despite the pandemic—not to mention intense competition for drive-thru sites.

The chain boasts average unit volumes of $1.5 million, according to Restaurant Business sister company Technomic. That’s double what a drive-thru burger chain might do, for instance.

The chain’s system sales grew last year even though consumers largely stopped commuting for much of the year. And over the past five years its annual growth rate has easily outpaced the coffee sector and all of its competitors. Look at the below graphic of data on the coffee sector over the past five years.

 

 

But it hasn’t grown as fast as it could

Dutch Bros franchises. But you won’t be able to buy one. On its website, the company notes this:

“Dutch Bros wants to empower employees who have shown desire, drive and determination to run a Dutch Bros location on their own. Growth opportunities are exclusively for existing, qualified Dutch Bros employees and are closed to the public.”

Dutch Bros has grown as its people have become ready to open a location of their own. There’s a good reason for this. “We make sure the culture and the way we do things is protected,” Ricci said. “We only promote from within related to how we expand our culture and our business.”

Dutch has not had trouble finding people. When it opened a location in College Station, Tex., it had 350 people apply for 50 positions. “We could have hired 150 of them because of the quality of the people that we had come through for employment,” Ricci said.

And its culture is unique

Dutch Bros employees are known as “broistas.” They are trained by more experienced broistas who are known as “The Mob.”

Its most loyal customers are known as the “Dutch Mafia.”

“It’s better than ‘employee’ and ‘manager,’” Ricci said. “What’s the point to that?”’

But it also points to the company’s unique culture, which is important to who the chain is. “Culture isn’t an event,” Ricci said. “It’s not a sign. It’s not a tagline. It’s something you live every day. You have to make sure you live that every day. It’s not fabricated. It’s as real as it can get.”

It was taking only cash as recently as five years ago

Dutch Bros has been working hard over the past couple of years to add technology to its restaurants. “We needed to change,” Ricci said. “Five years ago, we were a cash drawer model. We didn’t take credit cards.”

The pandemic accelerated its shift to digital. Early in the pandemic it eliminated its punch-card loyalty program and earlier this year launched its new loyalty program. Its Dutch Rewards app quickly became one of the most popular apps on the Apple Store.

The pandemic, Ricci said, “has made us a much better business because of the decisions we made.”

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