Dutch Bros- a fast-growing coffee shop

Dutch Bros ($BROS) presents their first earnings report as a public company in the next few minutes.

Obviously this isn’t SAAS. But that doesn’t mean it can’t provide SAAS-level returns, IF it can deliver. If it can hit a couple numbers today, I do believe it will portend future success. I’ll post what those numbers are below.

DutchBros operates a chain of 471 drive-thru coffee shops throughout the West Coast (as of June 30, 2021) If we keep this on this Board’s discussion in the future, please don’t comment on the quality of their coffee. Let’s try to keep this based on the numbers.

Here’s what I’d like to see today:

  1. Q3 Same Store Sales growth above 10%. This is aggressive for restaurants, but we need to see that the back-to-work thesis is intact - keep in mind Dutch Bros operates drive-thru kiosks. We need to see that people are buying coffee on their way to work, and if Q3 wasn’t aggressive, then maybe this isn’t worth our time. I wouldn’t accept same store sales to stay in double digits in the future, but I want to see it now. I’d also like to see cohort analyses on each shop based on when they opened. Does the new Texas market behave differently than the older Oregon market? I’d like to see that broken out.

  2. Guidance for new kiosks in 2022 that suggest they’ll build 100+. they are currently on a run rate of around 60 new stores in FY2021, after building more than 70 in 2020. We can’t have them slowing down new store construction 2 years in a row, especially when they have 39 other states to add to their footprint.

  3. Employee turnover. I know I scolded everyone above about not discussing non- quantitative matters, but there is an interesting aspect of Dutch Bros in that people like working there. Labor supply will continue to be tight for the foreseeable future. Keeping employees actually matters these days! There’s sort of a way we can measure this quantitatively: employee turnover. I don’t have an exact figure in mind, but I don’t want to see this metric any higher than others in the industry, for what that’s worth.

Anyway, I do believe this can be the type of company that can grow at greater than 35% per year for the next decade, but let’s see how this first call shakes out to see how it measures up vs our SAAS racehorses.

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This one popped up on my radar from a few different sources, and the teen (who’s now an adult with family, but that is a different story) said she really liked them.

But, seems the numbers I am reading are mixed compared to your hopes.

  • This quarter same store sales was up 7.3% for quarter and the shops owned by the company was worse at just 4.7%.
  • They are estimating that next year will in in the mid single digits again.

New stores estimated for 2022 is 112 shops, but if they can open 30 in forth quarter (est) then that should be like 120 next year just to stay consistent. Not seeing the hypergrowth here.

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But, seems the numbers I am reading are mixed compared to your hopes.

- This quarter same store sales was up 7.3% for quarter and the shops owned by the company was worse at just 4.7%.
- They are estimating that next year will in in the mid single digits……Not seeing the hypergrowth here. <\i>

Yeah, agreed dlbuffy. This looks like a high growth, but not a hyper growth play and not likely appropriate for this Board. 63% topline for company-owned stores (they have some franchisees for older cohorts, but all future build will be company-owner) is pretty nice, but not sure it can be sustained with single-digit SSS.