QSR May 2023

EMERGING BRANDS

Trav and Dane hoped to open their first station at Fred Meyer. They were hyped after applying. A week passed, and there was no phone call. Silence remained after two, then three weeks. So finally Trav called. The store confirmed it received the appli cation and asked the brothers to be patient. A few more weeks flew by, and Trav decided to call again. This time, the response was more snarky. Trav told Fred Meyer about how anxious he and his brother were and that they were ready to go. The store official, not moved, said, “Yeah, well, we’re not ready to go and when we are, we’ll let you know.” In light of that debacle, Trav and Dane searched for another site and found one in downtown Grants Pass on 6th Street near the U.S. Post Office. The brothers sealed an agreement with the landlord for $150 per month. They were positioned beside an old billboard sign with power outlets, a convenient spot to plug in a grinder and refrigerator. The Dutch Bros team was set, but nervous—at least one of them was. “I remember Dane tripping on the first day, like, ‘I don’t know if I can do it, man. This just feels too weird,’” Trav says. “We had a little building behind us that we had set up as our backdrop and our storage facility that we could roll the cart into and lock everything up at night. And he stood back there and I go, ‘Hey dude, I’m gonna make you a mocha and I’m gonna put on some Led Zeppelin and we’ll start rolling here.’” The pushcart earned around $65 that first day. Trav and Dane were indeed rolling, until the store manager of Grocery Outlet—which shared a parking lot with a strip mall and the cart—directed all of his ire toward the brothers. Full of not-so nice profanities, the Grocery Outlet representative demanded they leave. “‘I don’t give a f*** who you talked to,’” says Trav, recalling the unadulterated rage from the store manager. “‘This is my parking lot, and I’m gonna move your sh** unless it’s out of here tomorrow. Is that clear? and I’ll do it with my forklift if I’ve got to.’ And I’m like, ‘OK, we don’t want any problems.’ And he’s like, ‘Yeah me either so beat it out of here.’ It’s just like hardcore.” Undeterred, the brothers returned the next day, making the store manager even angrier. This time, Trav followed him into his office and convinced him to let the pushcart stay for 30 days as an experiment. During one of those days, some of Grocery Outlet’s corporate leadership pulled into the parking lot. One lit up a cigarette, another ordered a cappuccino, and a third received a mocha. Trav and Dane set the tone by offer ing the beverages for free. The group enjoyed their drinks so much that they praised the store for allowing the pushcart to be in the parking lot. Thus, Dutch Bros was born—for real this time. A couple of years later, the company opened its first drive-thru. Expansion continued from there. The concept opened its first franchise in 2000. In 2005, Dane was diagnosed with ALS, at which point Trav strapped the business on his back and carried it forward. The biggest change came in 2008 when the chain decided to stop selling franchises to operators who didn’t grow up in the company. They were good people, Trav says, but they just didn’t understand the culture.

Dane passed away in 2009, and the brand honored his leg acy by pushing past the Great Recession and kickstarting a new, successful growth path. In 2017, Dutch Bros shut off franchis ing completely so it could be the sole judge of getting “the best of the best” people in its system. “Then we could build a pipeline of people and a ladder for them to climb and pay them extraordinarily well and they could build their teams and do leadership development and culti vate culture like nobody’s business,” Trav says. “That people system that we developed I think is one of the best things that we’ve ever done.” METEORIC RISE Dutch Bros ended 2022 with 671 shops, making it the third-larg est coffee chain in the U.S. in terms of unit count, only trailing Dunkin’ and Starbucks. In 2023, the brand plans to open 150 stores. That would put the company past 800 units, a goal it set back in 2018 when it received an investment from TSG Consumer Partners. Dutch Bros is also expected to earn $1 billion in revenue on a trail ing 12-month basis in late 2023 and surpass 1,000 restaurants by 2025. Ricci is often asked how Dutch Bros scales culture from Boise, Idaho, to El Paso, Texas, and Knoxville, Tennessee. The company does this through an internal development model in which a team member can’t run a Dutch Bros in a new market without being part of the brand for a long time. He estimates that on average, it takes seven to nine years for people to get promoted into a trade area. Growth is predicated on the avail ability of talent. The pipeline has to be strong because when Dutch Bros enters a new market, it opens multiple stores as part of an overall fortressing strategy. At the start of 2023, there were roughly 275 people in the pipeline ready to build new trade areas. “As I tell people, we’re not a real estate company plugging people into it,” Ricci says. “We’re a people company plugging real estate into it. … We’re taking the best of the best of the leaders that we have currently in the system and then we’re moving them in to basically create what people view is so spe cial with Dutch.” Valuing experience starts at the top. In February, Christine Barone, formerly the CEO of True Food Kitchen and an exec utive with Starbucks, joined the company as president. She’s tasked with leading operations and leveraging her knowledge of coffee, service industries, and digital marketing. Her first impression: everyone on the leadership team is genuine, and that carries throughout the organization. She views Dutch Bros as a company that recognizes employ ees want to work in places where they can have fun, make connections with colleagues, and go home in a good mood. “It felt to me like Dutch Bros really just was getting a lot of things incredibly right,” Barone says. “And I also have three teenagers, and so they think I’m very cool now and that was an exciting part of the journey of joining Dutch as well.” In Q4, shop-level turnover improved about 3 percent quar

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MAY 2023 | QSR | www.qsrmagazine.com