Dutch Bros navigates Omicron with disc development

For a number of brands, macroeconomic headwinds in 2021 have led to disruptions in construction and underperformance in development.

Dutch Bros CEO Joth Ricci knows his coffee chain is not immune to these pressures. But it’s also quite clear that the impact just isn’t the same.

In the first year as a public brand, Dutch Bros opened a record 98 stores systemwide, beating previous forecasts of 92 units. Among these openings were three new states: Texas, Oklahoma and Kansas.

In the fourth quarter, the chain launched an unprecedented 35 stores, including 23 in December. During the last weekend of the year, when Omicron was near its peak, the company managed to open eight stores. But arguably the brand’s most impressive feat came on December 3, when it opened six units in six states.

Dutch Bros ended 2021 with 538 stores in 12 states, up from 441 in 2020. This represents 22% year-over-year growth, eclipsing Dutch Bros’ norm of 20% annual unit expansion.

In 2022, the brand expects at least 125 openings, a growth of around 23%. This is above previous forecasts of at least 112. The business is off to a good start; it opened 25 units in February and is aiming for at least 30 debuts by the end of the first quarter. This includes its first store east of the Mississippi River in Nashville, Tennessee.

“Through our pre-opening programs, we continue to invest in the success of each new store, particularly as we enter new markets,” Ricci said on the fourth quarter and 2019 earnings call. 2021 chain. “We send a dedicated opening team to instill our distinctive culture of speed, quality and service, and in the long run, that investment pays off in spades.”

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Dutch Bros, which primarily focuses on business-managed expansion, has nearly 200 regional operator candidates in its pipeline ready to run a market. These restaurateurs began as hourly employees in corporate and franchise stores and have an average tenure of 6.5 years. These operators will support the upcoming 750-1,000 stores currently in the store pipeline.

Behind these operators are 900 other employees of the Dutch Bros Leadership Pathway program, which gives hourly workers a clear line of sight to becoming a regional operator.

“We are not a real estate company,” Ricci said. “Our primary focus is not site uptime, it is people development. When we commit to growth numbers, we do so because we are confident in the readiness of our operators. minus 125 new store openings this year, we do so knowing that we have a sufficient workforce ready to meet the target.

Dutch Bros’ growth approach is three-pronged, according to Ricci. One is to open up new markets, which are likely to be fewer this year since so many debuted in 2021. The other two strategies are to occupy young and traditional markets to spread demand and relieve pressure at existing stores.

For example, after the College Station, Texas-based location opened with an above-average AUV for the system, Dutch Bros quickly filled the market with three more stores within four miles of each other. other.

“The net effect has been a better experience for our teams and our customers,” said CFO Charlie Jemley. “This will be a recurring theme as we enter new markets. We don’t party after a grand opening and we’re looking to harvest. We are very attentive to wait times and provide the best possible experience for our customers and our teams.

“Our goal for speed is not only to have good overall service times for each experience, but also to be consistent in delivering that service by being very reliable,” he added. “We believe protecting stores from overload helps us achieve these goals.”