Dutch Bros Is Gaining On Starbucks And Dunkin'

The regional coffee chain is ready to give national brands a run for their money.

Dutch Bros, a beloved coffee chain of the western United States, is going through a growth spurt with the potential to make industry giants Starbucks and Dunkin' nervous. Though it's long been popular enough to draw crowds, it's now quickly expanding its footprint to make a splash in other markets.

In 2023, it became abundantly clear that Dutch Bros was on the rise. The coffee chain achieved systemwide sales of $1.2 billion in 2022, which was a 28.9% increase over 2021, the year the company went public. Flash forward to the close of 2023, and Dutch Bros is reporting systemwide sales of more than $1.4 billion. Plus, same-store sales were up 5% in the fourth quarter of 2023. QSR Magazine ranks Dutch Bros the fourth largest fast food chain in the "snack" category, just behind Starbucks, Dunkin', and Dairy Queen.

Restaurant Business reports that Dutch Bros is planning to open a support center for its operations in Arizona, allowing for even more growth. The new center will house 40% of the brand's operations support by 2025 and is meant to help the company better attract employees.

As Dutch Bros further strengthens its presence in the western half of the country, it is also making big moves to expand its reach eastward. After opening 159 new locations across 13 states in 2023, the coffee chain has plans to open its first location in Orlando, Florida this week. Dutch Bros ended last year with 831 locations and plans to open between 150 to 165 restaurants this year, per the company's latest financial reports.

Comparatively, Starbucks has more than 16,000 locations in the United States and Dunkin' has more than 9,500. Dutch Bros may be lagging behind these major coffee players by store count, but Placer.ai data shows the coffee chain's foot traffic has increased consistently over the past few years. In January, visits to Dutch Bros increased 10% compared to the same month last year. Placer.ai notes this is miles above the growth rate for coffee shop visits more broadly, which actually decreased by 2.7% for the same time period.

Another foothold Dutch Bros has in its climb to the top is a loyal customer base. Around 65% of transactions at the coffee chain in the fourth quarter of 2023 came from members of its rewards program, Restaurant Business reports. In comparison, Starbucks recently reported 30% of its sales in the U.S. come from mobile orders, Nation's Restaurant News reports.

To please its loyal fan base (and likely as a natural progression to compete with its competitors), Dutch Bros is now looking into how to upgrade its app with mobile ordering capabilities. The brand plans to test a new app with this feature throughout Arizona, where it has more than 70 locations, and hopes to extend the capability to all its locations by the end of 2024, Nation's Restaurant News reports.

"We recognize this could be a big opportunity for us and also understand the importance of getting this right, delivering on our core values of speed, quality, and service," Dutch Bros Chief Executive Officer Christine Barone said during the most recent earnings call. "As such, it is our goal to roll out this capability to the majority of shops by the end of the year."