Dutch Bros Inc

Dutch Bros Inc. is a Delaware corporation and its Class A common stock trades on the New York Stock Exchange under the symbol “BROS”.

OUR COMPANY

Dutch Bros is a high growth operator and franchisor of drive-thru shops that focus on serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE. Founded in 1992 by brothers Dane and Travis Boersma, Dutch Bros began with a double-head espresso machine and a pushcart in Grants Pass, Oregon. Today, we believe that Dutch Bros is one of the fastest-growing brands in the quick service beverage industry in the United States by location count. As of December 31, 2023, we had 831 shops, of which 542 were company-operated and 289 were franchise, across 16 states as shown in the graphic below. For additional information regarding company-operated and franchise shops by state, refer to Part I, Item 2 Properties of this Form 10-K.

The Dutch Bros Experience

Dutch Bros is more than just the products we serve: we are dedicated to making differences in the lives of our employees, customers, and the communities in which we operate. Our people are the key to our success, and our broistas are the face of Dutch Bros, delivering on the Company’s core values of QUALITY, SPEED, and SERVICE.

•QUALITY: Our broistas are provided with the resources and training to provide high-quality hand-crafted beverages to our customers.

•SPEED: When our shops are busy, a “runner” broista leaves the shop and greets our customers before they reach the drive-thru window. This runner explains the menu and helps customers personalize their orders. Using tablets, our runners take orders, sending them to broistas inside the shop, who utilize our flexible systems to hand-craft custom beverages. This system, in combination with “escape lanes,” in many shops that allow customers to receive their drinks and exit before reaching the window if their drinks are ready, helps our team manage throughput all day. See “Our Shops” section for illustration of our shop model.

•SERVICE: We embrace a customer-first attitude and use every interaction during the drive-thru experience to connect with our customers and seek to deliver an experience that exceeds our customers’ expectations.

The combination of hand-crafted and high-quality beverages, our unique drive-thru experience and our community-driven, people-first culture has allowed us to successfully open new shops and continue to share the “Dutch Luv”. To achieve these experiences and create meaningful differentiation in our industry, we and our franchise partners are committed to attracting and retaining broistas who deliver an experience that exceeds our customers’ expectations. We empower our broistas to take the extra step to make each customer interaction remarkable.

Our Menu

We sell a wide range of customizable hot, iced, and blended beverages.

•Coffee: coffee-based beverages make up ~50%1 of our menu mix. Coffee-based beverages include our espresso-based custom drinks, cold brew, and our proprietary “Freeze” blended beverages. Our Private Reserve coffee is a 100% Arabica three-bean blend, roasted in our Grants Pass facility. In our shops, we utilize premium La Marzocco machines to extract the coffee and deliver shots of smooth, full-bodied espresso.

•Energy: ~25%1 of our menu mix is based upon our proprietary Blue Rebel energy drink, which is highly customizable with flavors and modifiers and can be served blended or over ice. Our energy platform helps unlock the afternoon daypart and helps us appeal to a diverse customer base.

•Other: the remaining ~25%1 of our menu mix is a wide variety of teas, lemonades, sodas, and smoothies.

1 Based on number of drinks sold across our system in 2023.

Customers are encouraged to explore our robust “secret” menu and customize beverages through the addition of flavors and other modifiers. Many of our customers add “soft-top,” a sweet, creamy whipped topping that can be added to almost any order. High-levels of customization encourage innovation, creating a competitive moat and helping drive a broad demographic appeal.

Our Dutch Rewards Loyalty Program

In early 2021, we released our app-based digital loyalty program (Dutch Rewards) and quickly scaled it to account for approximately 60% of transactions by the end of 2021. We have continued to grow penetration even as we have rapidly built new shops and entered new geographies. In 2023, approximately 65% of all transactions were attributable to Dutch Rewards members.

Dutch Rewards uses a spend-based model, where customers collect points that can be redeemed for rewards. These rewards can be utilized to receive free drinks or shared with others. Points and rewards generally expire after six months.

We offer members the ability to preload funds on their account and pay through our app, a function we call Dutch Pass. In addition to being convenient for customers, Dutch Pass enables us to increase our speed of service by reducing the payment collection time. Our Dutch Pass functionality also allows users to purchase and share digital gift cards, providing more customers the opportunity to share in the Dutch Bros Experience.

We utilize Dutch Rewards to communicate and interact directly with our customers and drive traffic. Over time, we have been developing increased sophistication as we have moved toward a more targeted approach where we use consumer insights to drive behaviors that we expect will create lasting value. We intend to continue investing in consumer insights and moving toward more personalized marketing to offer targeted messaging, offers, and rewards that enhance the Dutch Bros experience at an attractive return on investment.

Our Shops

We are a drive-thru focused business: over 90% of our business is conducted through the drive-thru. We believe that our drive-thru business model places a premium on customer convenience without sacrificing the personal experience. Our shops and our real estate strategy are designed from the ground up to support the drive-thru business.

Our shops typically have a smaller footprint than other drive-thru formats - this compact footprint allows us greater flexibility to place locations on more parcels. We typically target lots that are at least 25,000 square feet to handle substantial car volume. Except for a handful of legacy “coffee houses”, all our shops deploy either a single or double drive-thru window with multiple feeder lanes for traffic flow.

Most of our shops also have walk-up ordering windows and “escape lanes” that enable customers to exit the line after a runner delivers their drink before reaching the window, helping increase throughput and reducing congestion. For illustration of our shop model, see the graphic below.

Our Long-Term Franchise Partners

Historically, we used a franchising strategy alongside company-operated shop development to drive growth in select markets. Over time, as we decided to grow more from within, we only offered franchise partnership opportunities to the highest-quality employees within our network. Since 2017, our focus has been a company-operated strategy with all operators recruited from within our system. While we maintain great relationships with our existing franchise partners and they continue to open new shops as they look to infill their high-demand markets, we anticipate that substantially all new shops we open each year will be company-operated shops.

OUR GROWTH STRATEGIES

We are in the early stages of our growth story. We will expand our business to positively impact our communities through the following growth strategies:

Operations

Sourcing and Supply Chain

We pride ourselves on the quality of our coffee. To ensure we are able to consistently deliver high-quality coffee across our 831 shops in our system, we are actively involved in the sourcing, roasting, packaging, and distribution of coffee beans to our systemwide shops.

We designed our supply chain to be flexible in response to changes in the market. On average, we typically have approximately four months of green coffee bean inventory stored at our two ports of entry in the United States or at our roasting facility in Grants Pass, Oregon. In the event of a supply disruption in any one of our production origins, we have identified alternate coffee beans with substantially similar flavor profiles that can be sourced and incorporated to produce our blend.

We have taken several steps to increase our diversity of supply and reduce transportation costs as we expand company-operated shops eastward within the United States. We anticipate our new roasting facility in Texas will be operational in 2024.

We also manufacture our own proprietary Dutch Bros. Blue Rebel Energy Drink via a co-bottling and co-packaging relationship. In 2023, we began testing beverage tap systems for our Blue Rebel Energy drink in shops. We believe distributing a portion of our Blue Rebel Energy drink via a “bag in a box” system for use in shop beverage taps will help us reduce our dependence on aluminum cans.

Quality, Health, and Safety

We and our franchise partners strive to maintain a safe, healthy environment at each shop through the careful training and supervision of personnel and by following rigorous quality standards. Our Quality Assurance team informs, monitors, and reports on standards for preparation and cleaning, as well as inspects every shop in the system on a quarterly basis in preparation for biannual health inspections. As part of our people-first culture, the health and safety of our customers and employees are our highest priority.

Our commitment to beverage and food safety is strengthened through the direct relationship between our supply chain, culinary, food safety, and quality assurance teams. We review our supply partners’ material decisions regarding ingredients, and we reserve the right to conduct spot-checks. We examine each suppliers’ safety and quality records and verify insurance coverage. We believe that our established requirement for franchise partners to purchase certain supplies and equipment from approved vendors further enhances safety and quality within our system.

People

Our people are the driving force of our mission and are fundamental to our success. One of the most important relationships we have is with our employees, who are key members of the communities we love and support. We attract and seek out potential employees by identifying those with a love for life, a natural ability to connect with people under any circumstance, and most of all, a genuine smile!

As of December 31, 2023, we and our franchise partners have approximately 24,000 employees, of which 16,000 employees are in our company-operated shops and headquarters. The chart below provides the approximate percentage of systemwide employees by shop type and by state location:

The charts below provide the approximate percentages of our company-operated shop and headquarters employees by gender and ethnicity:

Diversity, Equity, and Inclusion

We are committed to DEI in our Company, at the window, and in our communities, cultivating an inclusive environment of love, acceptance, and kindness. Our DEI commitment strives to ensure all customers, crews, and communities are welcomed, honored, and loved. We are actively working to develop a holistic DEI program that can be a resource for everyone we serve. The events of the past several years have offered another reminder of how critically important our efforts have become, and as a result we have taken real, meaningful steps toward advancing our DEI program including, but not limited to, the following:

•hired two female executives in the past 18 months: our Chief Executive Officer and President and Chief Marketing Officer;

•expanded our library of DEI training, events, and resources to headquarters employees and shop management.

Total Rewards

We offer competitive salaries and wages and continually assess them across business environments and labor markets. We are continually making enhancements to our total rewards program to attract and retain top talent as part of our growth strategy. We offer a comprehensive suite of benefits to our broistas, shop management, and headquarters employees, including, but not limited to, the following:

•company-wide minimum wage of at least $10.00 per hour across all markets;

•company paid parental leave of more than eight weeks, after one full year of employment for shop management and headquarters employees;

•wellness program to help employees live their best lives and free access to our employee assistance program for all employees;

•tuition assistance toward employees’ professional development after one full year of employment;

•flexible working arrangements for headquarters employees, including on-site, hybrid, and remote options;

•up to 16 hours of paid volunteer hours for all employees to use when helping out the community; and

•team focused culture with growth and leadership opportunities that support career advancement.

Training and Development

We are committed to inspiring and facilitating personal and professional growth for our people as they fulfill their dreams and contribute to their communities. As part of this commitment, we provide resources to train and develop our people.

Broista Training

•2 day cultural immersion, history, and fundamental knowledge

•10 shifts of on-the-job training

•Review of “Manifesto,” field guide, and employee handbook, and have proficiency tests twice per year

Leadership Pathways

We exclusively source regional operators, who we view as the linchpins of our field organization and lead between 3-7 shops at scale, from within our organization. For our continued growth, it is critical that we consistently train and develop new leaders. Our leadership development program outlines shop growth opportunities at all levels of the organization and furthers our philosophy of hiring and developing leaders from within. This program provides ample opportunities for our shop broistas to create their own pathway, which can be a mix of Path A and B, to reach their potential goals.

This leadership program develops a pipeline of home-grown talent, which we believe will be sufficient for our new shop growth over the next several years.

Philanthropy

Since our inception, we have been dedicated to giving back to the communities in which we serve, and we consider our brand to be a powerful platform for social impact. Our philanthropic efforts support local and national causes. A culture of philanthropy and giving back to build better communities permeates the entire Dutch Bros organization, energizing both our broistas and customers alike.

We host three company-wide givebacks days each year. The Company, along with our franchise partners and Dutch Bros Foundation (the Foundation) provide donations for funds raised in each of these giveback days. The Foundation is a not-for-profit founded by the Company that provides philanthropy to coffee farmers and local communities.

Additionally, our operators and franchise partners are empowered to create their own local, shop-specific giveback programs that help support and build relationships within their communities. In addition to the 2023 donations noted above for the Company-wide giveback days, the Company, along with our franchise partners and the Foundation donated nearly $2.5 million in 2023 to various organizations through our local giveback days.

Competition

The beverage industry is highly competitive and fragmented, and our shops compete on a variety of factors, including convenience, taste, price, quality, service, and location. We believe our primary competitors include national and regional coffee chains, local specialty coffee shops, regional drive-thru coffee chains, and drive-thru quick service restaurants with coffee and other beverage programs. Our competitors operate company-operated, franchised, and mixed business models. In addition, due to our proprietary Dutch Bros. Blue Rebel energy beverages, we also compete with convenience stores.

Intellectual Property

We own many registered trademarks and service marks in the United States, the most important of which might be our trademarked Windmill logo. Other important trademarks include our “Dutch Bros,” “Dutch Bros Coffee,” “Dutch Bros Rebel,” and “Dutch Bros. Blue Rebel” word marks and our recognizable Dutch Bros sign logo. We believe the Dutch Bros name and the many distinctive marks associated with it are of significant value and are very important to our business. Accordingly, as a general policy, we pursue registration and monitor the use of our marks in the United States and challenge unauthorized use.

We license the use of our marks to franchise partners, third-party vendors and others through franchise agreements, vendor agreements and licensing agreements. These agreements typically restrict third parties’ activities with respect to use of the marks, impose brand standards requirements, and require licensees to inform us of any potential infringement of the marks.

We register some of our copyrighted material and otherwise rely on common law protection of our copyrighted works. Such copyrighted materials are not material to our business.

Government Regulation and Environmental Matters

We are subject to extensive federal, state, local, and foreign laws and regulations, as well as other statutory and regulatory requirements, including those related to, among others, nutritional content labeling and disclosure requirements, food safety regulations, local licensure, building, and zoning regulations, employment regulations, and laws and regulations related to our licensed operations. New laws and regulations or new interpretations of existing laws and regulations may also impact our business. The costs of compliance with these laws and regulations are high, are likely to increase in the future, and any failure on our part to comply with these laws may subject us to significant liabilities and other penalties. See "Risk Related to Regulation and Litigation" in Item 1A, Risk Factors for more information.

We are not aware of any federal, state, or local provisions that have been enacted or adopted regulating the discharge of materials into the environment, or otherwise relating to the protection of the environment, that have materially affected, or are reasonably expected to materially affect, our results of operations, competitive position, or capital expenditures.

Seasonality

Our business is subject to seasonal fluctuations that impact our revenue and company-operated shop gross profit margins. We typically experience higher nominal system sales in the summer months, which impacts revenue and company-operated shop gross profit margins in our second and third quarters of our fiscal year.

Information About our Executive Officers

The executive officers of Dutch Bros Inc. as of the filing of this Form 10-K, are as follows:

Mr. Boersma is our Co-Founder and has served as our Executive Chairman since August 2021 and as the Executive Chairman of Dutch Bros OpCo since February 2021. Prior to serving as our Executive Chairman, he served as the Chief Executive Officer of Dutch Bros OpCo from February 2019 to February 2021. Mr. Boersma has led us as Co-Founder since 1992. Mr. Boersma attended Southern Oregon University.

Ms. Barone has served as our Chief Executive Officer and as a member of our Board since January 2024, and as our President since February 2023. Ms. Barone has worked in the food service and beverage industries for more than a decade, and most recently served as Chief Executive Officer at True Food Kitchen, a high growth restaurant and lifestyle brand, from August 2016 to February 2023. Prior to that, she served in various leadership roles at Starbucks Corporation (Nasdaq: SBUX). Earlier in her career, she held positions with Bain & Company and Raymond James. Since March 2020, Ms. Barone has served on the Board of Directors of Yelp Inc. Ms. Barone holds a B.A. in Applied Mathematics and an M.B.A. from Harvard University.

Mr. Jemley has served as our Chief Financial Officer since August 2021 and the Chief Financial Officer of Dutch Bros OpCo since January 2020. Since June 2017, Mr. Jemley has served as a member of the Board of Directors of Four Corners Property Trust Inc., a real estate investment trust (NYSE: FCPT), where he chairs the Audit Committee and serves as a member of the Nominating and Governance Committee. From July 2018 to December 2019, he served as the Chief Financial Officer of CKE Restaurant Holdings, Inc., a quick service restaurant company. From February 2006 to January 2018, Mr. Jemley served in various senior management positions at Starbucks Corporation (Nasdaq: SBUX), including as Senior Vice President Finance, International and Consumer Products Group. From April 1990 to January 2006, Mr. Jemley served in various positions in finance and store development at Yum! Brands, Inc. (NYSE: YUM) including most recently as the Chief Financial Officer of Yum Restaurants China from December 2003 to January 2006. Mr. Jemley holds an M.B.A. from the Michael G. Foster School of Business at the University of Washington and a B.B.A in Accounting from the University of Louisville.

Mr. Maxwell has served as our Chief Operating Officer since August 2021 and the Chief Operating Officer of Dutch Bros OpCo since January 2017, and previously served in various roles at Dutch Bros OpCo, including as the Vice President and General Manager from April 2009 to December 2016, Vice President of Growth from January 2004 to March 2009 and Franchise Coordinator from January 1999 to December 2003. Prior to joining Dutch Bros, Mr. Maxwell worked in finance and investment advising. Mr. Maxwell attended Lewis & Clark College.

Ms. Davila has served as our Chief Marketing Officer since June 2023. Prior to joining Dutch Bros, she served as Chief Marketing Officer at CKE Restaurants, Inc., a quick service restaurant group, from September 2022 to June 2023. Prior to that, she served in various roles at PF Chang’s China Bistro Inc., a casual dining restaurant chain, including most recently as Chief Marketing Officer from September 2019 to August 2022, as Senior Vice President – Marketing from January 2019 to September 2019, and as Vice President – Marketing and Brand Development from November 2017 to January 2019. Ms. Davila is a Fulbright Scholar and holds a B.A. from Washington University in St. Louis, a J.D. from Seton Hall University, and an M.B.A. from Emory University.

Ms. Tullett has served as our Chief Legal Officer since September 2022 and has more than 20 years of experience helping diverse organizations manage operational risk and achieve record levels of growth, compliance, and profitability. Prior to joining Dutch Bros, she served Papa Murphy’s International, a franchise model take-and-bake pizza company, for more than 20 years in various roles, including most recently as Senior Vice President, General Counsel, and head of new store Development from May 2019 to August 2022, and from May 2014 to May 2019, as Chief Legal Officer while the company was publicly traded on the Nasdaq. In addition to her role at Dutch Bros, Ms. Tullett serves on the Board of Directors for Vancouver Symphony Orchestra. Ms. Tullett holds a J.D. from Lewis & Clark, Northwestern School of Law.

Please refer to our website for a complete listing of our executive management team.

Available Information

Our website address is dutchbros.com. Our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the SEC, and all amendments to these filings, can be obtained free of charge from our website at https://investors.dutchbros.com/financials/sec-filings/default.aspx or by contacting our Investor Relations department at our office address listed above as soon as reasonably practical following our filing or furnishing of any of these reports with the SEC. The SEC maintains a website that contains reports, proxy and information statements, and other information regarding issuers that file electronically with the SEC at www.sec.gov. We also routinely use the investor relations page on our website as a channel of distribution for important Company information, including press releases, analyst presentations, and financial and corporate governance information. The contents of these websites are not incorporated into this filing. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.