Dutch Bros. Coffee keeps on opening new locations in the Sacramento. Here’s why
A new Dutch Bros. Coffee on East Commerce Way in North Natomas’ Sports Complex neighborhood is the fifth new location this year in the Sacramento region for the drive-through chain known for its personable service and dozens of beverage choices.
Three more locations are slated to open in the next several months.
The chain now has more than 25 of its more than 700 stores in Sacramento. This expansion is part of the company’s growth strategy in 14 states, and executives said 150 new locations will open by the end of this year with a goal of 4,000 stores in the next 10 to 15 years.
While it won’t be catching up with Starbucks’ 40,000 locations anytime soon, publicly-traded Dutch Bros. has more than doubled its number of locations in the past five years.
What makes Dutch Bros. Coffee unique
The company was founded back in 1994 by two Oregon-based brothers and has become known for its personable service even though it is a drive-through. Orders are taken by attendants who come up to car windows. The menu includes dozens of coffee and energy drink options including a secret menu that adds to the fun of ordering.
William Blair Equity analyst Sharon Zackfia said the chain particularly appeals to the under-35 age group with its Instagram list of energy drinks that the younger generation puts on their feeds.
Among its colorful Rebel-branded energy drinks is the Shark Attack, a multicolor drink with flavors such as blue raspberry, lime, and coconut, topped off with a pomegranate drizzle and the electric berry, featuring lime syrup and blue raspberry syrup.
The company is known for its customer service.
“Basically all of their shops are open with internally promoted managers so that helps them stay small as they get big and kind of create this unique customer connection,” she said.
The company is also adding a new feature to many locations: an escape lane.
Company CEO Joth Ricci explained last month at an investment conference in Chicago that the escape lanes are for when customers “become too chatty” with the barista. He said the company doesn’t want to end the customer’s conversion, so motorists behind the stopped car can have their drinks delivered in the escape lane.
The North Natomas location also features an escape lane.
Small coffee drinks at the North Natomas location, and others in the Sacramento region, start at $3 but depending specialty drinks depending on the size can cost as much $10.
Earnings don’t tell the whole story
Ironically, back in November 2022, executives of publicly-traded Dutch Bros. said in an earnings call that the Sacramento area was the only one of its 39 markets in which same-store sales were not growing.
The executives explained that a 9.7% quarterly decline in sales was due to infill development.
The idea, they said, were that they were opening more Sacramento area locations to cut vehicle lines, the number one reason that customers drive away. But in the short term, executives explained, more locations also means less customers per location.
“When we start to do infill in that market, we’re going to naturally see some impacts that will improve overall customer service, but it will knock down volumes,” CEO Ricci said in the earnings call. “And we’re OK with that.”
While the company does not disclose specific locations’ revenue, Ricci said last month at the investment conference that the average location makes $1.9 million in revenue a year.
Ricci also said much of the chain’s expansion is focused in California and Texas. He said Dutch Bros. does best in hotter weather markets because most of the drinks it sells are served cold.
If you go
Newest location: 4481 East Commerce Way in Natomas
Hours: 5 a.m.-10 p.m. Sunday through Thursday, 5 a.m.-11 p.m. Friday and Saturday
Locations slated to open: 8720 La Riviera Drive in La Riviera, 7775 Stockton Blvd. in the Florin section of south Sacramento and 7225 Freeport Blvd. in the Meadowview neighborhood
