Growth Chains: Woe is Who?

Dutch Bros Coffee

This chain’s drive-thru model sets it apart, but its culture of love proves the ultimate differentiator.

Ducth-Bros MeridianGOThe majority of Dutch Bros’ 275 units are drive-thrus. Two building footprints are available —16-by-30 feet and 20-by-40 feet — and most locations include a patio for walk-up orders. Photos courtesy of Dutch Bros CoffeeBrothers Travis and Dane Boersma launched Dutch Bros Coffee 25 years ago as a pushcart on 6th Street in Grants Pass, Ore., using a manual espresso machine, propane for fuel, and portable waste and water tanks. They soon invested $475 in a pop-up tent to guard the cart against the elements and transported their business every day from the family's dairy farm into town with an old Mazda truck that they'd picked up for $300. Travis was 21 and Dane 38; neither doubted that their little business could and would grow.

That was the whole idea, after all — and grown it has. Dutch Bros Coffee today operates 275 locations throughout 7 Western states and employs more than 7,000 associates. The chain added 25 new units last year and has another 35 in the queue for this year. Travis, who assumed leadership of the company following Dane's death from ALS in late 2009, says unit growth will similarly compound going forward, with Dutch Bros planning to open another 100 units in states where it already has a presence before the company begins to look at expanding into neighboring California, Arizona, Washington, Idaho and Colorado.

"With our age difference, we were at quite different places in life when we started," says Boersma. "But Dane was my best friend, mentor and partner. One day, around six months after we started our first pushcart, we sat down on the living room floor of his mobile home and did some lofty, wild and crazy goal setting. Dane had read a self-help book that he was passionate about and that he felt could have a huge impact on our personal and professional lives. There was a formula for success in the book that resonated: Know your specific outcome, take massive action to get it, ask yourself if the action you're taking is working and, if it isn't, change it until it does. We've stuck with that philosophy, and the short- and long-term goals that we set at the time have pretty much been achieved."

In a segment that during Dutch Bros' lifetime has grown fiercely competitive and increasingly specialized, the company continues to thrive thanks to its ability to create real points of differentiation. Early on, after growing to five pushcarts, the brothers opened their first drive-thru unit and, in so doing, discovered what their niche would be in the marketplace.

"We figured it would be more convenient for our customers to be able to just swing by the drive-thru," Boersma says. "They loved it, so we went back to the formula from the book and ended up focusing on the drive-thru model as the best way to grow and help us achieve some of the other wild and crazy goals that we had set, which included having locations throughout the 11 Western United States."

Except for a handful of walk-in coffeehouses in markets where drive-thru isn't permitted, all Dutch Bros locations are single- or double-lane drive-thrus. The company uses two building footprints: 16-by-30 feet and 20-by-40 feet. Most locations also include a patio for walk-up orders, and the company recently debuted its first bike-thru window on the side of a coffeehouse unit in Portland, Ore.

Love All, Serve All Culture

If drive-thru serves as Dutch Bros' key platform differentiator, culture and approach to growth really set it apart. Intensely focused on three overriding drivers for the business — speed, quality and service — the brothers have built a corporate culture that, as Boersma puts it, is based on a "love all, serve all" philosophy.

"With speed, drink quality and service being our main focal points, we tried to figure out the best way to serve people — all the people that we touch," Boersma says. "We identified early on that we're in the relationship business and that, yes, we sell coffee, but our core product is love. Our culture is the ultimate differentiator that keeps us unique in the market today, and our vision is and always has been to provide a compelling future for the people within our communities and within our organization."

Rather than dilute its culture as the company expanded, Dutch Bros has made strategic moves to continue to nurture and strengthen it. While the company initially grew through traditional franchising, in 2007, the brothers closed franchising to outside investors and shifted its growth strategy to one that's 100 percent internal.

"As we grew, we started to realize that we wanted to put more of an emphasis on the culture and to provide opportunities for people within the organization. Rather than sell franchises to businesspeople with business experience, we were more interested in teaching business to people who really understood our culture. We know that the people within our organization grasp that really well, so we made the shift," says Boersma. "It's made a big difference in our business."

Today, Dutch Bros sells no franchises; instead, employees earn the opportunity. To be considered, they must have at least three years of employment at the company, one year in management, a credit score of 675, a letter of endorsement from their current franchise owner, and great reviews from both their coworkers and the people who work under them.

The chain has been experiencing year-over-year growth and was featured in the Portland Business Journal among the fastest-growing companies. Dutch Bros reports 2013-2015 revenue growth was 88.5 percent and 2015 revenue hit $283.69 million.

"We let our community of 'Bro-istas' know what our targeted areas are, and they can submit an application for an interview," says Boersma. "Employees who showcase their ability to cultivate culture and exemplify operational excellence can earn the opportunity to own up to seven franchised retail locations. We provide all the financing, and we typically get anywhere from 5 to 15 qualified applicants per franchise opportunity, so it's very competitive."

Snapshot

  • Headquarters: Grants Pass, Ore.
  • Founders: Travis and Dane Boersma
  • Founded: 1992
  • Segment: QSR coffee
  • Services: Drive-thru
  • No. of Units: 275 (20 company-owned)
  • Average Unit Size: 16-by-30 or 20-by-40    
  • Average Unit Volume: $1 million (est.)
  • Expansion Target: 11 Western states