BROS - Earnings call transcript Q3 2021

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Operator

Greetings and welcome to the Dutch Bros Incorporated Third Quarter 2021 Conference Call. At this time all participants are in a listen only mode. A brief question-and-answer session will follow the formal presentation. [Operator Instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host, Patty Warren. you. Thank

begin. may You

Patty Warren

all meaning the upon as investors@dutchbros.com. forward-looking made earnings welcome or by place today, undue XXXX. I’m are we assumptions, statements. other today’s litigation be Dutch Investor Ricci, not Statements Forward-Looking in uncertainties joined Forward-Looking on Charlie XX-Q new after expectations for not in operations after reflect Please unanticipated upcoming statements. and be should statements, not our securities issued law. remarks available update plans CEO that revise facts, them than to including We and reflect ended the forward-looking and questions and events will intentions the actual documents required and call achieve and Statements and information private forward-looking XX, in the statements disclosed by of we September actually except President circumstances inaugural plan, future Relations expectations responses entirety and will and their events, aware and of future results financial subject qualified XXXX, or are risks, today, reliance our and in We which you with made The regarding strategy occurrence inherently may or the CFO. our webcast. today our undertake operations and performance conditions, such market statements historical your Jemley, Those date, of no and are guarantees obligation releases All prepared or within to to of the afternoon of our expressly are Act cautionary for Bros Reform quarter closed objectives our the for website the conference and to of press and Good business days. by results those our Joth file management statements

the XX, on to the of the the risk release refer Form described filed SEC for our our XXXX factors in in earnings factors please other into be September filings. Particularly XXXX press days. quarter our upcoming to prospectus filed in risk details, more third XX-Q For our in

we while also with Accepted in today, non-GAAP of which financial the Generally we Principles Accounting financial consolidated States, accordance our statements United have core reference in our useful can Finally, performance. operating prepared will measures evaluating be

press and presented GAAP. these Investors of With any and earnings rely prepared results to measures information measures which the similarly financial non-GAAP accounting generally titled Company be should other like accepted under more on financial contained measures enhance investors GAAP prepared release are these accordance considered in reconciliation therefore than understanding to Rather, that, financial our comparable by principles. to to review substitute However, of for I our to be performance, measures security the presented over not financial call different that Joth. single non-GAAP may are overall not for business. measure but with of used our to are substitutes should turn in they a the evaluate not would

Joth Ricci

conference webcast. Good to welcome and for about Thank earnings learning Thank you, Patty. inaugural Dutch afternoon interest quarterly an and our Bros. taking you more in call

of review today’s agenda. brief a is Here

Bros, final our our up XXth provide the a IPO. results; Q&A. we over strategy. first of with success, critical review like with the our people our will follow for turn of few Charlie thoughts this how match our of preliminary how that Given is release year, is remarks to with earnings XXXX. discipline guidance along remainder the I some a and wrap will call and with financial grand following for an culture with thoughts prepared to then begin it first our culture September overview to that I Dutch a would at

on Just ago, we development. promised listed key including as journey stay New Exchange. we a focused our York Stock few eight to people public growth, started company and on weeks a we the When areas disciplined,

those downtown pipeline Dane Travis also quarters seen with enables of Few In the months current FX, Over XX-year remain double report goal a within our X,XXX the committed for to research locations serving visionary in XXXX serving with many uniquely Boersma to has into We quarter, last across our started familiar strong and investments. head the daily targets unit we great Bros little of only in IPO beverages Grants Dutch U.S., Amazon industry executive serves growth believe and proud we our our communities results. strategies a plays that quality Today that have but Oregon. discussed long-term are of to continue leadership deliver Bros and positioned to the and as our for A you meeting two handcrafted background Bros XX-year strategy aren’t Dutch nearly after Pass and analysts. are chairman. been is our across XX-years. developing exceeding the not Trav pushcart we that Company, western at we Dutch cases and or people course espresso machine role who Dutch in Bros high a of supports our to our drinks and U.S. the investors and reach the

industry While, the States as count. Dutch recognized growing and restaurant one and the Service of Food fastest brands in by has already location restaurant United Bros

shops than enter and the of potential. our early states. stages XXX and Oklahoma. expansion. XX brand translates new states, and nearly two still have believe has to look XXXX, are we Since regions Bros We story a well across Texas Dutch drive-through year, Numbers to shop count the enormous shown has we forward growth across long-term in This continued doubled more

most And little above our well spite average. is markets. states fact, system in those unit In marketing recent in entered of we average the our volume that are very in

a other, their through we have uncompromising markets. source believe vast we The Unlike the group authentically to by are future shops to of values communities. Dutch consistent and decision customers be and medium the through drive-through roughly majority of will shops. our menu opportunities, are personalized Several based a Bros stop managed our made a experience drives with an experiences begin of franchise years-ago, trusted growth Bros owned a continue we open window. may why we today shop who speaker is an core This takes our That with people faceless starts While Dutch existing and half have connection. with in values exemplify each to for who runner the truly pipeline at partners Company franchisees, most your These culture, by comes directly Dutch our to on eager either focus Bros Dutch muffled operators shops. board. human people will and live what offering on identifying franchise love. at focused our to a are on caring existing on for order instead and Great working growth. individuals field or are fuels potential greeting what a our and Company co-develop leadership in-person share a our for the traditional tablet, operated culture experience of Every

release. and speed service of premium without brand bypassing of place a on You the our personality quality,

operational car of energy every serve, day. they lane to will a all excited throughput Dutch to Our the ensure throughout a our people crafting get releases I and consistency drive-through personalizing experience excel and genuinely for and great hope to Bros at are this the to monitoring soon you experience from drink yourself.

which Pathway provides program, possible within has through Bros Our the a to made promote from path leadership Dutch philosophy manager operator. from [indiscernible] to regional clear

X.X-years. Bros and our is right hiring ability can are company mentorship an for then currently advancement. them Dutch employees average leadership opportunity XXX which the headlands. real open. leadership in that operated more differentiator strength with on will That and of our XXX staffing we the industry that resulted operator Dutch compared believe to regional for offer pipeline, retention people pipeline First X,XXX tenure and we the with training the prospects is we in program with a longer the with contending people, to support than them shops XXX There attract in than an of more relationship pathway each Bros outstanding has focus with The real our provide great candidates and careers significant then the alone of next term people to ongoing in

customer development our industry a leading provide service high a produces and are high product return. culture, financial that our All levels of in promoted jobs were turn our retention financial opportunities, rates the shop strong shop of of will this XXX employees we within. from non-existent retention the operators opened within plus for virtually January since of managers our growth. believe lead regional system the XXXX is the ranks Turnover We to wide and incentives and

and a we our our consumer a high platform. able in in of continued our factors opened the were first is to success the day have retention, As keep of We pandemic all key people struggled maybe to shops the demand with have others across parts, while result staffing. some industry found meet social one of rate during brand our impact as

lives and We employees, are our positive powerful platform communities difference a in the dedicated our Bros ensuring of for customers a massive making by to action. Dutch

across sharing business sustainability, platform all are We is the these in future calls. impact and social inclusion, of to relations our diversity, equity forward on we community pillars four philanthropy. Our making aspects built of look progress

Our growth is predicated pipeline. on people our

than of we We full having our brand have are penetration. a long for growth, reached XX% confident runway less

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minutes. has track our service, resulted best-in-class highly commitment Our Charlie customer unit discuss shop create a model, to which strong economic in enabled will proven growth in record people here few operations highly and and a to growth strategy, compelling of efficient us

to Dutch Our nearby sales opened for our Bros capacity handle. Many last existing too few often for shops single the just shops a the new where are constraints customers to customer reach research points of to growth. shops, at significant been store over infill years have high demand alleviate and

infill and market new Our growth strategy new trade shop expansion. balances zone

going, economic Given absorb our we existing built transfer between new we have location to and are sales an how fast a one. model

since markets. XX% positive Even XXXX, as we have over within sales growth maintained beginning our increased our of number of shops have same-shop the

we whitespace scale As we extends believe and markets, nationwide. our new enter

Oklahoma Company we continue east. Our Texas, will to on and focus in California near-term development move although will

new in recent have in We and in is or above openings performed are confident our Texas well a expansion both our expectations markets. our market and shop legacy Oklahoma volumes

our to several drivers footprint. next mouth planning As customers we Word for has opening sights develop brand new existing among believe we been shop propels first each the the awareness the in well awareness, markets, strongest markets year. yet our shops our of largely the commitment my are advocacy enthusiastic of in and spend also beyond encourages of sales them X% ambassadors. because to brand brand our last Bros surveyed of and of existing represented aware only people Dutch people wide total marketing XX% become system were

One the our helping are and we is mouth digital of ways by footprint. of media enhancing word spread social

and will Bros deepen multiple our social with can communities This Dutch and crews engage customers within our we serve So our across increase connections channels. impact. the

high as over we to in of expand our shop able we should excited to be to time this long-term in rate corporate trajectory. we end margins, share. corporate to of plan story and leverage we expected and really the base At invested project leverage have infrastructure and Finally, day, our SG&A slower enhance revenue. already a a the through Therefore, growth margins is operating our one costs to are growth ahead at grow our

we You hoped people operating to resulting even gains leverage our seeing increasing is margin what for. beyond had in are expanding development, awareness already brand from and commitment growth, disciplined

We are or well and model as have managing factors a better peers. than external new store our we strong

XX would Now, everything to quarter the XX We for call team opened record note, operated this achieving achieved of shops. quarter, on XX of to in shops XXXX. were system The impacted These shop the beforehand A well XX like all are thank challenges. XX documented be highlight record XX in quarter product. XXX Company grew count equipment at across will fourth in members those briefly shops, operated. shops their the open Company issues to over materials supply have year. We of this of this in we And prior I opening in a to XX% of our then building XX record chain supply opened chain was shops states. year-over-year XX work which least few industry this which of our three now of opening shops a financial Dutch Charlie. total Of comments. from Year-to-date, third anticipate to Company we and are a despite operated. Approximately total

we Dutch to Our have turn I review long-term more reinforce would growth underlying so over financial the demonstrate third prospects. quarter of strength call a much conviction and around a that, to results the this business Charlie details few Bros’ why result. With way. to like as Take it

Charles Jemley

Good Joth. afternoon. Thanks,

In high us XX%. over of as coupled shop same revenue, confidence shop Year-to-date and which The XXXX XX% of million. $XXX top shops. was grow we As on very great Joth the growth XX% achieved of a of September XXXX. in XXXX. predictable which was consistently start an our quarter, to growth sales driven ability mentioned, revenue to The On approximately growth first XX% at represents we and quarter very our with to a year-to-date is the XX% was comes and of driver to successful our the stores, achieved primary $XXX expansion, extraordinarily our operated Company our XX, total with additional grew performance what which provides this from back XX% by existing third XX% opening degree in top quarter, third ability new revenue nine-months. of of future. million to revenue continue grew drive Fundamentally, of strong results in half the

achieved also in headwinds in QX, over promotion X% new This a In X.X% revenue rolling sales low will these expenses be basis despite existing year-to-date. XXX of the our period by comparable We experienced on wide comparisons growth, a created always our growth grew basis, of same same-shop caused of core drag strong or system While on we shops abnormally the points. XXXX quarter XXXX. third discount sales of the approximately quarterly in stores.

declined our grew quarter from restaurant actually the of to in that third many model. same-shop industry drive-through Thanks We the focused the of sales XXXX. As unlike a in experienced X.X% reminder, COVID reliability

our performance the XXXX. COVID-XX pandemic, watching to relative also are we Given

This comparable Company three those so rose X.X% XXX our levels XXXX top the same-shop over same XXXX despite on is a QX. same-shops. shops, sales is base, growth For shops is operated in for for XXXX. impressive XXX XXXX quarter about sales quarter strong of for X.X% X.X% also the comes was What XX.X% total store positive Same-shop growth growth this in two headwinds. that of that

what enhanced our that aggregate, the which factors a proud more our of of sales to grow newer take XXX strength positive these business. creating across In points that an shops, making strong points abnormally volume shops company drag sales existing from negative promotion discount have in basis strategic in We result as basis I more performance represent the operated costs sales what new we to margin from call near accurate we further. shop comparisons and profitability. of the these XXXX experience we underlying negative and some was achieved. And transfer. in it Company experienced stores most same-shop we basis high cannibalization, call of want conscious rollover even strategic growth built drives headwinds of transfer then more moment First from older additional cases, a decisions momentum same-shop of and volume refer many low a customer the the as XXX the base made to of points. discuss representation discounts, industry high XXX to nearby to of shops of quarter Isolating balanced us three, sales transfer can sales as some existing stores gives

we protocols employees exchanging customers then metric suspended number launch it When the early limit instituted our feel began, While of a rollovers comfortable. cards. will rate and to make loyalty in We the future. XXXX. impact and stamping as targeted the and are the the of this now signing paper Rewards members to absorbing first in the significantly the stabilizes, Dutch of digitized is have low as stopped our a discount the cash our When program with expressed we pandemic expenses XXXX, now, rate. programs XXXX changes We loyalty based altered These now in percent to to in our two declined forward and and expenses. close cost gross the XXXX our in discount teens and million associated from promotional a promotional as discount settling After up expenses half of as falling normalizing. upper of discounted over promotional are meaningful mid-single-digits sales go

expect rate permanent to that lift. double We the be a digits, margin in low creating

and in card, patterns, Importantly, are unlike The value customers and us build giving customer Rewards punch to to we a now over them. operational service powerful ways. program allow promotional the is payback Dutch rewards expense and to more tool, we If this more with very the create satisfy continues expenses We rewards can learning on customers promotional program and them a about the by sales will directly yield simple time able us But to creative engage at may having many generated the engage paper by believe from and with accelerate, opportunities preferences. rise. clear by develop join percentage discounts efficiently our see efficiencies. and we of speed customers that is where

EBITDA and primary performance earlier, driver new adjusted revenue the of mentioned growth. strong shop outstanding I is As

quarters to a all uniformly expectations to and for of new Our on new markets. shops overall million outperform exceed an Average basis. in consistently XX-month also system, across time X.X we and to and the this weekly have high continue sales trailing existing recent AUVs new increasing shops continue seen

transferring in a its is infill high existing Gap] culture demonstrate are locations to Challenging provide by are that continue shops. has without [Audio strong to more to them. markets, new value. we our customers the charges times accomplished shops when for volume convenient This compromise. As balanced greatest often opportunity

A businesses backdrop our operate regular Company we is operated downtime In and managing to with that industry. shops even rely critical to we approach environment more Shifting or from believe metric source to us to where Our hours struggle staffing many operations today and employees the upon. positions retain customers constraints. less favorably now shop had in QX than on X.X% profitability. even

costs $XX.X grew through that overall low $XXX the consistent their growth of costs is shop operated operated mentioned XXXX. shops I the of quarter our million XXXX expected inefficiencies is the in million. in and If rate new grew I company we between result Company in quarter the the opened startup to revenue of result growth third The XXXX remaining the newest That quarter and shop ramp promotional revenue dollars. profit to to XX% shop apply abnormally grew XX% Company class. are That startup Any XXXX noticed shop shop shop promotional discount said, operated earlier. As impact QX, delta a profit - XX%. profitability profit profile results delta and three as pleased our openings. we unit of with we portfolio. discounted

$X.X and For XX.X% XXXX the costs related system margin connection compared quarter XX and general selling, sales expenses, the first recognition of the X.X the open of quarter, in were both donation in to third the in increases Total total these and quarter was example, direct compensation IPO charitable XXXX. stock-based million higher cost in XXX primarily IPO. shops revenue. million and Removing administrative third million with a of perspective. a This one-time average in XXX are core million on transaction non-cash the G&A performing of in than million from our

to continue and necessary will the to in growth. people and systems drive We invest enable

of EBITDA returns us year-to-date. Given million quarter, adjusted XX.X and operated the are we believe to shops, third well XX.X profitable growth level. the in We a sustainable on positioned support generated and and we Company high a and are necessary million these investments delivering

from XX, adjusted XXXX, the basis, details EBITDA, $XXX a lapping and the quarter income yet discount to to and reflects net On a EBITDA $X.XX year-to-date of to stock million charges, net not related In XXXX third quarter promotion reported loss September on pandemic low adds on income was based the our income or that for investor decrease equity reported XX% $X.X primary used adjusted presentation which have of our Initial net our back growth COVID-XX year. walk XX%. growth. we to proceeds $XX short EPS in a in abnormally reflects EPS. net Adjusted costs Public those million, we costs prior as for compared website. Offering million is from to X.X% the This of to order within compensation, one a QX from loan Note expenses strong the shot you included ended. related those posted has non-recurring We of to our We balance down down or $XXX and term maintain a IPO pay million entire our of geared new balance sheet time XXXX.

million had equivalents revolving on $X a million million credit XX, in September of we reflecting $XX cash facility, $XX debt. and just As drawn net

grow. nimble facility, We us as to committed be our and capacity also credit we had $XXX flexible in revolving undrawn million allowing in

turn for Before adjusted turning quarter select four. quarter of With openings guidance be it will in to it in closing expected I be to million and $XXX least the XX.X million. remarks. is range million. EBITDA in estimated for are $XXX sales the in at Joth be are back to over is to projected of Joth, four to that, range Same-shop to over the mid-single-digits, million metric XX.X shop Revenue back to XX wanted we share Total to projected XXXX. for

Joth Ricci

today’s what only better Thanks, away and the will the Charlie. not is what has you understanding disciplined make These take financials makes from and us growth a Again, Bros results call to continue Company, reinforce Dutch brands. successful. national hope but our I plans and of

it. culture phenomenal by the driven is success who Our embody and a people

to people a development on move strengthening move continue to our and we towards As steadily goal. systems we forward, shop focus will XXXX

and in increase extremely will audience ensure new awareness markets We customer we reaching existing for markets, to introduce invest brand living up and are we high digital the the standards ourselves. technology in service to set brand our right

through margins will expand we leverage. Finally, operating

build about now wins and in discipline, business success. having we please we and is the executing, your about interest it for open about confidence plan the for be lines. you thank is and fact your long-term short-term questions. would Bros can Our strategy is take We again that Operators, in it Dutch to happy on

Operator

is Our you. question Thank [Operator question. your from Instructions] proceed Charles with Cowen. Andrew first with Please

Andrew Charles

know the you are the thanks great .Given guys the show? have ago was What Great. success loyalty something that open minded your continued program into the the more digital road been of digital app. gait thoughts through on were past XXXX. and shift I in for ordering first months than in are about you when now the doing two this on you curious focused perhaps and quarter

Joth Ricci

it Andrew, you. is hear good to good from to Hey

and able we something talk think to with maybe is I about hope around the that actually certainly and we in on, to pretty XX-days will will grow are and looking But specifics I that next test we team foundation think I basis to on our build is soon of, And we radar, Bros to something off continue more I be that working be of to going towards is of a rewards XXX-days it. will of here think platform, looking something that options a from. really our upgrade built think a can are what we really at the fit was our that we the really, Dutch and experience. that variety

Andrew Charles

that But disclose and with? were just loyalty of around you the were sales ultimately marketing missed ticket you the working IPO mix it. apologies XX% you And guys towards loyalty within frequency offers are early one and running goes curious what being that guys when did pursuing Very I’m in I it the learnings helpful. if of increase the then to personalized

Charles Jemley

is it Andrew, Charlie. Hey

program tender, of members. is XX% rewards rewards about So through the -

Can that you with follow-up one? your So first second is question. your

Andrew Charles

Yes. XX, percent? six zero I’m sorry, Charlie.

Charles Jemley

Six zero.

Joth Ricci

Six Yes. zero.

Andrew Charles

have And just just what ticket loyalty guys early to are early starting to know, certainly not just I would - more you curious been Got you learnings do intended frequency have and I to personalized, it. quite there? and know a we the love that increase offers learnings but program, more

Charles Jemley

Yes.

very of local been non-rewards then increasing, kind And have promotions, wildly at receptive. I have think, also currently. a holiday members after been TAC thinking higher our levels average Cold targeted is it or is on learnings whether are Brew through Through X% X% to category than drinks promotional and we rewards that opportunities number. some the early around around of our either September,

have activity. I really of great some think with our so we almost those definitely And getting early shown million members rewards a program now some results. all with of Xst, have in launch February X.X that enrolled

Andrew Charles

is That great. you Thank so much.

Charles Jemley

You are welcome.

Joth Ricci

Thank you.

Operator

you. Thank

proceed Tarantino your Please with Our from Baird. next question question. with David is

David Tarantino

good hoping ask about newest first Hi, your afternoon. was in performance to Oklahoma. Texas and I in markets

think those adding I the what Since mentioned last above guess in seeing they those markets markets. been you are system terms have directionally the that and you more curious AUVs. we know And think I talked I in was further to of units are average. as I time penetrate you you still

wondering penetrate maybe if you those on you markets? Just could as you what are seeing elaborate

Charles Jemley

Yes.

So, David it is Charlie.

are markets ahead average. those So the XX%, excess still system holding of in of

those quickly have our are stores volumes. margins, we right been infilling are And when able to those well. we been in very and pleased So maintain and filling as with high outcomes we in very at fast look

as speeding we are fast Texas we there. through can So as get

David Tarantino

the that. out pre-opening bridge that And than you margins, it is gets the in do you detail. Alright. lower I for the think the shop that just a show margins same presentation, one if Charlie, after, so And on you reported, guess, costs. then XX% I another you for quarter, I Thank to backing bridge

is whether rate on you than why most So talk wonder business? the that you if last new the could recent the the be quarter I would factors XX-months a run lower for and about think

Charles Jemley

we quarter one, Number savings. in then superior goods, things pulse get of taken for couple significant a operationally year and of cost but is below perspective the so there. had we you then that starting eventually not in you itself a of bit to noted we pre-mix be far little to changed did third is November, And volume prices labor more get eventually the slightly freeze will from A little product. prices the that couple pre-COVID. since the We product we seasonality system any a to back we average we It our of any And have our feel bit may product early a are in have things. changed a deleverage.

bit and it normal in general inflation. you a to so wage that wage legislated about inflation, absorbed we other is general And have escalation. had thoughtful of price whether minimum changes and getting wage, careful been we very years, or last inflation, have And markets their little are know, they

price going a to instituted forward. we our again, Now increase defend margins

price current then got So what a increase is few both of the happened aspect. over you last quarters. lag versus seasonality inflationly And the the

David Tarantino

better guess, increase? as expect be given the about it. you guidance to think quarter does price that Got quarter fourth I And imply margins the that in that you than then your third fourth EBITDA or the quarter

Charles Jemley

No is guidance significantly. higher, I is not three, that driven. is the No, mean, number a quarter the lower seasonality absolute little than

seasonality are impacts. no, we not the other shape than margin change of So real expecting any in

David Tarantino

much. very you Thank Great.

Charles Jemley

Thanks.

Joth Ricci

Thanks David.

Operator

you. Thank

Bernstein with Jeffrey from question. Our next Barclays. comes your Please proceed question with

Jeffrey Bernstein

markets. very questions. much. the you public thank Welcome Great, to Few

Joth Ricci

Thanks.

Jeffrey Bernstein

not I’m not. should thanking us you if or be sure

just and maybe The is how level just think on the have periods couple wondering, pricing. necessary historical the would your the I’m of outside you level margins. can share price of like first whatever right mentioned. average in you of to about pricing you the And hold to you inflation. options It seem just do question terms do a you

take a If you margins a the little Maybe you let hit, you your or pricing leading bit prayed modestly. power you traffic. the more you think of alternative, protect guess have I but industry

wondering and just maybe I have then took one about So environment and in a what I was in think as you November this current follow-up. you pricing how proxy just

Charles Jemley

Okay.

to the X% are inflationary to But we great effort the really took mentioned want stay to not chain customers. year. things our our teams least ingredients. and therefore, to we subject We next the again want increase as don’t over pressures since and types margins just supply stores. pricing And having. low X% going our pricing years dismiss others that don’t very mentioned I to others will historically that value focused thing, And at giving just we into XX I genuinely on in get price that a make believe pre-COVID, defend to-date as complexity are environment simplify we that you Joth would We monitor It his to great be nearly the do we script an So and today the is hard to we to will have fast to the just take. philosophy. And that it. like it where of got we don’t to and and have able have approach pivot is any quickly.

and will industry we expect they to to up, are we margins generally think and very over time. are grateful that have we this I watch our hold leading

Jeffrey Bernstein

Is in that basket for quarter And set basket an it the share your what gone what expectations of and the or in through there remarks, or your quarter the no is and the entire prepared your mention inflation or going third was second you it third of labor your was can outlook we really, degree minimal is? forward. commodity of to commodity and labor have fairly maybe inflation of

Charles Jemley

low-single-digits is we we a of the say up that inflation could The been to is thinking going dairy And our not don’t mild it basket very is really have and that we immune but tempered. is big very that are cost forward, component and struggles structure. fortunate, happen overall,

out we a have costs. forward We long, coffee manage that are very we around blend bean pivot and and three our on can

to wage people had related seeing. our out West the And others on are this see are feel we inflation, not then, to example. so paying felt wage stage. we at have not labor the And were we already kind don’t changes from very of have here aside minimum of just intervene laws wage and pressure side, the well kind for We we

Jeffrey Bernstein

growth, Joth, industry my wondering about only and unit the the of projected And Understood. which clearly leading. just your you question, think as I’m is fundamental driver obviously top-line

wondering sound doesn’t be Doesn’t it is to like necessarily like stories areas and and pushback, really risk really talk high usually what staffing challenge sound you are to which it the perceive if that new is growth market about the that it talk growth. maybe you could not about. the Just greatest and real estate

rails when relative do to unit something out there the Thank mid-teens to I’m just put there what annual have higher arrive way be gross the to that guard of much So the doesn’t you limitation? in of or lower. leads wondering, at number How that seem you you.

Joth Ricci

Thank you Jeff.

I think the based predicated really, on people answer growth readiness. to our is our is that

real it. we plugging a that into are are people company, company we are not So estate estate trying do is real are people not to we what a into, plugging we

locations what year, where is careful degree be super stretching wouldn’t XX have open will And So we culture we I’m that. our locations of gone able to XX. to a to this we XX handle to from

would three run have but our our I also less on or good growth, the real next finding people of muscle not years. we what for a culture to And We building the of here be really been side might the compromise systems actually say really challenging related will estate.

is to people one all on shop. full it in to very manage are we make our confident that new our that sure our our will are we seem filter Our we pipeline development number we with plan, and and well leases, is out open growth

Jeffrey Bernstein

you. Thank Great.

Operator

you. Thank

your next question. with JPMorgan. John with proceed Please Ivankoe Our question,

John Ivankoe

having maybe challenges perhaps But, or that closed the staffing I Hi, run thank format even store format that guys affect and what very close and or occurred closed would a days at about store. throughput. I shifts, periodic staffing drive-through you. you have there stored weren’t understand the even must hours mean, obviously somewhere, some in in that logically not drive-through the quarter.

challenges you, I as number through opportunity even periodically really say, kind specific getting cars did in is guess, better? the you hey, to we pressing answer occur that that operational any an quarter get were forward guess, terms So, in I I’m and for of can an going here, there of of hours

Joth Ricci

Well, John, Hey, answers. I two this is Joth. think

I absolutely have think answers that affected there we that, the radar, an hit two damaged we that did even and from is there. yes, to problem staffing opportunity perform. to is that performance a there to ability immune our Two, not get of certainly really our overall better. might completely is But business the one, that here weren’t anything have

Does it had have we that to we I’m aware challenge challenge? No. So create problems? didn’t a mean anything that was not mean, does that. that that a of did enough

sure customer. the they So we staffed are are people the leadership again, very that that fortunate the in people in our way and fully to been make onboard in boring of field people that kind continue field also to sense and have our the at we recruit amazing serve and

report. for there to really us nothing So

John Ivankoe

That most is in good. is great. boring cases And

are of during further put through over that. to as think Converting I through priorities, down mean, couple customer kind whether of next I just thinking into it landscape parts mobile that perhaps slower thank as reward I your opportunity how So for wrote would that is curbside window or tender, walk of what program. interesting would years? the down is peak. is up think Bros XX% to you it or Dutch day you pay digital throughput kind digital And where for in at on of your in was maybe you current guess, be your that. yourselves an the you, and your a I it different you I necessarily not you order

Joth Ricci

people is that other and what rewards in business important is element do of the do service are. We I don’t even aspect to maintain there a windows. want we the there, way, of who because to payment way what think that through many great ever of remove we maybe is or aspect But And a now we stores service that. an to we of improve through is there learn. can through technology the what information fence digital that system had. last like so fencing and order they enhancements go you of our week when last kind frictionless Well I a and really right now, anything our and ahead operationally just app is three and improve one, opportunity The all for order a will things think Bros itself, we always right ahead, two, than top program us system this walk there of to Dutch is order the and we think up related the expansion priorities that to have development it development the the don’t

think And is I of building really incredible think getting early is stage some there is, there team our opportunities. on I the that. just

John Ivankoe

you. Thank

Joth Ricci

John. Thanks

Operator

you. Thank

from question. your comes with O’Cull question Chris Stifel. next Our proceed Please with

Unidentified Analyst

This for thanks is Chris. Great, guys. [Patrick] on

one the pace construction inflation issues, of any I’m due curious pressure really terms seeing prep construction of building that order costs, to equipment and are lot You upward equipment are a as side shortages you on to follow-up. or then ahead at you site or procuring need obviously just develop? if rapid I you And if raw or side, a have are labor sites any any material on farther things seeing out of or in

Charles Jemley

Hey you. Charlie. is how It are

out little a and pressure build costs. upward seeing are bit of We

had to have some on site, able quickly been pretty get materials have be disruption, able but to equipment site. pivot we to We on

things great get things we are and that in difficulty Again, to these We we on lobbies what fortunate pressure But we it dismissive doing of terms not the elaborate are not are and of built. sites not that. all experiencing takes getting terms like outs are build not site. seeing upward in great of logistically

Unidentified Analyst

you low. your but replace underneath helpful. for hood that a and it seen that you of just standpoint seeing employer having because maybe maybe little in not you your as the in higher. everything has that I’m increase already hourly as from an that have And curious, turnover choice that I you a just gotten able to turnover to you and that more on Great you is mobility as your is just bit then really in off or retention be people ranks, pay term to maybe are bring But have upward is some are I are as issues effective peers. Is of market one of the question certainly less really many there staffing operator appreciate said hourly guys mean, turnover you

have would call Just be Thanks. you any there additional helpful.

Joth Ricci

have last issue that had pay We turnover down few and seen have hourly not periods actually market. our over the in here go

markets. got So teams to again, I our in credit to give hiring

work. We have is a current employees to our best they Dutch place recruiters to of come lot our other communities are forward. at actually work it They a and people great our come employees as attracting that

is really that there a to be people at that so Bros market. the out think And in for been great about system Dutch I maker us that difference the how just talking have has and are we it

continues staffing there think again, anything, we for issue to improve, labor get going is And if the to market just as So, us. only isn’t the one better.

Operator

you. Thank

Our Bank of Sara next proceed with comes from with Senatore your America. question Please question.

Sara Senatore

One please. of question a couple follow-up and

you long mentioned is number right the to forward-. - that first The going is think about

Joth Ricci

Hey Sara you. hear can barely we hear you. actually can’t We

Sara Senatore

going about that [Technical the what is is than less number Difficulty]. or think bit going forward Difficulty] [Technical a see we to right are to are little

Charles Jemley

Charlie. is it Sara,

that depending the way On about a about that happened few sales on particular I is it, we level, are about the how a what much transfer, trade backfill thinking But the think months. or infill versus that given the little is over sequencing last zones. is forward flow it may bit and think new to just in it we right ebb do way quarter,

Sara Senatore

levels, sense of more previous about And a just you of we about cadence some transfer, that for have get of do to are working that back condition as sale you did volume open the it how against a it as long you, think over kind that now, take maybe store, sort to have store time?

Charles Jemley

now. less of But Not given recently. have percent stores really could we we enough on, data that are impact see anchor gone we impact how receiving ourselves are that fast that right receiving

quantify there that So we couldn’t build back definitely yet. opportunity. is we But think just some

all that We strategy. new are into sort of of new and still

on think quarters, in I the that. much better share I to will have information think So coming we

Sara Senatore

join Okay. my mentioned changes the you discounts and last then offering when next one, this or consumers program? the the answer to you is is have clear. information question or acquiring of payback how same the it make which Do it just some frequency any on spend people of And rewards

Charles Jemley

want data do So evolve let over is we this but I frequency, to on we time. think the that have thing

through just can words, identified this follow in customer we So them and in and February have program now began. other we rewards the a

point our to. a is you number is could frequency not them frequency we need So that cycles, a follow such of through to it high business really good. But

and we them. behavior becoming members engage a time people’s as over behaviors with how Our those are as part member rewards is of rewards changing changing

we So us exactly see a this you right. are optimism everything But gives of is around going. where ton

Sara Senatore

you Thank it. very much. Got

Joth Ricci

you. Thank

Charles Jemley

you. Thank

Operator

you. Thank

Sandler. question question. Miller Our Nicole next your Please with proceed comes with Piper from

Nicole Miller

Good afternoon and thank you.

questions. Just two

overlook well? first, to higher The might I just X% also comp momentum. sales be or I’m than seeing the loyalty Can of price don’t menu more tender thinking impact compares are marketing the it be you on year-over-year and but influences clearly check anything, want rank any All it challenging. on XX% same-store to more you the become X% as of

Joth Ricci

is. what Yes, a such price it mean, measurable. is almost just I well time is small over not momentum piece of our

average of would In loyal because are check loyalty again, But just yes, expect customers. loyal customers. an what that higher terms they you we from yet is doing get

So a of is we plain traffic seeing what good just are lot solid growth.

Nicole Miller

Alright.

was the anything and the very customer little you Essentially, So coming that the ask what going but coffee. cup customer, it execution, are to helpful excellent. want Dutch to first from, then concept because Where more understand the And to has behavior is is and customer a customers. for changed? the on of is of touched employee I the bit sure, they the

Joth Ricci

I wish, the to I knew that. Well, answer

a we of think are XX and our are that I years, day. we are probably we some we to points a market brand that to Coast and - very West think that I for obviously, about are every data mean, Starbucks in. every close learning I

back think we brew, in there. degree to too. get industry But menu things because also type nature, with I other introducing where for have sure are customers the shifting we of that and some is energy credit bit industry and in for a with so I cold as that our introducing people. changing a into is to and that us forth some to trade younger we thanked tend concept, I’m coming think of audience, so people customers the coffee think, do and I And a be people

everybody love stores. So, that that serves think we whether business, Is are or what is counter that that beverage all coffee is competing it whether convenience convenience lunch And or business store are is business, really local, is in. that it pickup for is we for about beverage it I business has probably there think the who Starbucks in us, I been is the the I the location. whether a think we chain, the occasion. it is anybody who beverages It else that large

of more, and So you the next learn research. information especially we type of we into dig as years will couple more over that

Nicole Miller

just asked I terribly. that. appreciate that question I

So are day mean, morning. I’m going to very of was try again, that although or in helpful. I coming the late they the middle

at up a.m. up chunk But early all hustling coming And, X and to my So day super drive-through. A or goodness, one. nice shouldn’t no say one over getting no are they the I is getting well, long.

well. from more the that where framework? themselves, that So I customer like it Sorry, driving else that are driving they be why that about were besides and Is didn’t frame that something to, they and is thinking work. in that would

Joth Ricci

Nicole. thanks okay, That is

is the - have you yes. short answer that think I

So, started we school morning, the have to getting I’m to school. early now do that going have dropped have we day. crowd. my do going I’m I’m do at with off kids We work the

done it is part, done I business business midday a think drink is in day, like pick me so which so the XX% is the an of our definitely of me second crowd. XX XX.X% crowd, to is tells after lunch is afternoon up we X that our crowd. have of it day school a

mean midday, the XX.X%, XX.X% very in day I parts, we the in XX.X% So across are and morning, spread afternoon.

mean, is important menu in part is of lives concept and kind a And making coming from their doing the yes. is offer. So the I day. pretty and we answer are that they I of whatever their that what they about are think a Dutch

Nicole Miller

questions. taking my for Thanks that. for Thanks

Joth Ricci

Thank you.

Operator

you. Thank

comes proceed question with Please your Zackfia from next Our William Sharon with Blair. question.

Sharon Zackfia

going if at Hi good about compare any missed there? could of you franchisees but if those to afternoon. the I be have company like levels franchise can stronger for then, talk smaller you managerial are metric with on what if there And looks was sorry a although you it more part business price this, owned. were might going metrics. is and taking the relative turnover you than hoping or about Is comps, I the and on something the talk XXXX, hourly it

Charles Jemley

the it take, I that aggressive, are where franchise geography, more it So will slight pricing but they will in difference is are take piece, they really is placed. they little a just

better the they anchored in are is some are of folks, Some and but just staffing just in not it bit that to operators, we weigh and a companies operator. of our dispersion turnover markets, they great geography. operators They company are that in the have more by markets growth in. really And as Joppa level have the about in here, the we almost then, store position no talked terms turnover of regional at core and than manager

businesses, employees my shift is And on XXX% around. experience lowest than I is other - I Our call of other the turnover. it it will is one know below lower simply from way and it

feeling not much just are churn. We

Joth Ricci

the Yes, really And no I for at call staffing. it, XXX% are level. think kind management range we staffed it to of it and is point, turnover is Charlie’s mid-XX%

day, said, So, to at we have part anything the that a have to come to And who for are stands. we I best new have if been love in our are love stands would fortunate, be Bros in people like work that of employees. Dutch chemistry who I recruiters mean, we working every people we

on for I our great there a think being ground love team creates to environment people and they So the work.

Sharon Zackfia

Alright, thank you.

Operator

questions comments. to back would floor time. to I There are over you. further no like for Ricci, at the turn any Thank Joth this closing

Joth Ricci

people people this journey and have have as everyone first Dutch to become for being thank welcome you who you company, response for us gotten just, part today. excitement been with and this the to are of the many just forward that you we for about we for Thank have we look time. that for have the to and who the We you public a with us. thankful now call joined having the very learning along family the Thank you journey Bros

Thank the to most look calls We again. you and rest day. have thank So forward importantly, and future you. great of shared a results your

Operator

This concludes today’s conference.

this lines at for you You your participation. Thank may time. your disconnect

Dutch Bros (BROS) 11 Nov 212021 Q3 Earnings call transcript