Dutch Bros Coffee Tenant Overview



Pros

  • Absolute NNN
  • No landlord responsibilities

Cons

  • Non-investment grade credit
  • A lot of franchisee operated stores, means doing proper due diligence on credit of guarantor, performance of store, etc.

Earnings Highlights

Dutch Bros Earnings Results
  • Achieves $254 million in Revenue in Quarter, a 26% Increase Year-over-Year
  • Total revenues grew 25.9% to $254.1 million as compared to $201.8 million in the same period of 2022
  • Company-operated shop gross profit was $42.3 million as compared to $38.8 million in the same period of 2022. In the fourth quarter of 2023, company-operated shop gross margin, which includes 150bps of pre-opening costs, was 18.6%, a year-over-year decrease of 350bps

Tenant Description

Dutch Bros is a popular coffee chain that operates in the net lease commercial real estate space. Founded in 1992 by Dane and Travis Boersma in Grants Pass, Oregon, Dutch Bros has grown into a prominent player in the specialty coffee industry. They are publicly traded on the NYSE under the ticker "BROS". The company's unique drive-thru concept and commitment to providing high-quality coffee and exceptional customer service have helped it gain a loyal customer base across the United States.

Dutch Bros yearly revenue is estimated to be $739 million and over 800 locations, with 133 of these locations being new in the last three years. Joth Ricci, Chief Executive Officer of Dutch Bros, Inc. states “We are targeting 150 new systemwide shops, which will enable us to achieve our five-year goal of 800 systemwide shops by year-end. Additionally, we expect to be within striking distance of $1 billion in revenue in 2023 and 1,000 systemwide shops by the first half of 2025, creating jobs and opportunities for our employees and the communities in which we serve." What began as a single pushcart coffee stand has now grown into a successful franchise with over 800 locations across the United States. Renowned for its handcrafted specialty coffee drinks, Dutch Bros emphasizes spreading positivity, building genuine connections with customers, and making a difference in the communities they serve.

Dutch Bros have a unique footprint of about 950 sf, and often with drive-throughs on both sides of the building. These outparcels are generally well-located, with long term NNN leases in place. These assets are currently trading at cap rates lower than both Dunkin’ and Starbucks.


Average Cap Rate
5.08%
Trailing 12-month average
Average Property & Lease
Average Sale Price $2,080,091
NOI $105,594
$/Square Foot $2,600 - $2,133
Building SF 800 - 975
Lot Size 0.79 Acres
Lease Term 10 -15 Years
Escalations 10% every 5 years is the avg
Stock Symbol BROS
Credit Rating
S&P N/A
Moody's N/A
Average Cap Rate Trend
4.51%
2023
5.08%
2024
Rates reflect year-over-year comparison
Recent Sales Comps
Escondido, CA 4.65%
Parker, CO 5.00%
Lexington, KY 5.35%