Dive Brief:
- Dutch Bros will buy the real estate and related site assets of 65 Salad and Go units in Arizona, Nevada, Oklahoma and Texas for an undisclosed amount, CFO Joshua Guenser said during a Wednesday earnings call.
- The purchase is expected to enhance the fast-growing coffee chain’s development pipeline and scale in these markets, Guenser said. The transaction is expected to close during the third quarter.
- Salad and Go filed for Chapter 11 bankruptcy protections earlier this week after it was unable to overcome challenges related to slumping consumer demand, past strategic growth missteps and rising costs. The cyclosporiasis outbreak further weakened consumer demand even though the chain has not been linked to tainted lettuce.
Dive Insight:
Dutch Bros has used acquisitions in the past to convert drive-thru-based real estate into growth potential. In January, it bought Clutch Coffee, converting all 20 of its units in the Carolinas to Dutch Bros locations.
Converting second-generation space reduces buildout costs and cuts down time to opening.
“We look at this as a great opportunity for us to get a hold of some fantastic real estate in markets where we see a lot of potential to continue growing,” Guenser said.
While the chain already has shops in Arizona and Nevada, Guenser said the former Salad and Go locations make a “nice addition to the overall portfolio,” and that there is still plenty of white space in those markets.
These conversions also will accelerate the chain’s push toward having 2,029 shops in 2029, and CEO Christine Barone indicated future acquisitions could be considered.
“We continue to see attractive conversion opportunities, both from emerging growth concepts and legacy beverage and drive-thru players,” she said.
Organic growth is continuing as well. The chain opened 48 units during the second quarter and expects to open 185 units this year, Guenser said, adding that the brand already has 90% of the units in its pipeline needed to reach its 2,209-shop goal.
Along with the current real estate pipeline, the acquisition could boost Dutch’s unit expansion rate to 20% in 2027 compared to 16.5% for this year, William Blair Analyst Sharon Zackfia said in an emailed report.
To help with this rapid growth, the chain has created a pipeline to train managers, CEO Barone said. Dutch Bros has 525 operator candidates with an average tenure of eight years. The operator position is a step above restaurant-level management, meaning these candidates would eventually oversee multiple shops. In areas like Arizona and the Las Vegas market, the chain already has strong leaders prepared to take over former Salad and Go shops.
