Dutch Bros (NYSE: BROS) has quickly become one of the most exciting names in the food and beverage industry. While more prominent players like Starbucks dominate the market, Dutch Bros has carved out its niche with a unique drive-thru model and an intensely loyal customer base.

But what makes Dutch Bros a stock to watch for the long run? Here are three key reasons this fast-growing coffee chain is worth investors' attention.

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1. A well-proven operating model

Dutch Bros isn't just another coffee company -- it has revolutionized the drive-thru coffee experience. Unlike traditional sit-down cafes, Dutch Bros focuses on speed, efficiency, and customer experience, allowing it to serve more customers per hour. Such an approach delights customers and also generates a good return on investment for the company.

Besides, the coffee chain is well known for its customizable drinks, particularly its cold and ice-blended beverages. Personalized beverages align with younger consumers' preferences and differentiate them from competitors. In 2024, cold beverages accounted for 94% of all drinks sold to Generation Z. The company has also moved beyond its early roots of serving coffee-based beverages to other products such as energy drinks and refreshments.

Beyond serving great beverages fast, the food company also focuses on building a loyal customer base. It relies on strategies like excellent customer service, community building via social media, and a loyalty system to reward customers. As a result, 71% of its transactions in the fourth quarter of 2024 went through the loyalty program, up from 44% in the first quarter of 2021.

Its highly efficient operating structure, differentiated product offerings, and loyal customer base explain its solid track record of growth. In the last five years, store count grew by 42% on a compound annual growth rate (CAGR), and revenue expanded by 50%.

2. Great store economics

While many restaurant chains struggle with high overhead costs and long capital payback periods, Dutch Bros stores deliver strong financial performance with an efficient cost structure and fast profitability.

Let's look at some quick numbers. The company expects to spend $1.25 million on capex for each new store in the future, with an expected annual sale of $1.8 million per new store in the second year of operation. With a targeted shop contribution of 30%, the return on investment is around 43%, giving it a payback of just slightly above two years. Note: Shop contribution is defined as gross profit plus depreciation.

Dutch Bros' solid return on investment is not without reason. One thing is that, unlike traditional coffee shops, Dutch Bros stores are smaller and require fewer employees, which keeps operating expenses lower. A low capex and relatively low overhead allow the company to generate strong store-level margins early on.

Besides, the beverage company has a proven track record of delivering same-store sales growth (SSSG) over time. For perspective, stores opened in 2020 and prior delivered 4.6% SSSG in 2024, and newer stores did even better, reaching 13.7% for those stores opened in 2023. SSSG will further enhance the return on investment in older stores.

These factors should sustain Dutch Bros' excellent store economics for the foreseeable future.

3. A great growth story

Dutch Bros has already proven its business model and store economics. The focus is on scaling up and expanding the business into new markets and products.

The company currently has just under 1,000 stores across 18 states. Over time, it expects to add another 3,500 stores in existing states and also expand into other new regions, particularly on the East Coast. In 2025 alone, it plans to add at least 160 stores in existing and new areas. If successful, this latest expansion will quadruple the store count in the coming years.

However, that's just one part of the story. It is actively adding new SKUs to its menu to grow SSSG, particularly focusing on food products. For perspective, Dutch Bros' food sales in 2024 are less than 2% of revenue, much lower than its industry peer, where food accounts for around a quarter of the sales. Expanding its food menu presents a major opportunity for increasing same-store sales.

Another area that could see good growth is the energy drinks segment, which is expected to grow faster than the coffee industry. With around 25 % of its sales from customized energy drinks, Dutch Bros is well positioned to benefit from this trend.

Overall, the food company expects to grow its top line by 20% in the coming years, with new stores growing at a mid-teens growth rate and SSSG in the low digits.

A growth stock to keep on the radar

It is not difficult to see why Dutch Bros could be a great growth stock. It has a proven operating model, solid store economics, and a long growth runway.

Unsurprisingly, the stock doesn't come cheap -- as of writing, it has a price-to-earnings (PE) ratio of 179.

It will be best to keep the stock on the radar and wait for a more reasonable entry price.

Should you invest $1,000 in Dutch Bros right now?

Before you buy stock in Dutch Bros, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Dutch Bros wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $495,226!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $679,900!*

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Lawrence Nga has no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.

The emergency room series has become a major success for Max, and it just wrapped up its first season on the streaming platform.

The stock market has gotten off to a bumpy start in 2025, with the S&P 500 index down sharply. On the other hand, taking a buy-and-hold approach to great companies on the heels of recent valuation discounts could open the door for patient investors to see very strong returns.

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This company is on the verge of a game changer

Keith Noonan (Take-Two Interactive): The video game industry is now bigger than the movie industry and the music industry combined, and Take-Two Interactive Software (NASDAQ: TTWO) stands out as a leading player in the space. In fact, Take-Two would be my hands-down, go-to pick if I had to choose the one company most likely to release this next decade's most successful entertainment product.

Later this year, the company is scheduled to launch Grand Theft Auto VI (GTA VI), the follow-up to the most profitable entertainment product ever. First released in 2013, Grand Theft Auto V has now sold more than 210 million copies. The game has also generated massive amounts of high-margin revenue through in-game purchases made by players of its online multiplayer mode.

GTA VI may or may not be able to match the unit sales of its series predecessor, but it's almost certain that the game is going to be a massive earnings generator for Take-Two. The game is set to take the online multiplayer component to an even higher level, and in-game purchases made through Grand Theft Auto VI will be a huge performance driver for the company.

It is poised to be a disruptive release in the video game industry -- so much so that some other publishers plan on avoiding the game's release window rather than trying to release competing products in the same window. The highly awaited sequel is on track to dominate the sales charts this year and soak up tons of attention from players.

Some reports have even suggested that Take-Two could price a copy of Grand Theft Auto VI at roughly $100, which is significantly above the $70 level that's the norm for big-budget, current-generation games. Whether or not the company will make that move is still unclear, but it wouldn't be shocking to see the publisher flex the pricing power of its upcoming landmark release.

With GTA VI seemingly on the verge of shaking up the entertainment industry, Take-Two is one of my favorite stocks right now.

A no-brainer path toward growth

Jennifer Saibil (Dutch Bros): Dutch Bros continues to crush the market right now, up roughly 1% this year as the S&P 500 is down 15%. It has tons of opportunity, and it's likely to keep outperforming the market over the next three years and beyond.

It operates a chain of nearly 1,000 coffee shops as of the end of 2024, and many of them are just drive-thrus. However, even outside of its stores, it's creating an ambiance that consumers are warming up to, with broistas (its term for baristas) walking through the lanes and taking orders.

The focus is on speed and customer service, and as it rolls out new stores, it's working with different formats to be able to handle demand efficiently. Customers also enjoy its distinctive branded beverages and price point, which is cheaper than leader Starbucks.

Dutch Bros is demonstrating robust growth and increasing profits. Revenue rose 35% year over year in the fourth quarter, driven by 32 new stores and a 6.9% year-over-year increase in same-store sales. Company-operated shop contribution profit increased 51% with a 28.9% margin, up 2.4 percentage points. Net income increased from a $3.8 million loss to $6.4 million.

Management has ambitions to expand to 4,000 stores over the next 10 to 15 years. It's planning to open at least 160 stores in 2025, and it will need to accelerate the rate of openings to reach that goal. But if it can, it's a no-brainer for sales growth.

At the same time, it's rolling out stores with consumer preferences and profitability in mind. As it builds its brand presence and gains loyalty, it should be able to continue enjoying same-store sales growth as it expands, raising its potential. It also just launched a new mobile-order program that's gaining traction and demonstrating promise as a growth driver.

There's so much to expect from Dutch Bros over the next three years and longer, and the stock is a strong contender to keep beating the market.

Should you invest $1,000 in Dutch Bros right now?

Before you buy stock in Dutch Bros, consider this:

The Motley Fool Stock Advisor analyst team just identified what they believe are the 10 best stocks for investors to buy now… and Dutch Bros wasn’t one of them. The 10 stocks that made the cut could produce monster returns in the coming years.

Consider when Netflix made this list on December 17, 2004... if you invested $1,000 at the time of our recommendation, you’d have $496,779!* Or when Nvidia made this list on April 15, 2005... if you invested $1,000 at the time of our recommendation, you’d have $659,306!*

Now, it’s worth noting Stock Advisor’s total average return is 787% — a market-crushing outperformance compared to 152% for the S&P 500. Don’t miss out on the latest top 10 list, available when you join Stock Advisor.

See the 10 stocks »

*Stock Advisor returns as of April 10, 2025

Keith Noonan has positions in Take-Two Interactive Software. The Motley Fool has positions in and recommends Starbucks and Take-Two Interactive Software. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.

The stock market is having a terrible year so far. President Donald Trump's sweeping tariffs have rattled investors and analysts. There is rising fear that an impending global trade war will lead to a global recession.

Some investors have been booking profits in equities and moving toward "safer investments" such as gold and government bonds. This explains why high-flying stocks such as Dutch Bros (NYSE: BROS) saw a significant pullback in the past few weeks.

Where to invest $1,000 right now? Our analyst team just revealed what they believe are the 10 best stocks to buy right now. Learn More »

The coffee-focused restaurant chain's share prices shot up big time in February following the release of strong quarterly results, clocking gains of more than 60% in just over two months. But Dutch Bros stock is down 37% from the 52-week high it hit on Feb. 18.

This pullback could be an opportunity for savvy investors to add a fast-growing company to their portfolios. Let's look at the reasons why buying Dutch Bros stock right now could turn out to be a smart long-term move.

Dutch Bros' impressive growth seems here to stay

Dutch Bros ended 2024 with annual revenue up 33% to $1.28 billion. The company also reported an impressive increase of 63% in its bottom line to $0.49 per share. This increase was driven by a combination of healthy growth in its same-store sales and the opening of new stores. Dutch Bros increased its new shop count by 18% last year.

What's more, the company-operated shop contribution margin was up by 150 basis points last year (roughly 35% of stores are owned by franchisees), which explains why its earnings grew at a faster pace than its revenue. An important thing to note here is that Dutch Bros managed to expand its margins despite an increase in coffee prices. The company did this by raising prices and by lowering the capital cost of opening each new shop.

Dutch Bros management points out that last year was its "peak per unit capex," which means that it expects the opening cost of each new shop to come down. This should allow it to mitigate the potential effect of an increase in coffee prices due to newly imposed tariffs from the U.S. and elsewhere. The U.S. announced 46% tariffs on imports from Vietnam and a 32% duty on Indonesian imports. Brazil and Colombia were slapped with 10% import duties.

So, there is a good chance that Dutch Bros will continue to see a hike in coffee prices this year. Even then, management forecasts a 17% jump in its adjusted EBITDA (earnings before interest, taxes, depreciation, and amortization) this year. Management also expects sales to grow by 22% this year. These numbers are solid, considering the potential effect of higher prices that Dutch Bros will need to pass on to its customers due to a tariff-fueled increase in coffee prices.

This explains why analysts expect a dip in Dutch Bros' earnings growth in 2025. Consensus estimates project a 23% increase in the company's bottom line this year to $0.60 per share. However, its earnings are expected to grow at a faster pace over the next couple of years, as shown in the chart below.

Data by YCharts.

More importantly, Dutch Bros can sustain impressive growth for a much longer period, as it sees a massive opportunity to grow its business in the long run. The company opened its 1,000th shop in February, and it expects to double this count in the next four years. Dutch Bros also sees the potential of opening more than 7,000 shops in the long run.

As such, it won't be surprising to see Dutch Bros become a much bigger company in the long run. That's why investors looking to buy a potential long-term winner right now should take a closer look at this name.

The stock is expensive, but it can justify its valuation

Even though Dutch Bros stock has retreated significantly of late, it continues to trade at a relatively expensive valuation. It's trading at 151 times trailing earnings, and the forward earnings multiple of 83 isn't all that cheap either. However, we have seen that Dutch Bros' earnings growth could accelerate starting next year.

The long-term store opening opportunity is another reason why this company seems built for healthy growth in the long run. All this tells us why it may be a good idea to start accumulating Dutch Bros stock while it is retreating, as the market could reward its accelerating growth with more upside in the future. 14 of the 16 analysts covering Dutch Bros recommend buying the stock, with a median 12-month price target of $82. That would be a 54% jump from current levels. This should give investors another incentive to buy this growth stock, as it seems poised to deliver solid gains in both the short and the long run.

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*Stock Advisor returns as of April 5, 2025

Harsh Chauhan has no position in any of the stocks mentioned. The Motley Fool recommends Dutch Bros. The Motley Fool has a disclosure policy.

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