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What changed in Dutch Bros Inc.'s 10-K — 2022 vs 2023

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Paragraph-level year-over-year comparison of Dutch Bros Inc.'s 2022 and 2023 10-K annual filings, covering the Business, Risk Factors, Legal Proceedings, Cybersecurity, MD&A and Market Risk sections. Every new, removed and edited paragraph is highlighted side-by-side so you can see exactly what management changed in the 2023 report.

+419 added−416 removedSource: 10-K (2024-02-23) vs 10-K (2023-02-27)

Top changes in Dutch Bros Inc.'s 2023 10-K

419 paragraphs added · 416 removed · 327 edited across 7 sections

Item 1. Business

Business — how the company describes what it does

60 edited+11 added−22 removed21 unchanged
Biggest changeWe offer a comprehensive suite of benefits to our broistas, shop management, and headquarters employees, such as: • company-wide minimum wage of at least $10.00 per hour across all markets; • company paid medical, dental, vision, and life insurance for all full-time employees; • company paid parental leave of more than eight weeks, after one full year of employment for shop management and headquarters employees; • wellness program to help employees live their best lives; • access to free drinks and Dutch Bros swag for employees to show off their “Dutch Luv”; • tuition assistance toward employees’ professional development after one full year of employment; • flexible working arrangements for headquarters employees, including on-site, hybrid, and remote options; • up to 16 hours of paid volunteer hours to use when helping out the community, which is available to all employees; and • team focused culture with growth and leadership opportunities for career advancement.
Biggest changeWe offer a comprehensive suite of benefits to our broistas, shop management, and headquarters employees, including, but not limited to, the following: • company-wide minimum wage of at least $10.00 per hour across all markets; • company paid parental leave of more than eight weeks, after one full year of employment for shop management and headquarters employees; • wellness program to help employees live their best lives and free access to our employee assistance program for all employees; • tuition assistance toward employees’ professional development after one full year of employment; • flexible working arrangements for headquarters employees, including on-site, hybrid, and remote options; Dutch Bros Inc. | Form 10-K | 11 Table of Contents • up to 16 hours of paid volunteer hours for all employees to use when helping out the community; and • team focused culture with growth and leadership opportunities that support career advancement.
Broista ê Shift Lead í î Path A: Shop Level Operations Path B: Shop Opening Team Assistant Manager Master of Broistas (MOB) Manager Assistant Lead MOB Regional Manager Lead MOB î í Regional Operator This leadership program develops a pipeline of home-grown talent, which we believe will be sufficient for our new shop growth over the next several years.
Broista ê Shift Lead í î Path A: Shop Level Operations Path B: Shop Opening Team Shop Lead Master of Broistas (MOB) Manager Assistant Lead MOB Regional Manager Lead MOB î í Regional Operator This leadership program develops a pipeline of home-grown talent, which we believe will be sufficient for our new shop growth over the next several years.
These agreements typically restrict third parties’ activities with respect to use of the marks and impose brand standards requirements, and require licensees to inform us of any potential infringement of the marks. We register some of our copyrighted material and otherwise rely on common law protection of our copyrighted works. Such copyrighted materials are not material to our business.
These agreements typically restrict third parties’ activities with respect to use of the marks, impose brand standards requirements, and require licensees to inform us of any potential infringement of the marks. We register some of our copyrighted material and otherwise rely on common law protection of our copyrighted works. Such copyrighted materials are not material to our business.
The chart below provides the approximate percentage of systemwide employees by shop type and by state location: Dutch Bros Inc. | Form 10-K | 8 Table of Contents The charts below provide the approximate percentages of our company-operated shop and headquarters employees by gender and ethnicity: Diversity, Equity, and Inclusion We are committed to DEI (Diversity, Equity, and Inclusion) in our Company, at the window and in our communities, cultivating an inclusive environment of love, acceptance, and kindness.
The chart below provides the approximate percentage of systemwide employees by shop type and by state location: Dutch Bros Inc. | Form 10-K | 10 Table of Contents The charts below provide the approximate percentages of our company-operated shop and headquarters employees by gender and ethnicity: Diversity, Equity, and Inclusion We are committed to DEI in our Company, at the window, and in our communities, cultivating an inclusive environment of love, acceptance, and kindness.
Points and rewards generally expire after six months. Further, we offer members the ability to preload funds on their account and pay through our app, a function we call Dutch Pass. In addition to being convenient for customers, Dutch Pass enables us to increase our speed of service by reducing the payment collection time.
Points and rewards generally expire after six months. We offer members the ability to preload funds on their account and pay through our app, a function we call Dutch Pass. In addition to being convenient for customers, Dutch Pass enables us to increase our speed of service by reducing the payment collection time.
Through this relationship, we source high-quality coffee beans from across Central and South America. We typically purchase coffee contracts 18-24 months in advance of when we take physical delivery of the beans, allowing us to lock in pricing and to manage our input costs.
Through this relationship, we source high-quality coffee beans from across Central and South America. We typically purchase coffee contracts 18-24 months in advance of when we take physical delivery of the beans, allowing us to lock in pricing and to better manage our input costs.
Dutch Bros Inc. | Form 10-K | 4 Table of Contents Customers are encouraged to explore our robust “secret” menu and customize beverages through the addition of flavors and other modifiers. Many of our customers add “soft-top,” a sweet, creamy whipped topping that can be added to almost any order.
Dutch Bros Inc. | Form 10-K | 5 Table of Contents Customers are encouraged to explore our robust “secret” menu and customize beverages through the addition of flavors and other modifiers. Many of our customers add “soft-top,” a sweet, creamy whipped topping that can be added to almost any order.
Our Menu We sell a wide range of customizable hot, iced, and blended beverages. • Coffee: coffee-based beverages make up ~50% 1 of our menu mix. Coffee-based beverages include our espresso-based custom drinks, cold brew, and our proprietary “Freeze” blended beverages. Our Private Reserve coffee is a 100% Arabica three-bean blend, roasted in our Grant’s Pass facility.
Our Menu We sell a wide range of customizable hot, iced, and blended beverages. • Coffee: coffee-based beverages make up ~50% 1 of our menu mix. Coffee-based beverages include our espresso-based custom drinks, cold brew, and our proprietary “Freeze” blended beverages. Our Private Reserve coffee is a 100% Arabica three-bean blend, roasted in our Grants Pass facility.
After the coffee beans are roasted, we blend them to create our signature Private Reserve espresso. • We package and ship our Private Reserve, Decaf and White Coffee espresso blends to 14 distribution centers that supply all our company-operated and franchised locations. We designed our supply chain to be flexible in response to changes in the market.
After the coffee beans are roasted, we blend them to create our signature Private Reserve espresso. We package and ship our Private Reserve, Decaf and White Coffee espresso blends to 15 distribution centers that supply all our company-operated and franchised locations. We designed our supply chain to be flexible in response to changes in the market.
Our energy platform helps unlock the afternoon daypart and helps us appeal to a diverse customer base. • Other: the remaining ~25% 1 of our menu mix is a wide variety of teas, lemonades, sodas, and smoothies. _________________ 1 Based on number of drinks sold across our system in 2022.
Our energy platform helps unlock the afternoon daypart and helps us appeal to a diverse customer base. • Other: the remaining ~25% 1 of our menu mix is a wide variety of teas, lemonades, sodas, and smoothies. _________________ 1 Based on number of drinks sold across our system in 2023.
Our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the Securities and Exchange Commission (the SEC), and all amendments to these filings, can be obtained free of charge from our website at https://investors.dutchbros.com/financials/sec-filings/default.aspx or by contacting our Investor Relations department at our office address listed above as soon as reasonably practical following our filing or furnishing of any of these reports with the SEC.
Our Form 10-K, Quarterly Reports on Form 10-Q, Current Reports on Form 8-K, and other filings with the SEC, and all amendments to these filings, can be obtained free of charge from our website at https://investors.dutchbros.com/financials/sec-filings/default.aspx or by contacting our Investor Relations department at our office address listed above as soon as reasonably practical following our filing or furnishing of any of these reports with the SEC.
Dutch Bros Inc. | Form 10-K | 3 Table of Contents The Dutch Bros Experience Dutch Bros is more than just the products we serve: we are dedicated to making differences in the lives of our employees, customers, and the communities in which we operate.
Dutch Bros Inc. | Form 10-K | 4 Table of Contents The Dutch Bros Experience Dutch Bros is more than just the products we serve: we are dedicated to making differences in the lives of our employees, customers, and the communities in which we operate.
Foster School of Business at the University of Washington and a B.B.A in Accounting from the University of Louisville. Brian Maxwell, 51 Chief Operating Officer Mr.
Foster School of Business at the University of Washington and a B.B.A in Accounting from the University of Louisville. Brian Maxwell, 52 Chief Operating Officer Mr.
Victoria Tullett, 55 Chief Legal Officer Ms. Tullett has served as our Chief Legal Officer since September 2022 and has more than 20 years of experience helping diverse organizations manage operational risk and achieve record levels of growth, compliance, and profitability.
Tullett has served as our Chief Legal Officer since September 2022 and has more than 20 years of experience helping diverse organizations manage operational risk and achieve record levels of growth, compliance, and profitability.
From April 1990 to January 2006, Mr. Jemley served in various positions in finance and store development at Yum! Brands, Inc. (NYSE: YUM) including most recently as the Chief Financial Officer of Yum Restaurants China from December 2003 to January 2006. Mr. Jemley received an M.B.A. from the Michael G.
Jemley served in various positions in finance and store development at Yum! Brands, Inc. (NYSE: YUM) including most recently as the Chief Financial Officer of Yum Restaurants China from December 2003 to January 2006. Mr. Jemley holds an M.B.A. from the Michael G.
This runner explains the menu and helps customers personalize their orders. Using tablets, our runners take orders, sending them to broistas inside the shop, who utilize our flexible systems to handcraft custom beverages.
This runner explains the menu and helps customers personalize their orders. Using tablets, our runners take orders, sending them to broistas inside the shop, who utilize our flexible systems to hand-craft custom beverages.
Every September, we dedicate a day to give $1 from every drink sold to nonprofit organizations helping create brighter futures for local kids. 2022 Donations More than $0.8 million More than $2.3 million More than $1.1 million Additionally, our operators and franchise partners are empowered to create their own local, shop-specific giveback programs that help support and build relationships within their communities.
Every September, we dedicate a day to give $1 from every drink sold to nonprofit organizations helping create brighter futures for local kids. 2023 Donations More than $0.9 million $2.5 million More than $0.9 million Additionally, our operators and franchise partners are empowered to create their own local, shop-specific giveback programs that help support and build relationships within their communities.
Founded in 1992 by brothers Dane and Travis Boersma, Dutch Bros began with a double-head espresso machine and a pushcart in Grants Pass, Oregon. Today, we believe that Dutch Bros is one of the fastest-growing brands in the foodservice and restaurant industry in the United States by location count.
Founded in 1992 by brothers Dane and Travis Boersma, Dutch Bros began with a double-head espresso machine and a pushcart in Grants Pass, Oregon. Today, we believe that Dutch Bros is one of the fastest-growing brands in the quick service beverage industry in the United States by location count.
To achieve these experiences and create meaningful differentiation in our industry, we and our franchise partners are committed to attracting and retaining broistas who go all out to deliver an experience that exceeds our customers’ expectations, every day. We empower our broistas to take the extra step to make each customer interaction remarkable.
To achieve these experiences and create meaningful differentiation in our industry, we and our franchise partners are committed to attracting and retaining broistas who deliver an experience that exceeds our customers’ expectations. We empower our broistas to take the extra step to make each customer interaction remarkable.
To ensure we are able to consistently deliver high-quality coffee across our 671 shops in our system, we are actively involved in the sourcing, roasting, packaging, and distribution of coffee beans to our and our franchise partners’ shops. • We partner with third-party importers and exporters to purchase and import our green coffee beans.
To ensure we are able to consistently deliver high-quality coffee across our 831 shops in our system, we are actively involved in the sourcing, roasting, packaging, and distribution of coffee beans to our systemwide shops. We partner with third-party importers and exporters to purchase and import our green coffee beans.
Broista Training • 2 day cultural immersion, history, and fundamental knowledge • 10 shifts of on-the-job training • Review of “Manifesto” and employee handbook, and have proficiency tests twice per year Dutch Bros Inc. | Form 10-K | 10 Table of Contents Leadership Pathways We exclusively source regional operators, who we view as the linchpins of our field organization and lead between 3-7 shops at scale, from within our organization.
Broista Training • 2 day cultural immersion, history, and fundamental knowledge • 10 shifts of on-the-job training • Review of “Manifesto,” field guide, and employee handbook, and have proficiency tests twice per year Leadership Pathways We exclusively source regional operators, who we view as the linchpins of our field organization and lead between 3-7 shops at scale, from within our organization.
One of the most important relationships we have is with our employees, who are key members of the communities we love and support. We attract and seek out potential employees by identifying people with a love for life, a natural ability to connect with folks from all walks of life, and most of all, a big smile!
One of the most important relationships we have is with our employees, who are key members of the communities we love and support. We attract and seek out potential employees by identifying those with a love for life, a natural ability to connect with people under any circumstance, and most of all, a genuine smile!
Government Regulation and Environmental Matters We are subject to extensive federal, state, local and foreign laws and regulations, as well as other statutory and regulatory requirements, including those related to, among others, nutritional content labeling and disclosure requirements, food safety regulations, local licensure, building and zoning regulations, employment regulations, and laws and regulations related to our licensed operations.
Dutch Bros Inc. | Form 10-K | 13 Table of Contents Government Regulation and Environmental Matters We are subject to extensive federal, state, local, and foreign laws and regulations, as well as other statutory and regulatory requirements, including those related to, among others, nutritional content labeling and disclosure requirements, food safety regulations, local licensure, building, and zoning regulations, employment regulations, and laws and regulations related to our licensed operations.
As of December 31, 2022, we had 671 shops, of which 396 were company-operated and 275 were franchise, across 14 states as shown in the graphic below. For additional information regarding company-operated and franchise shops by state, refer to Part I, Item 2 Properties of this Form 10-K.
As of December 31, 2023, we had 831 shops, of which 542 were company-operated and 289 were franchise, across 16 states as shown in the graphic below. For additional information regarding company-operated and franchise shops by state, refer to Part I, Item 2 Properties of this Form 10-K.
We believe that our established requirement for franchise partners to purchase certain supplies and equipment from approved vendors further enhances safety and quality within our system. People Our people are the driving force of our mission and are a fundamental driver of our success.
We examine each suppliers’ safety and quality records and verify insurance coverage. We believe that our established requirement for franchise partners to purchase certain supplies and equipment from approved vendors further enhances safety and quality within our system. People Our people are the driving force of our mission and are fundamental to our success.
As of December 31, 2022, we and our franchise partners have approximately 22,000 employees, of which 14,000 employees are in our company-operated shops and headquarters.
As of December 31, 2023, we and our franchise partners have approximately 24,000 employees, of which 16,000 employees are in our company-operated shops and headquarters.
Dutch Bros Inc. | Form 10-K | 11 Table of Contents Philanthropy Since our inception, we have been dedicated to giving back to the communities in which we serve, and we consider our brand to be a powerful platform for social impact. Our philanthropic efforts support local and national causes.
Philanthropy Since our inception, we have been dedicated to giving back to the communities in which we serve, and we consider our brand to be a powerful platform for social impact. Our philanthropic efforts support local and national causes.
We believe that our drive-thru business model places a premium on customer convenience without sacrificing the personal experience. Our shops and our real estate strategy are designed from the ground up to support the drive-thru business. Our shops typically have a smaller footprint than other drive-thru formats - our shops are typically 865 to 950 square feet.
We believe that our drive-thru business model places a premium on customer convenience without sacrificing the personal experience. Our shops and our real estate strategy are designed from the ground up to support the drive-thru business.
Our Quality Assurance team informs, monitors, and reports on standards for preparation and cleaning, as well as inspects every shop in the system on a quarterly basis. As part of our people-first culture, the health of our employees is our highest priority, and we provide them with appropriate resources.
Our Quality Assurance team informs, monitors, and reports on standards for preparation and cleaning, as well as inspects every shop in the system on a quarterly basis in preparation for biannual health inspections. As part of our people-first culture, the health and safety of our customers and employees are our highest priority.
The contents of these websites are not incorporated into this filing. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only.
The contents of these websites are not incorporated into this filing. Further, the Company’s references to the URLs for these websites are intended to be inactive textual references only. Dutch Bros Inc. | Form 10-K | 16 Table of Contents
The events of the past several years have offered another reminder of how critically important our efforts have become, and as a result we have taken real, meaningful steps toward advancement of our DEI program including, but not limited to, the following: • hired three female executives in the past 18 months including our President, Chief Legal Officer, and Chief Technology Officer.
The events of the past several years have offered another reminder of how critically important our efforts have become, and as a result we have taken real, meaningful steps toward advancing our DEI program including, but not limited to, the following: • hired two female executives in the past 18 months: our Chief Executive Officer and President and Chief Marketing Officer; • expanded our library of DEI training, events, and resources to headquarters employees and shop management.
Prior to serving as our Executive Chairman, he served as the Chief Executive Officer from February 2019 to February 2021 of Dutch Bros OpCo. Mr. Boersma has led us as Co-Founder since 1992. Mr. Boersma attended Southern Oregon University. Jonathan “Joth” Ricci, 54 Chief Executive Officer Mr.
Boersma is our Co-Founder and has served as our Executive Chairman since August 2021 and as the Executive Chairman of Dutch Bros OpCo since February 2021. Prior to serving as our Executive Chairman, he served as the Chief Executive Officer of Dutch Bros OpCo from February 2019 to February 2021. Mr. Boersma has led us as Co-Founder since 1992. Mr.
From July 2018 to December 2019, he served as the Chief Financial Officer of CKE Restaurant Holdings, Inc., a quick service restaurant company. From February 2006 to January 2018, Mr. Jemley served in various senior management positions at Starbucks Corporation (Nasdaq: SBUX), most recently as Senior Vice President Finance, Starbucks Reserve & Roastery, Global Digital & Store Development.
From July 2018 to December 2019, he served as the Chief Financial Officer of CKE Restaurant Holdings, Inc., a quick service restaurant company. From February 2006 to January 2018, Mr. Jemley served in various senior management positions at Starbucks Corporation (Nasdaq: SBUX), including as Senior Vice President Finance, International and Consumer Products Group. From April 1990 to January 2006, Mr.
A culture of philanthropy and giving back to build better communities permeates the entire Dutch Bros organization, energizing both our broistas and customers alike. We host three company-wide givebacks days each year. The Company, along with our franchise partners and Dutch Bros Foundation (the Foundation) provide donations for funds raised in each of these giveback days.
A culture of philanthropy and giving back to build better communities permeates the entire Dutch Bros organization, energizing both our broistas and customers alike. We host three company-wide givebacks days each year.
Beginning in 2023, we anticipate beginning to distribute a portion of our Blue Rebel Energy drink, along with our cold brew coffee, via a “bag in a box” system for use in shop beverage taps. We believe this will help us reduce our dependence on aluminum cans.
We believe distributing a portion of our Blue Rebel Energy drink via a “bag in a box” system for use in shop beverage taps will help us reduce our dependence on aluminum cans.
Information About our Executive Officers The executive officers of Dutch Bros Inc. as of the filing of this Form 10-K, are as follows: Travis Boersma, 52 Co-founder and Executive Chairman of the Board Mr. Boersma is our Co-Founder and has served as our Executive Chairman since August 2021 and as the Executive Chairman of Dutch Bros OpCo since February 2021.
Dutch Bros Inc. | Form 10-K | 14 Table of Contents Information About our Executive Officers The executive officers of Dutch Bros Inc. as of the filing of this Form 10-K, are as follows: Travis Boersma, 53 Co-founder and Executive Chairman of the Board Mr.
Barone has served as our President and the President of Dutch Bros OpCo since February 2023. Ms. Barone has worked in the food service and beverage industries for more than a decade, and most recently served as Chief Executive Officer at True Food Kitchen, a high growth restaurant and lifestyle brand, from August 2016 to February 2023.
Barone has worked in the food service and beverage industries for more than a decade, and most recently served as Chief Executive Officer at True Food Kitchen, a high growth restaurant and lifestyle brand, from August 2016 to February 2023. Prior to that, she served in various leadership roles at Starbucks Corporation (Nasdaq: SBUX).
Dutch Bros Inc. | Form 10-K | 5 Table of Contents Our Long-Term Franchise Partners Historically, we used a franchising strategy alongside company-operated shop development to drive growth in select markets. Over time, as we decided to grow more from within, we only offered franchise partnership opportunities to the highest-quality employees within our network.
Our Long-Term Franchise Partners Historically, we used a franchising strategy alongside company-operated shop development to drive growth in select markets. Over time, as we decided to grow more from within, we only offered franchise partnership opportunities to the highest-quality employees within our network. Since 2017, our focus has been a company-operated strategy with all operators recruited from within our system.
Our commitment to beverage and food safety is strengthened through the direct relationship between our supply chain, culinary, and quality assurance teams. We review our supply partners’ material decisions regarding ingredients, and we reserve the right to conduct spot-checks. We examine each suppliers’ safety and quality records and verify insurance coverage.
Dutch Bros Inc. | Form 10-K | 9 Table of Contents Our commitment to beverage and food safety is strengthened through the direct relationship between our supply chain, culinary, food safety, and quality assurance teams. We review our supply partners’ material decisions regarding ingredients, and we reserve the right to conduct spot-checks.
Total Rewards We offer competitive salaries and wages with continual assessment by location of the business environment and labor market. We are continually making enhancements to our total rewards program to attract and retain top talent as part of our expanding growth strategy.
Total Rewards We offer competitive salaries and wages and continually assess them across business environments and labor markets. We are continually making enhancements to our total rewards program to attract and retain top talent as part of our growth strategy.
While we maintain great relationships with our existing franchise partners and they continue to open new shops as they look to infill their high-demand markets, we anticipate approximately 90% of new shops we open each year will be company-operated shops. OUR GROWTH STRATEGIES TO SHARE THE “DUTCH LUV” We are in the early stages of our growth story.
While we maintain great relationships with our existing franchise partners and they continue to open new shops as they look to infill their high-demand markets, we anticipate that substantially all new shops we open each year will be company-operated shops.
We broke ground on a second state-of-the-art coffee roasting facility in Texas. We anticipate the new roasting facility will be operational in 2024. We also manufacture our own proprietary Dutch Bros. Blue Rebel Energy Drink via a co-bottling and co-packaging relationship.
We anticipate our new roasting facility in Texas will be operational in 2024. We also manufacture our own proprietary Dutch Bros. Blue Rebel Energy Drink via a co-bottling and co-packaging relationship. In 2023, we began testing beverage tap systems for our Blue Rebel Energy drink in shops.
Additionally, in 2022 we hired an industry veteran as our first Vice President of Procurement to help support our supply chain initiatives as we continue to scale. Quality, Health, and Safety We and our franchise partners strive to maintain a safe, healthy environment at each shop through the careful training and supervision of personnel and by following rigorous quality standards.
Quality, Health, and Safety We and our franchise partners strive to maintain a safe, healthy environment at each shop through the careful training and supervision of personnel and by following rigorous quality standards.
See "Regulatory and Legal Risks" in Item 1A, Risk Factors for more information.
See "Risk Related to Regulation and Litigation" in Item 1A, Risk Factors for more information.
This compact footprint allows us greater flexibility to place locations on more parcels. We typically target lots that are at least 25,000 square feet to handle substantial car volume. Except for a handful of legacy “coffee houses”, all our shops deploy either a single or double drive-thru window with multiple feeder lanes for traffic flow.
Our shops typically have a smaller footprint than other drive-thru formats - this compact footprint allows us greater flexibility to place locations on more parcels. We typically target lots that are at least 25,000 square feet to handle substantial car volume.
Prior to that, she served in various leadership roles at Starbucks Corporation (Nasdaq: SBUX). Earlier in her career, she held positions with Bain & Company and Raymond James. Ms. Barone holds a B.A. in Applied Mathematics and an M.B.A. from Harvard University. Charles Jemley, 59 Chief Financial Officer Mr.
Earlier in her career, she held positions with Bain & Company and Raymond James. Since March 2020, Ms. Barone has served on the Board of Directors of Yelp Inc. Ms. Barone holds a B.A. in Applied Mathematics and an M.B.A. from Harvard University. Charles Jemley, 60 Chief Financial Officer Mr.
This practice also allows us to be a good partner to our coffee producers, providing security of future business. Dutch Bros Inc. | Form 10-K | 7 Table of Contents • We currently roast all our coffee in our roasting facility in Grants Pass, Oregon.
This practice also allows us to be a good partner to our coffee producers, providing security of future business. We currently roast all our coffee in our roasting facility in Grants Pass, Oregon. We roast our coffee bean varietals to specific profiles designed to highlight each of the coffee bean’s unique flavors and aromas.
Our Dutch Pass functionality also allows users to purchase and share digital gift cards, providing more customers the opportunity to share in the Dutch Bros Experience. Our Shops We are a drive-thru focused business: over 90% of our business is conducted through the drive-thru.
Our Dutch Pass functionality also allows users to purchase and share digital gift cards, providing more customers the opportunity to share in the Dutch Bros Experience. We utilize Dutch Rewards to communicate and interact directly with our customers and drive traffic.
High-levels of customization encourage innovation, creating a competitive moat and helping drive a broad demographic appeal. Our Dutch Rewards Loyalty Program In February 2021, we released our app-based digital loyalty program (Dutch Rewards) which has grown to 5.2 million registered members as of December 31, 2022.
High-levels of customization encourage innovation, creating a competitive moat and helping drive a broad demographic appeal. Our Dutch Rewards Loyalty Program In early 2021, we released our app-based digital loyalty program (Dutch Rewards) and quickly scaled it to account for approximately 60% of transactions by the end of 2021.
This system, in combination with “escape lanes” that allow customers to receive their drinks and exit before reaching the window if their drinks are ready, helps our team manage throughput all day. • SERVICE: We embrace a customer-first attitude and use every interaction during the drive-thru experience to connect with our customers and strive to deliver an experience that exceeds our customers’ expectations.
This system, in combination with “escape lanes,” in many shops that allow customers to receive their drinks and exit before reaching the window if their drinks are ready, helps our team manage throughput all day.
Intellectual Property We own many registered trademarks and service marks in the United States, the most important of which might be our trademarked Windmill logo. Other important trademarks include our “Dutch Bros,” “Dutch Bros Coffee,” “Dutch Bros Rebel,” and “Dutch Bros. Blue Rebel” word marks and our recognizable Dutch Bros sign logo.
Our competitors operate company-operated, franchised, and mixed business models. In addition, due to our proprietary Dutch Bros. Blue Rebel energy beverages, we also compete with convenience stores. Intellectual Property We own many registered trademarks and service marks in the United States, the most important of which might be our trademarked Windmill logo.
Dutch Bros Inc. | Form 10-K | 12 Table of Contents We license the use of our marks to franchise partners, third-party vendors and others through franchise agreements, vendor agreements and licensing agreements.
Accordingly, as a general policy, we pursue registration and monitor the use of our marks in the United States and challenge unauthorized use. We license the use of our marks to franchise partners, third-party vendors and others through franchise agreements, vendor agreements and licensing agreements.
Her experience with high growth companies, risk management, and franchisee relations align with the next stage of Dutch Bros’ development. In addition to her role at Dutch Bros, Ms. Tullett serves on the Board of Directors for Vancouver Symphony Orchestra. Ms. Tullett is a graduate of Lewis & Clark, Northwestern School of Law in Portland, Oregon.
In addition to her role at Dutch Bros, Ms. Tullett serves on the Board of Directors for Vancouver Symphony Orchestra. Ms. Tullett holds a J.D. from Lewis & Clark, Northwestern School of Law. Please refer to our website for a complete listing of our executive management team. Available Information Our website address is dutchbros.com.
In addition to the 2022 donations noted above, the Company, along with our franchise partners and the Foundation donated more than $2.0 million in 2022 to various organizations through our local giveback days. Competition The beverage industry is highly competitive and fragmented, and our shops compete on a variety of factors, including convenience, taste, price, quality, service, and location.
In addition to the 2023 donations noted above for the Company-wide giveback days, the Company, along with our franchise partners and the Foundation donated nearly $2.5 million in 2023 to various organizations through our local giveback days.
We believe the Dutch Bros name and the many distinctive marks associated with it are of significant value and are very important to our business. Accordingly, as a general policy, we pursue registration and monitor the use of our marks in the United States and challenge any unauthorized use.
Other important trademarks include our “Dutch Bros,” “Dutch Bros Coffee,” “Dutch Bros Rebel,” and “Dutch Bros. Blue Rebel” word marks and our recognizable Dutch Bros sign logo. We believe the Dutch Bros name and the many distinctive marks associated with it are of significant value and are very important to our business.
We utilize Dutch Rewards to interact directly with our customers, applying 1:1 marketing to offer targeted messaging, offers, and rewards that enhance the Dutch Bros experience. Dutch Rewards uses a spend-based model, where customers collect points that can be redeemed for rewards. These rewards can be utilized to receive free drinks or shared with others.
We have continued to grow penetration even as we have rapidly built new shops and entered new geographies. In 2023, approximately 65% of all transactions were attributable to Dutch Rewards members. Dutch Rewards uses a spend-based model, where customers collect points that can be redeemed for rewards. These rewards can be utilized to receive free drinks or shared with others.
Ricci has served as our Chief Executive Officer and a member of our board of directors since August 2021, our President from August 2021 to February 2023, the Chief Executive Officer of Dutch Bros OpCo since February 2021, and the President of Dutch Bros OpCo from January 2019 to February 2023. Since January 2020, Mr.
Boersma attended Southern Oregon University. Christine Barone, 50 Chief Executive Officer and President Ms. Barone has served as our Chief Executive Officer and as a member of our Board since January 2024, and as our President since February 2023. Ms.
Prior to joining Dutch Bros, Mr. Maxwell worked in finance and investment advising. Mr. Maxwell studied at Lewis & Clark College. Christine Schmidt, 46 Chief Administrative Officer Ms.
Prior to joining Dutch Bros, Mr. Maxwell worked in finance and investment advising. Mr. Maxwell attended Lewis & Clark College. Dutch Bros Inc. | Form 10-K | 15 Table of Contents Tana Davila, 41 Chief Marketing Officer Ms. Davila has served as our Chief Marketing Officer since June 2023.
We believe our primary competitors include national and regional coffee chains, local specialty coffee shops, regional drive-thru coffee chains, and drive-thru quick service restaurants with coffee and other beverage programs. Our competitors operate company-operated, franchised, and mixed business models. In addition, due to our proprietary Dutch Bros. Blue Rebel energy beverages, we also compete with convenience stores.
Competition The beverage industry is highly competitive and fragmented, and our shops compete on a variety of factors, including convenience, taste, price, quality, service, and location. We believe our primary competitors include national and regional coffee chains, local specialty coffee shops, regional drive-thru coffee chains, and drive-thru quick service restaurants with coffee and other beverage programs.
Prior to her role as Chief Administrative Officer, Ms. Schmidt served in various roles at Dutch Bros OpCo, including most recently as chief financial officer from May 2016 to September 2019, and prior to that, as vice president of finance and in a variety of other positions supporting and growing marketing, finance, and operations.
Prior to that, she served in various roles at PF Chang’s China Bistro Inc., a casual dining restaurant chain, including most recently as Chief Marketing Officer from September 2019 to August 2022, as Senior Vice President – Marketing from January 2019 to September 2019, and as Vice President – Marketing and Brand Development from November 2017 to January 2019. Ms.
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In 2008, we stopped selling franchises to people that did not come from within our system. In 2017, we shifted to a company-operated strategy with all operators recruited from within our system.
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See “Our Shops” section for illustration of our shop model. • SERVICE: We embrace a customer-first attitude and use every interaction during the drive-thru experience to connect with our customers and seek to deliver an experience that exceeds our customers’ expectations.
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We will expand our business to positively impact our communities through the following growth strategies: Develop our People, Who are our Growth Capital • 100% of our Regional Operators began their Dutch Bros journey as broistas.
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Over time, we have been developing increased sophistication as we have moved toward a more targeted approach where we use consumer insights to drive behaviors that we expect will create lasting value.
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We must attract and retain great people at the top of our funnel to sustain long-term growth. • Provide robust internal training and career advancement programs, which help develop a high-quality talent pool of candidates seeking larger roles within the Company. • Maintain the Dutch Bros culture as we scale.
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We intend to continue investing in consumer insights and moving toward more personalized marketing to offer targeted messaging, offers, and rewards that enhance the Dutch Bros experience at an attractive return on investment. Our Shops We are a drive-thru focused business: over 90% of our business is conducted through the drive-thru.
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We design our people systems with culture in mind, enabling us to continue making a positive impact in new communities and providing career development opportunities for employees. Place Shops Wherever People Want Great Beverages • Target 4,000 total shop addressable market (TAM) 1 within the next 10-15 years.
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Except for a handful of legacy “coffee houses”, all our shops deploy either a single or double drive-thru window with multiple feeder lanes for traffic flow.
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Maintain and grow people development systems and new shop pipeline, which is fully-populated for 2023. • Utilize “fortressing” strategy to rapidly build scale within markets by proactively opening new shops. We believe this strategy improves customer experience and promotes long-term brand loyalty by alleviating capacity constraints and reducing barriers for increased customer frequency.
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Dutch Bros Inc. | Form 10-K | 6 Table of Contents Legacy Configuration Current Configuration Endcap Configuration Size: ~500 square feet Size: ~800-1,000 square feet Size: ~1,200 square feet Geographies: Legacy West Coast Geographies: Widespread Geographies: Select Locations Characteristics: May have drive-thru lanes on both sides of the building; walk-up window optional; no lobby; storage outbuilding may be needed.
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Dutch Bros Inc. | Form 10-K | 6 Table of Contents Increase Brand Awareness and Encourage Deeper Customer Engagement • Engage through social media platforms, prioritizing social impact and developing deep connections withing the communities we serve. • Utilize targeted in-app marketing promotions and grassroots campaigns.
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Characteristics: Multiple drive-thru lanes served by one window; ample car stacking and circulation, escape lane likely; walk-up window standard; no lobby. Characteristics: Attached to the end of a strip center or purpose built with co-tenants; may have lobby with walk-up window, but no seating.
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We believe the Dutch Rewards program enables us to serve customers unique beverage-focused content, information related to our social impact initiatives and new ways to engage with Dutch Bros. • Leverage strong word-of-mouth advocacy, one of the strongest drivers of Dutch Bros brand awareness.
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Dutch Bros Inc. | Form 10-K | 7 Table of Contents OUR GROWTH STRATEGIES We are in the early stages of our growth story.
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Our commitment to our people encourages them to become enthusiastic brand ambassadors, and we believe that their visible love for the brand is infectious.
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We will expand our business to positively impact our communities through the following growth strategies: DEVELOP AND SUPPORT OUR PEOPLE, WHO ARE OUR GROWTH CAPITAL • Recruit, develop, and retain great people • Provide robust internal training and career advancement programs, which help develop a high-quality talent pool of candidates seeking larger roles within the Company • Target 100% internal promotion for regional operators from a list of 350+ qualified candidates with an average tenure of 7 years • Invest in leadership team to effectively scale OPEN NEW SHOPS WHEREVER PEOPLE WANT GREAT BEVERAGES • Leverage strong unit-level economics, ample liquidity, and robust underwriting standards to open shops with attractive returns, balancing building types, lease financing structure, and market entry strategies as needed • Target 4,000+ shops with a focus on drive-thru convenience with the long term objective of mid-teen annual percentage growth rate DEEPEN CUSTOMER ENGAGEMENT TO DRIVE TRAFFIC AND TRIAL • Continue increasing the sophistication of our rewards program by investing in rewards and analytics and offering more specific and targeted offers • Build and amplify brand awareness in new and existing markets through paid media and community engagement • Utilize innovation to keep the brand fresh, encourage trial, and add occasions • Employ promotions that encourage “multiples-based” purchases and facilitate group-buying behavior and word-of-mouth trial EXPAND 4-WALL MARGINS AND DRIVE G&A LEVERAGE • Continue targeting year-2 contribution margins of 30%+ for new shops, which support quick paybacks and funds new unit growth • Continue to invest in state-of-the-art roasting facility in Texas to support our expansion strategy and supply chain requirements in what we believe will be a cost-advantaged manner in the long-term • Continue achieving G&A leverage through strong top line growth and smart investments Dutch Bros Inc. | Form 10-K | 8 Table of Contents Operations Sourcing and Supply Chain We pride ourselves on the quality of our coffee.
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Utilize Digital Technology that Enhances the Employee and Customer Experience • Meet customer speed expectations by investing in, and integrating technology. • Utilize technology to reduce friction in customer interactions, providing opportunities to create deeper connections and better service. • Utilize data-driven insights to refine menu offerings, drive frequency, and increase guest spend.
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The Company, along with our franchise partners and Dutch Bros Foundation (the Foundation) provide donations for funds raised in each of these giveback Dutch Bros Inc. | Form 10-K | 12 Table of Contents days. The Foundation is a not-for-profit founded by the Company that provides philanthropy to coffee farmers and local communities.
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Expand Margins Through Operating Leverage • Deploy a resourceful and flexible approach to product design and procurement, optimized for adaptability and scalability. • Invest in state-of-the-art roasting facility in Texas to support our expansion strategy and long-term supply chain requirements in a cost-advantaged manner. • Achieve structural selling, general, and administrative cost leverage as our selling, general and administrative costs grow at a slower rate than our shop base and revenue. _________________ 1 Internal analysis conducted by Dutch Bros, along with third-party analysis by Quantitative Analysis.
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Prior to joining Dutch Bros, she served as Chief Marketing Officer at CKE Restaurants, Inc., a quick service restaurant group, from September 2022 to June 2023.

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Item 1A. Risk Factors

Risk Factors — what could go wrong, per management

190 edited+49 added−25 removed352 unchanged
Biggest changeDutch Bros Inc. | Form 10-K | 15 Table of Contents • Our shops are geographically concentrated in the Western United States, and we could be negatively affected by conditions specific to that region. • Interruption of our supply chain of coffee, flavored syrups or other ingredients, coffee machines and other restaurant equipment or packaging could affect our ability to produce or deliver our products and could negatively impact our business and profitability. • Increases in the cost of high-quality arabica coffee beans, dairy or other commodities or decreases in the availability of high-quality arabica coffee beans, dairy or other commodities could have an adverse impact on our business and financial results. • Pandemics or disease outbreaks have had, and may continue to have, an effect on our business and results of operations. • Our success depends substantially on the value of our brand and failure to preserve its value could have a negative impact on our financial results. • Food safety and quality concerns may negatively impact our brand, business and profitability, our internal operational controls and standards may not always be met and our employees may not always act professionally, responsibly and in our and our customers’ best interests.
Biggest changeIntense competition in the food service and restaurant industry could make it more difficult to expand our business and could also have a negative impact on our operating results if customers favor our competitors. • Our failure to manage our growth effectively could harm our business and operating results. • Our inability to identify, recruit, and retain qualified individuals for our shops could slow our growth and adversely impact our ability to operate. • Our shops are geographically concentrated in the Western United States, and we could be negatively affected by conditions specific to that region. • Interruption of our supply chain of coffee, flavored syrups or other ingredients, coffee machines and other restaurant equipment or packaging could affect our ability to produce or deliver our products and could negatively impact our business and profitability. • Increases or sustained inflation in the cost of high-quality arabica coffee beans, dairy, or other commodities or decreases in the availability of high-quality arabica coffee beans, dairy, or other commodities could have an adverse impact on our business and financial results. • Pandemics or disease outbreaks have had, and may continue to have, an effect on our business and results of operations. • Our success depends substantially on the value of our brand and failure to preserve its value could have a negative impact on our financial results. • Food safety and quality concerns may negatively impact our brand, business, and profitability, our internal operational controls and standards may not always be met and our employees may not always act professionally, responsibly and in our and our customers’ best interests.
We may not have adequate insurance coverage for handling security incidents or breaches, including fines, judgments, settlements, penalties, costs, attorney fees and other impacts that arise out of incidents or breaches.
We may not have adequate insurance coverage for handling security incidents, including fines, judgments, settlements, penalties, costs, attorney fees and other impacts that arise out of incidents or breaches.
From time to time, there may be a shortage of qualified employees in certain of the communities in which we operate or expand to.
From time to time, there may be a shortage of qualified employees in certain of the communities in which we operate or to which we expand.
Factors that could cause fluctuations in the trading price of our Class A common stock include the risk factors set forth in this section as well as the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the trading prices and trading volumes of competitors’ stocks; • changes in operating performance and stock market valuations of other companies generally, or those in our industry in particular; • sales of shares of our Class A common stock by us or our stockholders, including the Continuing Members; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state or long-term prospects of our business, and how those results compare to securities analyst expectations, including whether those results fail to meet, exceed or significantly exceed securities analyst expectations, particularly in light of the significant portion of our revenue derived from a limited number of customers; • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; Dutch Bros Inc. | Form 10-K | 46 Table of Contents • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • actual or perceived privacy or data security incidents; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses, franchises or other assets by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any significant change in our management; and • general political and economic conditions and slow or negative growth of our markets.
Factors that could cause fluctuations in the trading price of our Class A common stock include the risk factors set forth in this section as well as the following: • price and volume fluctuations in the overall stock market from time to time; • volatility in the trading prices and trading volumes of competitors’ stocks; • changes in operating performance and stock market valuations of other companies generally, or those in our industry in particular; • sales of shares of our Class A common stock by us or our stockholders, including the Continuing Members; • failure of securities analysts to maintain coverage of us, changes in financial estimates by securities analysts who follow our company, or our failure to meet these estimates or the expectations of investors; • changes in our financial, operating or other metrics, regardless of whether we consider those metrics as reflective of the current state or long-term prospects of our business, and how those results compare to securities analyst expectations, including whether those results fail to meet, exceed or significantly exceed securities analyst expectations, particularly in light of the significant portion of our revenue derived from a limited number of customers; • announcements by us or our competitors of new products or services; • the public’s reaction to our press releases, other public announcements, and filings with the SEC; • rumors and market speculation involving us or other companies in our industry; Dutch Bros Inc. | Form 10-K | 48 Table of Contents • actual or anticipated changes in our results of operations or fluctuations in our results of operations; • actual or anticipated developments in our business, our competitors’ businesses, or the competitive landscape generally; • litigation involving us, our industry or both, or investigations by regulators into our operations or those of our competitors; • actual or perceived privacy or data security incidents; • developments or disputes concerning our intellectual property or other proprietary rights; • announced or completed acquisitions of businesses, franchises or other assets by us or our competitors; • new laws or regulations or new interpretations of existing laws or regulations applicable to our business; • changes in accounting standards, policies, guidelines, interpretations or principles; • any significant change in our management; and • general political and economic conditions and slow or negative growth of our markets.
We rely on information technology networks and systems and data processing: to market; to sell and deliver our products; to fulfill orders; to collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of and share (Process or Processing) personal information, confidential or proprietary information, financial information and other sensitive information (collectively, Sensitive Information); to manage a variety of business processes and activities; for financial reporting purposes; to operate our business; to process orders; to accept payments using credit cards and debit cards; to accept payments using the Dutch Rewards mobile app; for legal and marketing purposes; and to comply with regulatory, legal and tax requirements.
We rely on information technology networks and systems and data processing: to market; to sell and deliver our products; to fulfill orders; to collect, receive, store, process, generate, use, transfer, disclose, make accessible, protect, secure, dispose of and share (Process or Processing) personal information, confidential or proprietary information, financial information and other sensitive information (collectively, Sensitive Information); to manage a variety of business processes and activities; for financial reporting purposes; to operate our business; to process orders; to accept payments using credit cards and debit cards; to accept payments using the Dutch Rewards mobile app; for legal purposes; and to comply with regulatory, legal and tax requirements.
The accelerated payments required in such circumstances will be calculated by reference to the present value (at a discount rate equal to the lesser of (i) 6.5% per annum and (ii) one year LIBOR, or its successor rate, plus 100 “basis points”) of all future payments that the Continuing Members and Pre-IPO Blocker Holders would have been entitled to receive under the Tax Receivable Agreements, and such accelerated payments and any other future payments under the Tax Receivable Agreements will utilize certain valuation assumptions, including that Dutch Bros Inc. will have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the Tax Receivable Agreements and sufficient taxable income to fully utilize any remaining net operating losses subject to the Tax Receivable Agreements on a straight line basis over the shorter of Dutch Bros Inc. | Form 10-K | 44 Table of Contents the statutory expiration period for such net operating losses and the five-year period after the early termination or change of control.
The accelerated payments required in such circumstances will be calculated by reference to the present value (at a discount rate equal to the lesser of (i) 6.5% per annum and (ii) one year LIBOR, or its successor rate, plus 100 “basis points”) of all future payments that the Continuing Members and Pre-IPO Blocker Holders would have been entitled to receive under the Tax Receivable Agreements, and such accelerated payments and any other future payments under the Tax Receivable Agreements will utilize certain valuation assumptions, including that Dutch Bros Inc. will have sufficient taxable income to fully utilize the deductions arising from the increased tax deductions and tax basis and other benefits related to entering into the Tax Receivable Agreements and sufficient taxable income to fully utilize any remaining net operating losses subject to the Tax Receivable Agreements on a straight line basis over the shorter of Dutch Bros Inc. | Form 10-K | 46 Table of Contents the statutory expiration period for such net operating losses and the five-year period after the early termination or change of control.
In the event of a major earthquake, hurricane, or catastrophic event such as drought, fire, power loss, telecommunications failure, cyber-attack, war, or terrorist attack, we may be unable to continue our operations and may endure system interruptions, reputational harm, breaches of data security, and loss of critical data, all of which would harm our business, results of operations, and financial condition.
In the event of a major earthquake, hurricane, or catastrophic event such as drought, fire, power loss, telecommunications failure, cyber-attack, war, or terrorist attack, we may be unable to continue our operations and may endure system interruptions, property loss, reputational harm, breaches of data security, and loss of critical data, all of which would harm our business, results of operations, and financial condition.
As part of our focus on building long-term customer loyalty, we do not expect our customers to bear the entire burden of increased labor and commodity costs and, when possible, we do not increase prices in order to pass increased labor or commodity costs on to customers, as we believe such price increases would negatively impact our brand and consumer loyalty.
As part of our focus on building long-term customer loyalty, we do not typically expect our customers to bear the entire burden of increased labor and commodity costs and, when possible, we do not increase prices in order to pass increased labor or commodity costs on to customers, as we believe such price increases would negatively impact our brand and consumer loyalty.
We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, qualify for, and rely on, exemptions and relief from certain corporate governance requirements. You do not have the same protections afforded to stockholders of companies that are subject to such requirements.
We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, qualify for, and may rely on, exemptions and relief from certain corporate governance requirements. You do not have the same protections afforded to stockholders of companies that are subject to such requirements.
For example, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM) and the TCPA impose specific requirements on communications with customers. For example, the TCPA imposes various consumer consent requirements and other restrictions on certain telemarketing activity and other communications with consumers by phone, fax or text message.
For example, the Controlling the Assault of Non-Solicited Pornography and Marketing Act of 2003 (CAN-SPAM) and the TCPA impose specific requirements on communications with customers. Additionally, the TCPA imposes various consumer consent requirements and other restrictions on certain telemarketing activity and other communications with consumers by phone, fax or text message.
If our company-operated and franchised shops cannot compete successfully with other beverage and coffee shops, including Dunkin’ Donuts, Starbucks, other specialty coffee shops, drive-thru QSRs, and the growing number of coffee delivery options in new and existing markets, we could lose customers and our revenue could decline.
If our company-operated and franchised shops cannot compete successfully with other beverage and coffee shops, including Dunkin’ Donuts, CosMc’s, Starbucks, other specialty coffee shops, drive-thru QSRs, and the growing number of coffee delivery options in new and existing markets, we could lose customers and our revenue could decline.
If the impacts of a security incident or breach, or the successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), it could harm our business.
If the impacts of a security incident, or the successful assertion of one or more large claims against us that exceeds our available insurance coverage, or results in changes to our insurance policies (including premium increases or the imposition of large deductible or co-insurance requirements), it could harm our business.
In recent years, beverage and restaurant companies have been subject to lawsuits, including class action lawsuits, alleging violations of federal and state laws regarding workplace and employment matters, discrimination, and similar matters. A number of these lawsuits have resulted in the payment of substantial damages by the defendants.
In recent years, beverage and restaurant companies have also been subject to lawsuits, including class action lawsuits, alleging violations of federal and state laws regarding workplace and employment matters, discrimination, and similar matters. A number of these lawsuits have resulted in the payment of substantial damages by the defendants.
In particular, following the issuance of shares of Class A common stock in connection with the redemption of Dutch Bros OpCo Class A common units from our Continuing Members and the related cancellation of shares of our Class B common stock or Class C common stock, such shares of Class A common stock will have the same economic rights as other shares of Class A common stock.
In particular, following the issuance of shares of Class A common stock in connection with the redemption or exchange of Dutch Bros OpCo Class A common units from our Continuing Members and the related cancellation of shares of our Class B common stock or Class C common stock, such shares of Class A common stock will have the same economic rights as other shares of Class A common stock.
Our success depends largely upon the continued services of our executive officers and other key employees, and the hiring and retention of additional executives and other key personnel. We rely on our leadership team in the areas of marketing, sales, customer experience, and selling, general and administrative.
Our success depends largely upon the continued services of our executive officers and other key employees, and the hiring and retention of additional executives and other key personnel. We rely on our leadership team in the areas of finance, marketing, sales, customer experience, and selling, general and administrative.
As a result of this distress, our franchise partners may not be able to meet their financial obligations as they come due, including the payment of royalties, rent, or other amounts due to us.
As a result of distress, our franchise partners may not be able to meet their financial obligations as they come due, including the payment of royalties, rent, or other amounts due to us.
Also, because we sometimes purchase real property for various shop locations, we're subject to all the risks generally associated with owning real estate, including changes in the investment climate for real estate, demographic trends and supply or demand for the use of the shops, which may result from competition from similar restaurants in the area as well as strict, joint and several liability for environmental contamination at or from the property, regardless of fault.
Also, because we sometimes purchase real property for various shop locations, we are subject to all the risks generally associated with owning real estate, including changes in the investment climate for real estate, demographic trends and supply or demand for the use of the shops, which may result from competition from similar restaurants in the area as well as strict, joint and several liability for environmental contamination at or from the property, regardless of fault.
Noncompliance with PCI-DSS can result in penalties ranging from $5,000 to $100,000 per month by credit card companies, litigation, damage to our reputation, and revenue losses.
Noncompliance with the PCI DSS can result in penalties ranging from $5,000 to $100,000 per month by credit card companies, litigation, damage to our reputation, and revenue losses.
In particular, our broistas are paid wage rates at or based on the applicable federal, state, or local minimum wage, and increases in the applicable minimum wage have in the past and will increase labor costs.
In particular, our broistas are typically paid wage rates at or based on the applicable federal, state, or local minimum wage, and increases in the applicable minimum wage have in the past and will increase labor costs.
If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that Dutch Bros Inc. | Form 10-K | 45 Table of Contents we would be unable to enforce contracts with third parties, and that third parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company.
If it were established that we were an unregistered investment company, there would be a risk that we would be subject to monetary penalties and injunctive relief in an action brought by the SEC, that Dutch Bros Inc. | Form 10-K | 47 Table of Contents we would be unable to enforce contracts with third parties, and that third parties could seek to obtain rescission of transactions undertaken during the period it was established that we were an unregistered investment company.
In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2022, our management and auditors determined that material weaknesses existed in the internal control over financial reporting because we do not have effective controls over (1) change management of system configurations in two IT environments, and (2) the accounting for breakage estimates related to our Dutch Rewards loyalty program.
In connection with the audit of our consolidated financial statements as of and for the year ended December 31, 2022, our management and auditors determined that material weaknesses existed in the internal control over financial reporting because we did not have effective controls over (1) change management of system configurations in two IT environments, and (2) the accounting for breakage estimates related to our Dutch Rewards loyalty program.
As part of our longer term growth strategy, we expect to enter into geographic markets in which we have little or no prior operating experience.
As part of our longer-term growth strategy, we expect to continue to enter into geographic markets in which we have little or no prior operating experience.
If we do not increase prices to cover increased labor or commodity costs, this is likely to result in lower revenue, and may also reduce margins. Furthermore, the successful operation of our business depends upon our, and our franchise partners’, ability to attract, motivate, and retain a sufficient number of qualified employees.
If we do not increase prices to cover increased labor or commodity costs, or if such increase is delayed, this is likely to result in lower revenue, and may also reduce margins. Furthermore, the successful operation of our business depends upon our, and our franchise partners’, ability to attract, motivate, and retain a sufficient number of qualified employees.
Dutch Bros Inc. | Form 10-K | 42 Table of Contents No adjustments to the exchange ratio of Dutch Bros OpCo Class A common units for shares of Class A common stock will be made as a result of either (i) any cash distribution by Dutch Bros Inc. or (ii) any cash that Dutch Bros Inc. retains and does not distribute to its stockholders.
Dutch Bros Inc. | Form 10-K | 44 Table of Contents No adjustments to the exchange ratio of Dutch Bros OpCo Class A common units for shares of Class A common stock will be made as a result of either (i) any cash distribution by Dutch Bros Inc. or (ii) any cash that Dutch Bros Inc. retains and does not distribute to its stockholders.
For example, increasing inflation, international, domestic and regional economic conditions, consumer income levels, financial market volatility, a slow or stagnant pace of economic growth, rising energy costs, rising interest rates, social unrest, and governmental, political, and budget concerns or divisions may have a negative effect on consumer confidence and discretionary spending.
For example, increasing and sustained inflation, international, domestic and regional economic conditions, consumer income levels, financial market volatility, a slow or stagnant pace of economic growth, rising energy costs, rising interest rates, social unrest, and governmental, political, and budget concerns, uncertainty, or divisions may have a negative effect on consumer confidence and discretionary spending.
Our shares of Class B common stock have no economic rights but each share will entitle its holder to ten votes (or such lower number as required to prevent the holders of Class B common stock from holding, in the aggregate, 80% or more of the aggregate voting power of Dutch Bros Inc. at any time) for so long as the aggregate number of outstanding shares of our Class B common stock represents at least 5% of the total outstanding shares of common stock, and thereafter, one vote per share on all matters on which stockholders are entitled to vote generally.
Our shares of Class B common stock have no economic rights but each share entitles its holder to ten votes (or such lower number as required to prevent the holders of Class B common stock from holding, in the aggregate, 80% or more of the aggregate voting power of Dutch Bros Inc. at any time) for so long as the aggregate number of outstanding shares of our Class B common stock represents at least 5% of the total outstanding shares of common stock, and thereafter, one vote per share on all matters on which stockholders are entitled to vote generally.
Pandemics or disease outbreaks such as the COVID-19 pandemic have impacted and are likely to continue to impact customer traffic at our Dutch Bros shops and may make it more difficult to staff our shops and, in more severe cases, may cause a temporary inability to obtain supplies and may increase commodity costs.
Pandemics or disease outbreaks such as the COVID-19 pandemic have impacted and may continue to impact customer traffic at our Dutch Bros shops and may make it more difficult to staff our shops and, in more severe cases, may cause a temporary inability to obtain supplies and may increase commodity costs.
Dutch Bros Inc. | Form 10-K | 35 Table of Contents Risks Related to Regulation and Litigation Changes in statutory, regulatory, accounting, and other legal requirements, including changes in accounting principles generally accepted in the United States, could potentially impact our operating and financial results. We are subject to numerous statutory, regulatory, and legal requirements.
Dutch Bros Inc. | Form 10-K | 37 Table of Contents Risks Related to Regulation and Litigation Changes in statutory, regulatory, accounting, and other legal requirements, including changes in accounting principles generally accepted in the United States, could potentially impact our operating and financial results. We are subject to numerous statutory, regulatory, and legal requirements.
Actual tax benefits realized by Dutch Bros Inc. may differ from tax benefits calculated under the Tax Receivable Dutch Bros Inc. | Form 10-K | 43 Table of Contents Agreements as a result of the use of certain assumptions in the Tax Receivable Agreements, including the use of an assumed weighted-average state and local income tax rate to calculate tax benefits.
Actual tax benefits realized by Dutch Bros Inc. may differ from tax benefits calculated under the Tax Receivable Dutch Bros Inc. | Form 10-K | 45 Table of Contents Agreements as a result of the use of certain assumptions in the Tax Receivable Agreements, including the use of an assumed weighted-average state and local income tax rate to calculate tax benefits.
For example, these include the Telephone Consumer Protection Act (TCPA), the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the California Consumer Privacy Act (the CCPA), other state, local, and federal laws relating to data privacy and security, and rules and regulations promulgated under the authority of the Federal Trade Commission.
For example, these include the Telephone Consumer Protection Act (TCPA), the Electronic Communications Privacy Act, the Computer Fraud and Abuse Act, the California Consumer Privacy Act, as amended (the CCPA), other state, local, and federal laws relating to data privacy and security, and rules and regulations promulgated under the authority of the Federal Trade Commission.
For example, in recent years, wildfires spread across most western states causing poor air quality which reduced consumers’ willingness to venture outside their homes and reduced our AUVs, and any future wildfires may have a similar impact.
For example, in recent years, wildfires spread across most western states causing poor air quality which reduced consumers’ willingness to venture outside their homes and, we believe, reduced our AUVs, and any future wildfires may have a similar impact.
Our ability to operate new shops profitably and increase average shop revenue and comparable shop sales will depend on many factors, some of which are beyond our control, including: • consumer awareness and understanding of the Dutch Bros brand; • general economic conditions, such as inflation, which can affect shop traffic, local labor costs, and prices we pay for the beverage and other supplies we use; • consumption patterns and beverage preferences that differ from region to region; • changes in consumer preferences and discretionary spending; • difficulties obtaining or maintaining adequate relationships with distributors or suppliers in new markets; • increases in prices for commodities, including coffee, milk and flavored syrups; • inefficiency in our labor costs as the staff gains experience; • competition, either from our competitors in the food service and restaurant industry or our own shops; • temporary and permanent site characteristics of new shops; • changes in government regulation; • our ability to hire, motivate, and retain qualified employees who share our values; and • other unanticipated increases in costs, including costs of construction materials and trade labor, any of which could give rise to delays or cost overruns.
Our ability to operate new shops profitably and increase average shop revenue and comparable shop sales will depend on many factors, some of which are beyond our control, including: • consumer awareness and understanding of the Dutch Bros brand; • general economic conditions, such as inflation, which can affect shop traffic, local labor costs, and prices we pay for the beverage and other supplies we use; • consumption patterns and beverage preferences that differ from region to region; • changes in consumer preferences and discretionary spending, which we have seen impacted recently by factors such as inflation; • difficulties obtaining or maintaining adequate relationships with distributors or suppliers in new markets; • increases or continued elevation in prices for commodities, including coffee, milk, and flavored syrups; • inefficiency in our labor costs as the staff gains experience; • competition, either from our competitors in the food service and restaurant industry or our own shops; • temporary and permanent site characteristics of new shops; • changes in government regulation; • our ability to hire, motivate, and retain qualified employees who share our values; and • other unanticipated increases in costs, including costs of construction materials and trade labor, any of which could give rise to delays or cost overruns.
If we experience wildfires, such wildfires may also damage shops and the communities in which they operate which could decrease demand for our products. For example, in 2018 a wildfire partially destroyed the town of Surprise, California and damaged one of our shops.
If we experience wildfires, such wildfires may also damage shops and the communities in which they operate which could decrease demand for our products. For example, in 2018 a wildfire partially destroyed a town in northern California and damaged one of our shops.
Our corporate reputation could also suffer from negative publicity or consumer sentiment regarding Dutch Bros action or inaction or brand imagery, or a real or perceived failure of corporate governance or misconduct by any officer or any employee or representative of us or a franchise partner.
Our corporate reputation could also suffer from negative publicity or consumer sentiment regarding Dutch Bros’ action or inaction or brand imagery, or a real or perceived failure of corporate governance or misconduct by any officer or any employee or representative of us or a franchise partner.
As a result of our concentration in this market, we have been, and in the future may be, disproportionately affected by these adverse conditions compared to other chain beverage shops with a national footprint.
As a result of our concentration in this market, we have been, and in the future may be, disproportionately affected by these adverse conditions compared to other chain beverage shops with a more expansive national footprint.
Dutch Bros Inc. | Form 10-K | 39 Table of Contents We and our franchise partners are subject to extensive government regulations that could result in claims leading to increased costs and restrict our ability to operate franchises.
Dutch Bros Inc. | Form 10-K | 41 Table of Contents We and our franchise partners are subject to extensive government regulations that could result in claims leading to increased costs and restrict our ability to operate franchises.
Our financial results may fluctuate due to a variety of factors, many of which are outside of our control and may be difficult to predict, including, but not limited to: • changes in consumer tastes and nutritional and dietary trends; • successful identification and acquisition of appropriate sites to timely develop and expand our number of profitable shops; • protection of our brand and reputation; • dependence on a small number of suppliers, including for roasting; • expectations regarding our future operating and financial performance; • the size of our addressable markets, market share, and market trends; • effective management and continued growth of our workforce and operations; • our ability to attract, retain, and motivate skilled personnel, including key members of our senior management; • generation of projected same shop sales growth; • the sufficiency of our cash, cash equivalents, and investments to meet our liquidity needs; • dependence on long-term non-cancelable leases; • our employees and the status of our workers; • our inability to maintain good relationships with our franchising partners; • the timing and amount of deferred expenses related to the maintenance of company-operated shops; • the effects of seasonal trends on our results of operations; • our vulnerability to global financial market conditions, including the continuing effects from the recent recession; • adverse weather conditions in local or regional areas where our shops are located; and • our realization of any benefit from our organizational structure net of expenses associated with the same (including our obligations under the Tax Receivable Agreements).
Our financial results may fluctuate due to a variety of factors, many of which are outside of our control and may be difficult to predict, including, but not limited to: • changes in consumer tastes and nutritional and dietary trends; • successful identification and acquisition of appropriate sites to timely develop and expand our number of profitable shops; • protection of our brand and reputation; • dependence on a small number of suppliers, including for roasting; • expectations regarding our future operating and financial performance; Dutch Bros Inc. | Form 10-K | 52 Table of Contents • the size of our addressable markets, market share, and market trends; • effective management and continued growth of our workforce and operations; • our ability to attract, retain, and motivate skilled personnel, including key members of our senior management; • generation of projected same shop sales growth; • the sufficiency of our cash, cash equivalents, and investments to meet our liquidity needs; • dependence on long-term non-cancelable leases; • our employees and the status of our workers; • our inability to maintain good relationships with our franchising partners; • the timing and amount of deferred expenses related to the maintenance of company-operated shops; • the effects of seasonal trends on our results of operations; • our vulnerability to global financial market conditions, including the continuing effects from the recent recession; • adverse weather conditions in local or regional areas where our shops are located; and • our realization of any benefit from our organizational structure net of expenses associated with the same (including our obligations under the Tax Receivable Agreements).
We cannot make any assurances regarding our ability to effectively respond to changes in consumer health perceptions or our ability to successfully implement the nutrient content disclosure requirements and to adapt our menu offerings to trends in drinking and consumption habits.
We cannot make any assurances regarding our ability to effectively respond to changes in customer health perceptions or our ability to successfully implement the nutrient content disclosure requirements and to adapt our menu offerings to trends in drinking and consumption habits.
Such incidents include actual or perceived breaches of privacy, contaminated products, broistas infected with communicable diseases, such as COVID-19, or other potential incidents discussed in this Risk Factors section. The impact of such incidents may be exacerbated if they receive considerable publicity, including rapidly through social or digital media (including for malicious reasons), or result in litigation.
Such incidents include actual or perceived breaches of privacy, contaminated products, broistas infected with communicable diseases, or other potential incidents discussed in this Risk Factors section. The impact of such incidents may be exacerbated if they receive considerable publicity, including rapidly through social or digital media (including for malicious reasons), or result in litigation.
The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the war between Russia and Ukraine, terrorism, or other geopolitical events.
The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the war between Russia and Ukraine and the war between Israel and Hamas, terrorism, or other geopolitical events.
Our ability to open new shops is dependent upon a number of factors, many of which are beyond our control, including our and our franchise partners’ ability to: • identify available and suitable sites, specifically for drive-thru locations; • compete for such sites; • reach acceptable agreements regarding the lease of locations; • obtain or have available the financing required to acquire and operate a shop, including construction and opening costs, which includes access to build-to-suit leases and ground lease construction arrangements; • respond to unforeseen engineering or environmental problems with leased premises; • avoid the impact of inclement weather, natural disasters, and other calamities; • hire, train and retain the skilled management and other employees necessary to meet staffing needs; • obtain, in a timely manner and for an acceptable cost, required licenses, permits, and regulatory approvals and respond effectively to any changes in local, state, or federal law and regulations, such as regulatory bans on new drive-thru businesses, that adversely affect our and our franchise partners’ costs or ability to open new shops; and • control construction and equipment cost increases for new shops and secure the services of qualified contractors and subcontractors in an increasingly competitive environment.
Our ability to open new shops is dependent upon a number of factors, many of which are beyond our control, including our and our franchise partners’ ability to: • identify available and suitable sites, specifically for drive-thru locations; • compete for such sites; • reach acceptable agreements regarding the lease of locations; • obtain or have available the financing required to acquire and operate a shop, including construction and opening costs, which includes access to build-to-suit leases and ground lease construction arrangements; • respond to unforeseen engineering or environmental problems with leased premises; • avoid the impact of inclement weather, natural disasters, and other calamities; • hire, train, and retain the skilled management and other employees necessary to meet staffing needs; Dutch Bros Inc. | Form 10-K | 20 Table of Contents • obtain, in a timely manner and for an acceptable cost, required licenses, permits, and regulatory approvals and respond effectively to any changes in local, state, or federal law and regulations, such as regulatory bans on new drive-thru businesses, that adversely affect our and our franchise partners’ costs or ability to open new shops; and • control construction and equipment cost increases for new shops and secure the services of qualified contractors and subcontractors in an increasingly competitive environment.
We Process Sensitive Information necessary to provide our products and services and other business functions.
We Process Sensitive Information to provide our products and services and other business functions.
The global credit and financial markets have experienced extreme volatility and disruptions (including as a result of the COVID-19 pandemic and actual or perceived changes in interest rates and economic inflation), which has included severely diminished liquidity and credit availability, declines in consumer confidence, prolonged weak consumer demand, a decrease in consumer discretionary spending, declines in economic growth, high inflation, uncertainty about economic stability, and increases in unemployment rates.
The global credit and financial markets have experienced extreme volatility and disruptions (including as a result of the ongoing COVID-19 pandemic and actual or perceived changes in interest rates, continued economic inflation, and failures of financial institutions), which has included severely diminished liquidity and credit availability, declines in consumer confidence, prolonged weak consumer demand, a decrease in consumer discretionary spending, declines in economic growth, high inflation, uncertainty about economic stability, and increases in unemployment rates.
Additionally, our franchise partners’ interests may conflict or diverge with our interests in the future, which could have a negative impact on our business. • We have identified material weaknesses in our internal control over financial reporting.
Additionally, our franchise partners’ interests may conflict or diverge with our interests in the future, which could have a negative impact on our business. • We have previously identified and remediated material weaknesses in our internal control over financial reporting.
Additionally, because we accept payments using credit cards and debit cards, we are subject to the Payment Card Industry Data Security Standard (PCI DSS). The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.
Additionally, because we accept payments using credit cards and debit cards, we are subject to the PCI DSS. The PCI DSS requires companies to adopt certain measures to ensure the security of cardholder information, including using and maintaining firewalls, adopting proper password protections for certain devices and software, and restricting data access.
If we fail to remediate our existing material weaknesses or identify new material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act in a timely manner, if we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected.
If we identify new material weaknesses in our internal control over financial reporting, if we are unable to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, if we are unable to conclude that our internal control over financial reporting is effective, or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports and the market price of our common stock could be negatively affected.
Catastrophic events may disrupt our business. Labor discord or disruption, geopolitical events, social unrest, war, including repercussions of the recent war between Russia and Ukraine, terrorism, political instability, acts of public violence, boycotts, hostilities and social unrest, and other health pandemics that lead to avoidance of public places or cause people to stay at home could harm our business.
Labor discord or disruption, geopolitical events, social unrest, war, including repercussions of the recent war between Russia and Ukraine and the war between Israel and Hamas, terrorism, political instability, acts of public violence, boycotts, hostilities and social unrest, and other health pandemics that lead to avoidance of public places or cause people to stay at home could harm our business.
Accordingly, it is not possible for us to predict the duration and extent to which this will affect our business at this time. There is no guarantee that a future outbreak of this or any other widespread epidemics will not occur, or that the global economy will recover, either of which could seriously harm our business.
Accordingly, it is not possible for us to predict the duration and extent to which this will affect our business at this time. There is no guarantee that a future outbreak of COVID-19 or any other widespread epidemics will not occur, or that the global economy will recover to pre-pandemic levels, either of which could seriously harm our business.
Consumer demand for our products and our brand equity could diminish significantly if we, our employees, franchise partners, or other business partners fail to preserve the quality of our products, act or are perceived to act in an unethical, illegal, racially-biased, unequal or socially irresponsible manner, including with respect to the sourcing, content or sale of our products, service and treatment of customers at Dutch Bros shops, or the use of customer data for general or direct marketing or other purposes.
Consumer demand for our products and our brand equity could diminish significantly if we, our employees, franchise partners, or other business partners fail to preserve the quality of our products, act or are perceived to act in an unethical, illegal, racially-biased, unequal or socially irresponsible manner, including with respect to the sourcing, content or sale of our products, service and treatment of customers at Dutch Bros shops, or the Dutch Bros Inc. | Form 10-K | 32 Table of Contents use of customer data for general or direct marketing or other purposes.
Dutch Bros Inc. | Form 10-K | 16 Table of Contents Risk Factors You should carefully consider the risks described below in addition to the other information set forth in this Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Market Risk,” our consolidated financial statements and related notes in this Form 10-K, before making an investment decision.
Risk Factors You should carefully consider the risks described below in addition to the other information set forth in this Form 10-K, including “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” “Quantitative and Qualitative Disclosures about Market Risk,” our consolidated financial statements and related notes in this Form 10-K, before making an investment decision.
Together, these many laws and regulations present a thicket of compliance obligations and liability risks. As we grow, we will need to continue to increase our compliance efforts in these areas, which may affect our results from operations.
Together, these many laws and regulations present a thicket of compliance obligations and liability risks. As we grow, our compliance efforts in these areas will continue to increase, which may result in additional costs and affect our results from operations.
The PPACA further permits the FDA to require covered restaurants to make additional nutrient disclosures, such as disclosure of trans-fat content. An unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritional content of our menu items could negatively influence the demand for our offerings.
The PPACA further permits the Food and Drug Administration to require covered restaurants to make additional nutrient disclosures, such as disclosure of trans-fat content. An unfavorable report on, or reaction to, our menu ingredients, the size of our portions or the nutritional content of our menu items could negatively influence the demand for our offerings.
We rely upon third-party service providers and technologies to operate critical business systems to process Sensitive Information in a variety of contexts, including, without limitation, third-party payment processors, point of sale and order management systems, encryption and authentication technology, human resources systems including scheduling, payroll and compliance systems, internet service providers, enterprise resource planning and financial systems, document management and storage, employee email, our Dutch Rewards mobile app, and other functions.
Dutch Bros Inc. | Form 10-K | 29 Table of Contents We rely upon third-party service providers and technologies to operate critical business systems to process Sensitive Information in a variety of contexts, including, without limitation, third-party payment processors, point of sale and order management systems, encryption and authentication technology, human resources systems including scheduling, payroll and compliance systems, internet service providers, enterprise resource planning and financial systems, document management and storage, employee email, our Dutch Rewards mobile app, and other functions.
Government regulation and consumer eating habits may impact our business as a result of changes in attitudes regarding diet and health or new information regarding the health effects of consuming our menu offerings.
Government regulation and customer consumption habits may impact our business as a result of changes in attitudes regarding diet and health or new information regarding the health effects of consuming our menu offerings.
For example, if Dutch Bros OpCo makes distributions to us, the non-managing members of Dutch Bros OpCo will also be entitled to receive such distributions pro rata in Dutch Bros Inc. | Form 10-K | 48 Table of Contents accordance with their ownership of Dutch Bros OpCo Class A common units and their preferences as to the timing and amount of any such distributions may differ from those of our public stockholders.
For example, if Dutch Bros OpCo makes distributions to Dutch Bros Inc., the non-managing members of Dutch Bros OpCo will also be entitled to receive such distributions pro rata in accordance with their ownership of Dutch Bros OpCo Class A common units and their preferences as to the timing and amount of any such distributions may differ from those of our public stockholders.
Any one or more of the factors listed below or described elsewhere in this section could harm our business: • increases in real estate or labor costs in certain markets; • changes in consumer preferences; • disruptions in our supply chain; • the impact of shortages or inflation on our cost of goods or labor, including construction labor, which we have recently seen; Dutch Bros Inc. | Form 10-K | 17 Table of Contents • changes in governmental laws and rules, including those regarding minimum wage, and approaches to taxation; • severe weather or other natural or man-made disasters affecting a large market or several closely located markets that may temporarily but significantly affect our business in such markets, including the price or availability of goods; • labor discord or disruption, geopolitical events, social unrest, war, including repercussions of the war between Russia and Ukraine, terrorism, political instability, acts of public violence, boycotts, hostilities and social unrest, COVID-19 variants and other epidemics; and • adverse outcomes of litigation.
Any one or more of the factors listed below or described elsewhere in this section could harm our business: • increases in real estate or labor costs in certain markets, which we have recently experienced; • changes in consumer preferences; • disruptions in our supply chain; • the impact of shortages or inflation on our cost of goods or labor, including construction labor, which we have recently seen; • changes in governmental laws and rules, including those regarding minimum wage, and approaches to taxation; • severe weather or other natural or man-made disasters affecting a large market or several closely located markets that may temporarily but significantly affect our business in such markets, including the price or availability of goods; • labor discord or disruption, geopolitical events, social unrest, war, including repercussions of the war between Russia and Ukraine or the war between Israel and Hamas and the related risk of a larger regional conflict, terrorism, political instability, acts of public violence, boycotts, hostilities and social unrest, COVID-19 variants and other epidemics; and • adverse outcomes of litigation.
In addition, our amended Dutch Bros Inc. | Form 10-K | 56 Table of Contents and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint.
In addition, our amended and restated certificate of incorporation provides that, unless we consent in writing to the selection of an alternative forum, to the fullest extent permitted by law, the federal district courts of the United States of America shall be the exclusive forum for the resolution of any complaint asserting a cause or causes of action arising under the Securities Act, including all causes of action asserted against any defendant to such complaint.
If we are unable to remedy our material weaknesses, or if we fail to establish and maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our Class A common stock price.
If we fail to maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our Class A common stock price.
If we are unable to remedy our material weaknesses, or if we fail to establish and maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our Class A common stock price.
If we fail to maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our Class A common stock price.
Dutch Bros Inc. | Form 10-K | 57 Table of Contents Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibit a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibit a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner.
In addition, a labor dispute involving some or all of our employees may harm our reputation, disrupt our operations and reduce our revenue, and resolution of disputes may increase our costs.
In addition, one or more labor disputes involving some or all of our employees may harm our reputation, disrupt our operations and reduce our revenue, and resolution of disputes may increase our costs.
A security incident or other interruption could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to Sensitive Information or our information technology networks and systems (or those of the third parties upon which we rely).
Any of the previously identified or similar threats could cause a security incident or other interruption that could result in unauthorized, unlawful, or accidental acquisition, modification, destruction, loss, alteration, encryption, disclosure of, or access to Sensitive Information or our information technology networks and systems (or those of the third parties upon which we rely).
For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who has prepared or certified any part of the documents underlying such offering.
For the avoidance of doubt, this provision is intended to benefit and may be enforced by us, our officers and directors, the underwriters to any offering giving rise to such complaint, and any other professional entity whose profession gives authority to a statement made by that person or entity and who Dutch Bros Inc. | Form 10-K | 58 Table of Contents has prepared or certified any part of the documents underlying such offering.
Compared to us, some of our competitors have substantially greater financial and other resources, have been in business longer, have greater brand recognition, or are better established in the markets where our shops are located or are planned to be located.
Compared to us, some of our competitors have been in business longer, have greater brand recognition, or are better established in the markets where our shops are located or are planned to be located.
Instead, taxable income will be allocated to holders of Dutch Bros OpCo Class A common units. Accordingly, Dutch Bros Inc. will incur income taxes on its allocable share of any net taxable income of Dutch Bros OpCo and will also incur expenses related to its operations, including payments under the Tax Receivable Agreements, which we expect could be significant.
Accordingly, Dutch Bros Inc. will incur income taxes on its allocable share of any net taxable income of Dutch Bros OpCo and will also incur expenses related to its operations, including payments under the Tax Receivable Agreements, which we expect could be significant.
If we are unable to effectively combat the use of fraudulent or stolen credit cards, we may be subject to fines and higher transaction fees or be unable to continue to accept card payments because payment card networks have revoked our access to their networks, any of which would materially adversely impact our business, results of operations, and financial condition.
If we are unable to effectively combat the use of fraudulent or stolen credit cards, we may be subject to fines and higher transaction fees or be unable to continue to Dutch Bros Inc. | Form 10-K | 35 Table of Contents accept card payments because payment card networks have revoked our access to their networks, any of which would materially adversely impact our business, results of operations, and financial condition.
Additionally, the growth of our business can make it increasingly difficult to locate and hire sufficient numbers of key employees, to maintain an effective system of internal controls for a dispersed chain, and to train employees to deliver consistently high-quality hand-crafted beverages and customer experiences, Dutch Bros Inc. | Form 10-K | 34 Table of Contents which could materially harm our business and results of operations.
Additionally, the growth of our business can make it increasingly difficult to locate and hire sufficient numbers of key employees, to maintain an effective system of internal controls for a dispersed chain, and to train employees to deliver consistently high-quality hand-crafted beverages and customer experiences, which could materially harm our business and results of operations.
In addition, our effective tax rate in a given financial statement period may be materially impacted by a variety of factors including but not limited to changes in the mix and level of earnings, varying tax rates in Dutch Bros Inc. | Form 10-K | 36 Table of Contents the different jurisdictions in which we operate, fluctuations in the valuation allowance, or by changes to existing accounting rules or regulations.
In addition, our effective tax rate in a given financial statement period may be materially impacted by a variety of factors including but not limited to changes in the mix and level of earnings, varying tax rates in the different jurisdictions in which we operate, fluctuations in the valuation allowance, or by changes to existing accounting rules or regulations.
Because of the ten-to-one voting ratio between our Class B common stock and our Class A common stock, and the three-to-one voting ratio between our Class C common stock and Class D common stock, on the one hand, and our Class A common stock on the other hand, the holders of our Class B common stock, Class C common stock and Class D common stock collectively will continue to control a majority of the combined voting power of our common stock and Dutch Bros Inc. | Form 10-K | 47 Table of Contents therefore be able to control all matters submitted to our stockholders so long as they collectively represent at least a majority of the total voting power.
Because of the ten-to-one voting ratio between our Class B common stock, on the one hand, and our Class A common stock, and the three-to-one voting ratio between our Class C common stock and Class D common stock, on the one hand, and our Class A common stock on the other hand, the holders of our Class B common stock, Class C common stock and Class D common stock collectively will continue to control a majority of the combined voting power of our common stock and therefore be able to control all matters submitted to our stockholders so long as they collectively represent at least a majority of the total voting power.
Our ability to detect and combat such fraudulent transactions, which have become increasingly common and sophisticated, could be adversely impacted by the emergence and innovation of new technology Dutch Bros Inc. | Form 10-K | 33 Table of Contents platforms, including mobile and other devices. We expect that technically knowledgeable criminals will continue to attempt to circumvent our anti-fraud systems.
Our ability to detect and combat such fraudulent transactions, which have become increasingly common and sophisticated, could be adversely impacted by the emergence and innovation of new technology platforms, including mobile and other devices. We expect that technically knowledgeable criminals will continue to attempt to circumvent our anti-fraud systems.
Any provision in our amended and restated certificate of incorporation or our amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our Class A common stock and could also affect the price that some investors are willing to pay for our Class A common stock.
Any provision in our amended and restated certificate of incorporation or our amended and restated bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a Dutch Bros Inc. | Form 10-K | 59 Table of Contents premium for their shares of our Class A common stock and could also affect the price that some investors are willing to pay for our Class A common stock.
The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and other costs of doing business and, therefore, have an adverse effect on our results of operations.
Dutch Bros Inc. | Form 10-K | 39 Table of Contents The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and other costs of doing business and, therefore, have an adverse effect on our results of operations.
The risk of unauthorized circumvention of our security measures or those of our third parties on whom we rely has been heightened by advances in computer and software capabilities and the increasing sophistication of actors who employ complex techniques, including, without limitation, “phishing” or social engineering incidents, ransomware, extortion, account takeover attacks, personnel misconduct or error, denial or degradation of service attacks, malicious code (such as viruses or worms), supply-chain attacks, software bugs, adware, or malware.
The risk of unauthorized circumvention of our security measures or those of our third parties on whom we rely has been heightened by advances in computer and software capabilities and the increasing sophistication of actors who employ complex techniques, including, without limitation, “phishing” or social engineering incidents (including deep fakes, which are becoming increasingly difficult to detect), ransomware, extortion, account takeover attacks, personnel misconduct or error, denial or degradation of service attacks, malicious code (such as viruses or worms), supply-chain attacks, software bugs, adware, attacks enhanced or facilitated by artificial intelligence, or malware.
Additionally, and although less significant to our operations than coffee or dairy, other commodities, including but not limited to plant-based “milks,” tea, sugar, syrups, energy and packaging material, such as plastics, corrugate, and canning materials, Dutch Bros Inc. | Form 10-K | 25 Table of Contents are important to our operations, and may be subject to increased costs, which could negatively impact our margins.
Additionally, and although less significant to our operations than coffee or dairy, other commodities, including but not limited to plant-based “milks,” tea, sugar, syrups, energy and packaging material, such as plastics, corrugate, and canning materials, are important to our operations, and may be subject to increased costs, which could negatively impact our margins.
One of the key means to achieving our growth strategy will be through opening new shops and operating those shops on a profitable basis. During the year ended December 31, 2022, we opened 120 new company-operated shops.
One of the key means to achieving our growth strategy will be through opening new shops and operating those shops on a profitable basis. During the year ended December 31, 2023, we opened 146 new company-operated shops, across 13 states.
There can be no assurance that Dutch Bros OpCo and its subsidiaries will generate sufficient cash flow to make such distributions, or that applicable state law and contractual restrictions, including negative covenants in our debt instruments, will permit such distributions.
There can be no assurance that Dutch Bros OpCo and its subsidiaries will generate sufficient cash Dutch Bros Inc. | Form 10-K | 43 Table of Contents flow to make such distributions, or that applicable state law and contractual restrictions, including negative covenants in our debt instruments, will permit such distributions.
Our continuing support of a growing remote and hybrid workforce may make it increasingly difficult to manage our business and adequately oversee our employees and business functions, potentially resulting in harm to our company culture, increased employee attrition, the loss of key personnel, difficulty in properly classifying employees, and harm to the growth of our business.
Our continuing support of a growing remote and hybrid workforce may make it increasingly difficult to manage our business and adequately oversee our employees and business functions, potentially resulting in harm to our company culture, increased employee attrition, the loss of key personnel, difficulty Dutch Bros Inc. | Form 10-K | 28 Table of Contents in properly classifying employees, and harm to the growth of our business.
The difference in voting rights could adversely affect the value of our Class A common stock by, for example, delaying or deferring a change of control or if investors view, or any potential future purchaser of our company views, the superior voting rights of the Class B common stock, Class C common stock and Class D common stock to have value.
The difference in voting rights could adversely affect the value of our Class A common stock by, for example, delaying or deferring a change of control or if investors view, or any potential future purchaser of our company views, the superior voting rights of the Class B common stock, Class C common stock and Dutch Bros Inc. | Form 10-K | 49 Table of Contents Class D common stock to have value.
Sales of a substantial number of shares of our Class A or Class D common stock (after converting to Class A common stock) in the public market, or the perception that these redemptions, exchanges or sales might occur, could depress the market price of our Class A common stock and could impair our Dutch Bros Inc. | Form 10-K | 49 Table of Contents ability to raise capital through the sale of additional equity securities.
Sales of a substantial number of shares of our Class A or Class D common stock (after converting to Class A common stock) in the public market, or the perception that these redemptions, exchanges or sales might occur, could depress the market price of our Class A common stock and could impair our ability to raise capital through the sale of additional equity securities.
Our business is subject to the risk of litigation by employees, customers, competitors, landlords, or neighboring businesses, suppliers, franchise partners, stockholders, or others through private actions, class actions, administrative proceedings, regulatory actions, or other litigation. The outcome of litigation, particularly class action and regulatory actions, is difficult to assess or quantify.
Our business is subject to the risk of litigation by employees, customers, competitors, landlords, or neighboring businesses, suppliers, franchise partners, stockholders, or others through private actions, class actions, administrative proceedings, regulatory actions, or other litigation.

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Item 2. Properties

Properties — owned and leased real estate

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Biggest changeWe believe our current facilities are suitable for our near-term expansion plans, and expect to continue to add additional capacity on an as-needed basis. We are in the process of constructing another roasting facility in Texas to service our shops in new markets as we expand eastward, in line with our growth strategy.
Biggest changeWe are in the process of constructing a roasting facility in Texas to service our shops in new markets as we expand eastward, in line with our growth strategy.
In addition to our company-operated shops, we own and lease the following facilities: Location Primary Function(s) Square Feet Owned or Leased Grants Pass, Oregon Corporate headquarters 16,000 Owned Grants Pass, Oregon Headquarters office space 26,000 Leased Grants Pass, Oregon Roasting and packing facility 36,000 Owned Grants Pass, Oregon Roasting and warehouse facility 21,000 Leased Grants Pass, Oregon Aircraft hangar and transportation operations 84,000 Leased Our principal executive offices are located at 110 SW 4th Street, Grants Pass, Oregon, 97526.
In addition to our company-operated shops, we own and lease the following facilities: Location Primary Function(s) Square Feet Owned or Leased Grants Pass, Oregon Corporate headquarters 16,000 Owned Grants Pass, Oregon Headquarters office space 26,000 Leased Grants Pass, Oregon Roasting and packing facility 36,000 Owned Grants Pass, Oregon Roasting and warehouse facility 21,000 Leased Grants Pass, Oregon Aircraft hangar and transportation operations 84,000 Leased Scottsdale, Arizona Office space 7,000 Leased Our principal executive offices are located at 110 SW 4th Street, Grants Pass, Oregon, 97526.
For additional information regarding leases, see NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies and NOTE 8 — Leases in our consolidated financial statements, included elsewhere in this Form 10-K. Dutch Bros Inc. | Form 10-K | 59 Table of Contents
For additional information regarding leases, see NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies and NOTE 8 — Leases in our consolidated financial statements, included elsewhere in this Form 10-K. Dutch Bros Inc. | Form 10-K | 63 Table of Contents
ITEM 2. PROPERTIES As of December 31, 2022, we had 396 company-operated and 275 franchise shops with 671 total shops in 14 states. The chart below shows our properties by state as of December 31, 2022.
ITEM 2. PROPERTIES As of December 31, 2023, we had 542 company-operated and 289 franchise shops with 831 total shops in 16 states. The chart below shows our properties by state as of December 31, 2023.
Added
We believe our current facilities are suitable for our near term needs, and expect to add additional capacity related to the planned shift of approximately 40% of our total support staff to Arizona. In addition, we expect to continue to add additional capacity on an as-needed basis.

Item 3. Legal Proceedings

Legal Proceedings — active lawsuits and investigations

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Biggest changeThe outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially adversely affect our business, financial condition, results of operations and growth prospects. We are not currently involved in any material legal proceedings.
Biggest changeThe outcome of litigation and claims cannot be predicted with certainty, and the resolution of these matters could materially adversely affect our business, financial condition, results of operations, and growth prospects. Please refer to NOTE 17 — Commitments and Contingencies under the heading “Legal Proceedings” for further information.

Item 5. Market for Registrant's Common Equity

Market for Common Equity — stock, dividends, buybacks

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Biggest changeDutch Bros Inc. | Form 10-K | 61 Table of Contents September 15, 2021 September 30, 2021 December 31, 2021 March 31, 2022 June 30, 2022 September 30, 2022 December 30, 2022 Dutch Bros Inc. $ 100.00 $ 118.10 $ 138.79 $ 150.68 $ 86.29 $ 84.92 $ 76.85 S&P 500 Index $ 100.00 $ 96.14 $ 106.37 $ 101.11 $ 84.48 $ 80.02 $ 85.69 S&P 500 Consumer Discretionary Index $ 100.00 $ 97.34 $ 109.67 $ 99.59 $ 73.38 $ 76.41 $ 68.46 The above Stock Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
Biggest changeDutch Bros Inc. | Form 10-K | 65 Table of Contents September 15, 2021 December 31, 2021 December 31, 2022 March 31, 2023 June 30, 2023 September 30, 2023 December 31, 2023 Dutch Bros Inc. $ 100.00 $ 138.79 $ 76.85 $ 86.23 $ 77.56 $ 63.39 $ 86.34 S&P 500 Index $ 100.00 $ 106.37 $ 85.69 $ 91.71 $ 99.32 $ 95.70 $ 106.45 S&P 500 Consumer Discretionary Index $ 100.00 $ 109.67 $ 68.46 $ 79.25 $ 90.59 $ 86.06 $ 96.55 The above Stock Performance Graph and related information shall not be deemed “soliciting material” or to be “filed” with the SEC nor shall such information be incorporated by reference into any future filing under the Securities Act or the Exchange Act, each as amended, except to the extent that we specifically incorporate it by reference into such filing.
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. As of December 31, 2022, we also had three holders of record of our Class B common stock, two holders of record of our Class C common stock, and two holders of record of our Class D common stock.
This number of holders of record also does not include stockholders whose shares may be held in trust by other entities. As of December 31, 2023, we also had three holders of record of our Class B common stock, two holders of record of our Class C common stock, and two holders of record of our Class D common stock.
Stockholders As of December 31, 2022, our Class A common stock was held by 82 holders of record. The actual number of stockholders of Class A common stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Stockholders As of December 31, 2023, our Class A common stock was held by 105 holders of record. The actual number of stockholders of Class A common stock is greater than this number of record holders and includes stockholders who are beneficial owners, but whose shares are held in street name by brokers and other nominees.
Added
Recent Sales of Unregistered Securities On October 23, 2023, pursuant to Section 3(a)(9) of the Securities Act, we made an unregistered issuance of our Class A common stock via exchange of approximately 4.1 million Dutch Bros OpCo Class A common units held by our Co-Founder for shares of our Class A common stock on a one-for-one basis.
Added
Such shares of Class A common stock were then reserved for sale directly by our Co-Founder pursuant to a Rule 10b5-1 trading arrangement, and no proceeds were received by the Company.
Added
Pursuant to Section 3(a)(9) of the Securities Act, on November 15, 2023 and December 18, 2023, we made an unregistered issuance of our Class A common stock via (i) exchange of approximately 4.2 million Dutch Bros OpCo Class A common units and conversion of approximately 1.4 million shares of Dutch Bros Inc.
Added
Class D common stock, and (ii) exchange of approximately 1.0 million Dutch Bros OpCo Class A common units and conversion of approximately 0.3 million shares of Dutch Bros Inc. Class D common stock, respectively, held by our Sponsor for shares of our Class A common stock on a one-for-one basis.
Added
Such shares of Class A common stock were then sold directly by our Sponsor pursuant to Rule 144 of the Securities Act, and no proceeds were received by the Company.

Item 7. Management's Discussion & Analysis

Management's Discussion & Analysis (MD&A) — revenue / margin commentary

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Biggest changeConsolidated Statements of Operations Year Ended December 31, (in thousands) 2022 2021 2020 REVENUES Company-operated shops $ 639,710 $ 403,746 $ 244,514 Franchising and other 99,302 94,130 82,899 Total revenues 739,012 497,876 327,413 COSTS AND EXPENSES Cost of sales 558,096 344,573 211,478 Selling, general and administrative 183,528 264,529 104,935 Total costs and expenses 741,624 609,102 316,413 INCOME (LOSS) FROM OPERATIONS (2,612) (111,226) 11,000 OTHER EXPENSE Interest expense, net (18,018) (7,093) (3,736) Other income (expense) 3,976 (1,240) (363) Total other expense (14,042) (8,333) (4,099) INCOME (LOSS) BEFORE INCOME TAXES (16,654) (119,559) 6,901 Income tax expense (benefit) 2,599 (1,628) 843 NET INCOME (LOSS) (19,253) (117,931) 6,058 Less: Net income (loss) attributable to Dutch Bros OpCo prior to the Reorganization Transactions — (67,374) 6,058 Less: Net loss attributable to non-controlling interests (14,500) (37,878) — NET LOSS ATTRIBUTABLE TO DUTCH BROS INC. $ (4,753) $ (12,679) $ — Dutch Bros Inc. | Form 10-K | 65 Table of Contents Segment Financials Year Ended December 31, (in thousands) 2022 2021 2020 Revenues: Company-operated shops $ 639,710 $ 403,746 $ 244,514 Franchising and other 99,302 94,130 82,899 Total revenues 739,012 497,876 327,413 Cost of sales: Company-operated shops 518,383 317,045 183,968 Franchising and other 39,713 27,528 27,510 Total cost of sales 558,096 344,573 211,478 Segment gross profit: Company-operated shops 121,327 86,701 60,546 Franchising and other 59,589 66,602 55,389 Total gross profit 180,916 153,303 115,935 Depreciation and amortization: Company-operated shops $ 36,306 $ 16,291 $ 9,737 Franchising and other 5,706 6,263 4,349 All other 2,716 2,663 1,451 Total depreciation and amortization $ 44,728 $ 25,217 $ 15,537 Segment contribution: Company-operated shops 157,633 102,992 70,283 Franchising and other 65,295 72,865 59,738 Total segment contribution $ 222,928 $ 175,857 $ 130,021 Selling, general and administrative (183,528) (264,529) (104,935) Interest expense, net (18,018) (7,093) (3,736) Other income (expense) 3,976 (1,240) (363) INCOME (LOSS) BEFORE INCOME TAXES $ (16,654) $ (119,559) $ 6,901 Dutch Bros Inc. | Form 10-K | 66 Table of Contents Key Performance Indicators The key performance indicators (KPIs) that we use to effectively manage and evaluate our business are as follows: Year Ended December 31, (in thousands, except shop count data; unaudited) 2022 2021 2020 Shop count, beginning of period Company-operated 271 182 118 Franchised 267 259 252 Total shop count 538 441 370 Company-operated new openings 120 82 59 Franchised new openings 13 16 13 Acquisition of franchise shops 5 7 5 Closures 1 — (1) (1) Shop count, end of period Company-operated 396 271 182 Franchised 275 267 259 Total shop count 671 538 441 Systemwide AUV 2 $ 1,924 $ 1,850 $ 1,679 Company-operated shops AUV 2 $ 1,895 $ 1,752 $ 1,524 Systemwide same shop sales 3, 4 1.0 % 8.4 % 2.0 % Company-operated same shop sales 3 0.6 % 9.0 % 0.8 % Systemwide sales 4 $ 1,163,182 $ 913,822 $ 687,238 Company-operated operating weeks 5 17,489 11,526 8,316 Franchising and other operating weeks 5 13,828 13,175 12,358 Dutch Rewards member registrations 6 2,004 3,202 8 Year Ended December 31, 2022 2021 ⁷ 2020 ⁷ (in thousands; unaudited) $ % $ % $ % Company-operated shop revenues 639,710 100.0 403,746 100.0 244,514 100.0 Company-operated shop gross profit 121,327 19.0 86,701 21.5 60,546 24.8 Company-operated shop contribution 8 157,633 24.6 102,992 25.5 70,283 28.7 Selling, general, and administrative expenses 183,528 24.8 264,529 53.1 104,935 32.0 Adjusted selling, general, and administrative expenses 9 136,441 18.5 96,498 19.4 69,848 21.3 NET INCOME (LOSS) (19,253) (2.6) (117,931) (23.7) 6,058 1.9 Adjusted EBITDA 8 91,181 12.3 84,132 16.9 70,097 21.4 Dutch Bros Inc. | Form 10-K | 67 Table of Contents _________________ 1 Represents a temporary shop closure in 2021 that remained closed in 2022, and a permanent shop closure in 2020. 2 AUVs are determined based on the net sales for any trailing twelve-month period for systemwide and company-operated shops that have been open a minimum of 15 months.
Biggest changeDutch Bros Inc. | Form 10-K | 70 Table of Contents Key Performance Indicators The key performance indicators (KPIs) that we use to effectively manage and evaluate our business are as follows: Year Ended December 31, (in thousands, except shop count data; unaudited) 2023 2022 2021 Shop count, beginning of period Company-operated 396 271 182 Franchised 275 267 259 Total shop count 671 538 441 Company-operated new openings 146 120 82 Franchised new openings 13 13 16 Acquisition of franchise shops — 5 7 Re-openings / (Closures) 1 1 — (1) Shop count, end of period Company-operated 542 396 271 Franchised 289 275 267 Total shop count 831 671 538 Systemwide AUV 2 $ 1,973 $ 1,924 $ 1,850 Company-operated shops AUV 2 $ 1,902 $ 1,895 $ 1,752 Systemwide same shop sales 3, 4 2.8 % 1.0 % 8.4 % Company-operated same shop sales 3 1.5 % 0.6 % 9.0 % Systemwide sales 4 $ 1,444,433 $ 1,163,182 $ 913,822 Company-operated operating weeks 5 24,395 17,489 11,526 Franchising and other operating weeks 5 14,624 13,828 13,175 Dutch Rewards member registrations 6 2,252 2,004 3,202 Year Ended December 31, 2023 2022 2021 (in thousands; unaudited) $ % $ % $ % Company-operated shop revenues 857,939 100.0 639,710 100.0 403,746 100.0 Company-operated shop gross profit 180,235 21.0 121,327 19.0 86,701 21.5 Company-operated shop contribution 7 242,323 28.2 157,633 24.6 102,992 25.5 Selling, general, and administrative expenses 205,074 21.2 183,528 24.8 264,529 53.1 Adjusted selling, general, and administrative expenses 7 160,749 16.6 136,441 18.5 96,498 19.4 Net income (loss) 9,952 1.0 (19,253) (2.6) (117,931) (23.7) Adjusted EBITDA 7 160,062 16.6 91,181 12.3 84,132 16.9 Dutch Bros Inc. | Form 10-K | 71 Table of Contents _________________ 1 Represents the re-opening of a shop that was temporarily closed in 2021. 2 AUVs are determined based on the net sales for any trailing twelve-month period for systemwide and company-operated shops that have been open a minimum of 15 months.
Management uses these metrics as indicators of our system’s overall financial health, growth and future expansion prospects. 5 Company-operated and franchise shops operating weeks are calculated based on the number operating days for the shop base and dividing by 7. Our shop base is defined as shops opened as of the period end date.
Management uses these metrics as indicators of our system’s overall financial health, growth and future expansion prospects. 5 Company-operated and franchise shops operating weeks are calculated based on the number of operating days for the shop base and dividing by 7. Our shop base is defined as shops opened as of the period end date.
Non-GAAP adjustments Below are the definitions of the non-GAAP adjustments that are used in the calculation of our non-GAAP measures, as described above. Equity-based compensation Non-cash expenses related to the grant and vesting of stock awards, restricted stock awards and restricted stock units in Dutch Bros PubCo and/or Profit Interest Units in Dutch Bros OpCo to certain eligible employees.
Non-GAAP adjustments Below are the definitions of the non-GAAP adjustments that are used in the calculation of our non-GAAP measures, as described above. Equity-based compensation Non-cash expenses related to the grant and vesting of stock awards, restricted stock awards and restricted stock units in Dutch Bros Inc. and/or Profit Interest Units in Dutch Bros OpCo to certain eligible employees.
Estimating future taxable income is a key input in calculating the TRAs liability, and is inherently uncertain and requires judgment. In projecting future taxable income, we consider our historical results and incorporate certain assumptions. See NOTE 12 — Tax Receivable Agreements for further details.
Estimating future taxable income is a key input in calculating the TRAs liability, and is inherently uncertain and requires judgment. In projecting future taxable income, we consider our historical results and incorporate certain assumptions. See NOTE 11 — Tax Receivable Agreements for further details.
We believe the non-GAAP measures presented provide investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance.
We believe these non-GAAP measures presented provide investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance.
Dutch Bros Inc. | Form 10-K | 76 Table of Contents From time to time, we may explore additional financing sources which could include equity, equity‑linked, and debt financing arrangements.
Dutch Bros Inc. | Form 10-K | 79 Table of Contents From time to time, we may explore additional financing sources which could include equity, equity‑linked, and debt financing arrangements.
EBITDA, Adjusted EBITDA (in dollars and as a percentage of revenue) EBITDA — definition and/or calculation Net income (loss) before interest expense (net of interest income), income taxes expense (benefit), and depreciation and amortization expense.
EBITDA, Adjusted EBITDA (in dollars and as a percentage of revenue) EBITDA — definition and/or calculation Net income (loss) before interest expense (net of interest income), income tax expense (benefit), and depreciation and amortization expense.
The TRAs generally provide for us to pay the Continuing Members 85% of the net cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize or are deemed to realize in certain circumstances. We will retain the benefit of the remaining 15% of these net cash savings.
The TRAs generally provide for us to pay the Continuing Members and Pre-IPO Blocker Holders 85% of the net cash savings, if any, in U.S. federal, state and local income tax or franchise tax that we actually realize or are deemed to realize in certain circumstances. We will retain the benefit of the remaining 15% of these net cash savings.
Discussions of 2020 items and year-to-year comparisons between 2021 and 2020 are not included in this Annual Report on Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2021, filed with the SEC on March 11, 2022.
Discussions of 2021 items and year-to-year comparisons between 2022 and 2021 are not included in this Annual Report on Form 10-K and can be found in “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in Part II, Item 7 of our Annual Report on Form 10-K for the fiscal year ended December 31, 2022, filed with the SEC on February 27, 2023.
Adjusted EBITDA — definition and/or calculation Defined as EBITDA (as defined above), excluding equity-based compensation, expenses and donations associated with equity offerings, COVID-19: “Thank You” pay and catastrophic leave expenses, COVID-19: prepaid costs not utilized, costs incurred for company-wide milestone events, executives transitions costs, and (gain) loss on the remeasurement of the liability related to the TRAs.
Adjusted EBITDA — definition and/or calculation Defined as EBITDA (as defined above), excluding equity-based compensation, expenses and donations associated with equity offerings, COVID-19: “Thank You” pay and catastrophic leave expenses, COVID-19: prepaid costs not utilized, costs incurred for company-wide milestone events, executives transitions costs, (gain) loss on the remeasurement of the liability related to the TRAs, estimated expenses related to certain legal disputes, and organization realignment and restructuring costs.
Management uses this metric as an indicator of shop growth and future expectations of mature locations. 3 Same shop sales reflects the change in year-over-year sales, for the comparable shop base, which we define as shops open for 15 complete months or longer. Management uses this metric as an indicator of shop growth and future expansion strategy.
Management uses this metric as an indicator of shop growth and future expectations of mature locations. 3 Same shop sales reflects the change in year-over-year sales, for the comparable shop base, which we define as shops open for 15 complete months or longer as of the first day of the reporting period.
Year Ended December 31, (unaudited) 2022 2021 2020 Systemwide shop base 414 354 316 Company-operated shop base 173 120 89 4 Systemwide sales and systemwide same shop sales are operating measures that include sales at company-operated shops and sales at franchised shops during the comparable periods presented.
Year Ended December 31, (unaudited) 2023 2022 2021 Systemwide shop base 503 414 354 Company-operated shop base 246 173 120 4 Systemwide sales and systemwide same shop sales are operating measures that include sales at company-operated shops and sales at franchised shops during the comparable periods presented.
If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is recorded. See NOTE 13 — Income Taxes for further details. Tax Receivable Agreements In connection with our IPO, we entered into two TRAs with certain non-controlling interest owners (the Continuing Members).
If, based on the weight of available evidence, it is more likely than not that the deferred tax assets will not be realized, a valuation allowance is recorded. See NOTE 12 — Income Taxes for further details. Tax Receivable Agreements In connection with our IPO, we entered into two TRAs with the Continuing Members and Pre-IPO Blocker Holders.
We have two reportable operating segments: Company-operated shops and Franchising and other. _________________ 1 Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
We have two reportable operating segments: Company-operated shops and Franchising and other. _________________ Dutch Bros Inc. | Form 10-K | 67 Table of Contents 1 Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
To determine the length of the lease term at inception, we consider both termination and renewal option periods available. Reasonably certain renewal periods are included in the lease term at commencement, and are generally based on historical leasing activity.
To determine the length of the lease term at inception, we consider both termination and renewal option periods available. Reasonably certain renewal periods are included in the lease term at commencement.
As of December 31, 2022, we recognized $220.9 million of liabilities relating to our obligations under the TRAs.
As of December 31, 2023, we recognized $290.9 million of liabilities relating to our obligations under the TRAs.
We believe the non-GAAP measures presented provide investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because they exclude items that may not be indicative of our ongoing operating performance.
We believe the non-GAAP measure presented provides investors with a supplemental view of our operating performance that facilitates analysis and comparisons of our ongoing business operations because it excludes items that may not be indicative of our ongoing operating performance.
Interest on borrowings under the 2022 Credit Facility is based on (a) the Alternate Base Rate plus an applicable margin, or (b) the Adjusted Term SOFR Rate plus an applicable margin, and is payable in accordance with the selected interest rate period (at least quarterly) and upon maturity.
Dutch Bros Inc. | Form 10-K | 80 Table of Contents Interest on borrowings under the 2022 Credit Facility is based on (a) the Alternate Base Rate plus an applicable margin, or (b) the Adjusted Term SOFR plus an applicable margin, and is payable in accordance with the selected interest rate period (at least quarterly) and upon maturity.
Dutch Bros Inc. | Form 10-K | 79 Table of Contents Changes in the projected TRAs liability resulting from these tax benefit arrangements may occur based on changes in anticipated future taxable income, changes in applicable tax rates or other changes in tax attributes that may occur and impact the expected future tax benefits to be received by the Company.
Changes in the projected TRAs liability resulting from these tax benefit arrangements may occur based on changes in anticipated future taxable income, changes in applicable tax rates or other changes in tax attributes that may occur and impact the expected future tax benefits to be received by the Company.
As of December 31, 2022, purchase obligations were approximately $160 million, of which substantially all are expected to be paid within one year. • TRAs Obligations: Refer to NOTE 12 — Tax Receivable Agreements and NOTE 18 — Commitments and Contingencies, of the notes to the consolidated financial statements, included elsewhere in this Form 10-K, for further information of our obligations and the timing of expected payments.
As of December 31, 2023, purchase obligations were approximately $180 million, of which substantially all are expected to be paid within one to two years. • TRAs Obligations: Refer to NOTE 11 — Tax Receivable Agreements and NOTE 17 — Commitments and Contingencies, of the notes to the consolidated financial statements, included elsewhere in this Form 10-K, for further information of our obligations.
We currently expect to fund our material capital requirements in the long term with additional proceeds from our 2022 Credit Facility, but we may also seek additional debt or equity financing.
We currently expect to fund our current and long-term material capital requirements with operating cash flows and, as needed, additional proceeds from our 2022 Credit Facility, but we may also seek additional debt or equity financing.
Today, we believe that Dutch Bros is one of the fastest-growing brands in the food service and restaurant industry in the United States by location count. As of December 31, 2022, we had 671 company-operated and franchised shops in 14 states, an increase of approximately 24.7% from the same period in the prior year.
Today, we believe that Dutch Bros is one of the fastest-growing brands in the quick service beverage industry in the United States by location count. As of December 31, 2023, we had 831 company-operated and franchised shops in 16 states, an increase of approximately 23.8% from the same period in the prior year.
Donations associated with equity offerings In connection with our IPO, we made a donation to the Dutch Bros Foundation. This donation is separate from other donations to the Dutch Bros Foundation that we may periodically make. COVID-19: “Thank You” pay and catastrophic leave Costs related to two separate programs established to support employees during the COVID-19 pandemic.
This donation is separate from other donations to the Foundation that we may periodically make. COVID-19: “Thank You” pay and catastrophic leave Costs related to two separate programs established to support employees during the COVID-19 pandemic.
Our non-GAAP financial measures reflect adjustments based on one or more of the following items. These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated.
These non-GAAP financial measures should not be considered a substitute for, or superior to, financial measures calculated in accordance with GAAP, and the financial results calculated in accordance with GAAP and reconciliations from these results should be carefully evaluated.
Variations in judgment applied to these estimates could result in material differences such as the following: • Lease expenses, including rent, depreciation and amortization • Fair value of lease right-of-use asset and lease liability • Reasonably certain lease term See NOTE 8 — Leases for further details.
Variations in judgment applied to these estimates could result in material differences such as the following: Dutch Bros Inc. | Form 10-K | 81 Table of Contents • Lease expenses, including rent, depreciation and amortization • Present value of lease right-of-use assets and lease liabilities • Reasonably certain lease term See NOTE 8 — Leases for further details.
Other than operating expenses, our cash requirements for 2023 are expected to consist primarily of capital expenditures for investments in our new and existing shops, our supply chain, and our corporate facilities, including new roasting facility that is estimated to be approximately $15 million to $20 million.
Other than operating expenses, including approximately $24 million to $31 million in costs related to our organizational realignment and restructuring initiative, our cash requirements for 2024 are expected to consist primarily of capital expenditures for investments in our new and existing shops, our supply chain, and our corporate facilities, including a new roasting facility that is estimated to be approximately $10 million in incremental spend.
These awards are accounted for in accordance with guidance prescribed for in accounting for share-based compensation. Expenses associated with equity offerings Costs incurred as a result of our equity offerings. These costs include legal fees, consulting fees, tax and accounting fees, and payroll taxes related to the grant and vesting of equity awards for certain employees.
Expenses associated with equity offerings Costs incurred as a result of our equity offerings. These costs include legal fees, consulting fees, tax and accounting fees, and payroll taxes related to the grant and vesting of equity awards for certain employees. Donations associated with equity offerings In connection with our IPO, we made a donation to the Foundation.
Following are the reconciliations of the most comparable GAAP metric to non-GAAP metrics presented: Year Ended December 31, 2022 2021 ¹ 2020 ¹ (in thousands; unaudited) $ % $ % $ % Company-operated shop gross profit 2 121,327 19.0 86,701 21.5 60,546 24.8 Depreciation and amortization 36,306 5.6 16,291 4.0 9,737 4.0 Company-operated shop contribution 2 157,633 24.6 102,992 25.5 70,283 28.7 Year Ended December 31, 2022 2021 ¹ 2020 ¹ (in thousands; unaudited) $ % $ % $ % Net income (loss) 2 (19,253) (2.6) (117,931) (23.7) 6,058 1.9 Depreciation and amortization 44,728 6.0 25,217 5.1 15,537 4.7 Interest expense, net 3 18,018 2.4 7,093 1.4 3,736 1.1 Income tax expense (benefit) 2,599 0.4 (1,628) (0.3) 843 0.3 EBITDA 2 46,092 6.2 (87,249) (17.5) 26,174 8.0 Equity-based compensation 41,657 5.6 157,716 31.7 35,087 10.7 Expenses associated with equity offerings — — 6,523 1.3 — — Donations associated with equity offerings — — 3,792 0.7 — — COVID-19: Thank You pay and catastrophic leave 1,468 0.2 3,350 0.7 4,942 1.5 COVID-19: royalty abatement — — — — 1,400 0.4 COVID-19: first responder donation — — — — 2,000 0.6 COVID-19: prepaid costs not utilized 2,305 0.3 — — — — Dutch Rewards transition — — — — (3,669) (1.1) Dutchwear merchandising adjustment — — — — 4,163 1.3 Milestone events 2,434 0.3 — — — — Executives transition costs 691 0.1 — — — — TRAs remeasurement (3,466) (0.4) — — — — Adjusted EBITDA 2 91,181 12.3 84,132 16.9 70,097 21.4 Dutch Bros Inc. | Form 10-K | 82 Table of Contents Year Ended December 31, 2022 2021 ¹ 2020 (in thousands; unaudited) $ % $ % $ % Selling, general, and administrative 4 183,528 24.8 264,529 53.1 104,935 32.0 Equity-based compensation (41,657) (5.6) (157,716) (31.7) (35,087) (10.7) Expenses associated with equity offerings — — (6,523) (1.3) — — Donations associated with equity offerings — — (3,792) (0.7) — — COVID-19: prepaid costs not utilized (2,305) (0.3) — — — — Milestone events (2,434) (0.3) — — — — Executives transition costs (691) (0.1) — — — — Adjusted selling, general, and administrative 136,441 18.5 96,498 19.4 69,848 21.3 _________________ 1 Our historical results have been revised to reflect immaterial corrections related to the accrual of employee sick leave.
Following are the reconciliations of the most comparable GAAP metric to non-GAAP metrics presented: Year Ended December 31, 2023 2022 2021 (in thousands; unaudited) $ % $ % $ % Company-operated shop gross profit 180,235 21.0 121,327 19.0 86,701 21.5 Depreciation and amortization 62,088 7.2 36,306 5.6 16,291 4.0 Company-operated shop contribution 242,323 28.2 157,633 24.6 102,992 25.5 Year Ended December 31, 2023 2022 2021 (in thousands; unaudited) $ % $ % $ % Net income (loss) 9,952 1.0 (19,253) (2.6) (117,931) (23.7) Depreciation and amortization 69,135 7.2 44,728 6.0 25,217 5.1 Interest expense, net 32,321 3.3 18,018 2.4 7,093 1.4 Income tax expense (benefit) 6,967 0.8 2,599 0.4 (1,628) (0.3) EBITDA 118,375 12.3 46,092 6.2 (87,249) (17.5) Equity-based compensation 39,222 4.1 41,657 5.6 157,716 31.7 Expenses associated with equity offerings — — — — 6,523 1.3 Donations associated with equity offerings — — — — 3,792 0.7 COVID-19: Thank You pay and catastrophic leave — — 1,468 0.2 3,350 0.7 COVID-19: prepaid costs not utilized — — 2,305 0.3 — — Milestone events — — 2,434 0.3 — — Executives transition 1,000 0.1 691 0.1 — — TRAs remeasurement (2,638) (0.3) (3,466) (0.4) — — Legal proceedings 1,950 0.2 — — — — Organization realignment and restructuring: Consulting 2,153 0.2 — — — — Adjusted EBITDA 160,062 16.6 91,181 12.3 84,132 16.9 Dutch Bros Inc. | Form 10-K | 85 Table of Contents Year Ended December 31, 2023 2022 2021 (in thousands; unaudited) $ % $ % $ % Selling, general, and administrative 1 205,074 21.2 183,528 24.8 264,529 53.1 Equity-based compensation (39,222) (4.1) (41,657) (5.6) (157,716) (31.7) Expenses associated with equity offerings — — — — (6,523) (1.3) Donations associated with equity offerings — — — — (3,792) (0.7) COVID-19: prepaid costs not utilized — — (2,305) (0.3) — — Milestone events — — (2,434) (0.3) — — Executives transition (1,000) (0.1) (691) (0.1) — — Legal proceedings (1,950) (0.2) — — — — Organization realignment and restructuring: Consulting (2,153) (0.2) — — — — Adjusted selling, general and administrative 160,749 16.6 136,441 18.5 96,498 19.4 _________________ 1 Selling, general and administrative expenses include depreciation and amortization.
In addition, we have approximately $113 million revolving loans outstanding, which are expected to be paid within 1 year. • Operating and Finance Leases: Refer to NOTE 8 — Leases, of the notes to the consolidated financial statements, included elsewhere in this Form 10-K, for further information of our obligations and the timing of expected payments. • Purchase Obligations: include all legally binding contracts, including firm minimum commitments for inventory purchases, commitments for the purchase, construction or remodeling of real estate facilities, equipment purchases, marketing-related contracts, software acquisition/license commitments and service contracts.
Our current and long-term material cash requirements as of December 31, 2023, primarily include the following: • Debt Obligations: Refer to NOTE 9 — Debt, of the notes to the consolidated financial statements, included elsewhere in this Form 10-K, for further information of our obligations and the timing of expected payments. • Operating and Finance Leases: Refer to NOTE 8 — Leases, of the notes to the consolidated financial statements, included elsewhere in this Form 10-K, for further information of our obligations and the timing of expected payments. • Purchase Obligations: include all legally binding contracts, including firm minimum commitments for inventory purchases, commitments for the purchase, construction or remodeling of real estate facilities, equipment purchases, marketing-related contracts, software acquisition/license commitments and service contracts.
COVID-19: Prepaid costs not utilized Costs related to the write-off of previously prepaid expenses for the cancellation of our 2023 annual kick-off meeting as a result of COVID-19 concerns and the development of a virtual corporate engagement platform built in response to the health restrictions of the COVID-19 pandemic.
COVID-19: Prepaid costs not utilized Costs related to the write-off of previously prepaid expenses for the development of a virtual corporate engagement platform built in response to the health restrictions of the COVID-19 pandemic. The platform was developed as a substitute for in person engagement practices used pre-pandemic.
Depreciation and Amortization Year Ended December 31, (in thousands; unaudited) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Depreciation and amortization $ 36,306 $ 16,291 $ 9,737 $ 20,015 122.9% $ 6,554 67.3% As a percentage of company-operated shop revenues 5.6% 4.0% 4.0% N/A 160 bps N/A — bps Dutch Bros Inc. | Form 10-K | 72 Table of Contents Year Ended December 31, 2022 v 2021 The increase in depreciation and amortization were primarily driven by the opening of 120 new company-operated shops during 2022.
Depreciation and Amortization Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Depreciation and amortization $ 62,088 $ 36,306 $ 16,291 $ 25,782 71.0 % $ 20,015 122.9 % As a percentage of company-operated shop revenues 7.2 % 5.6 % 4.0 % N/A 160 bps N/A 160 bps Year Ended December 31, 2023 v. 2022 The increase in depreciation and amortization was primarily driven by the opening of 146 new company-operated shops during 2023.
Non-GAAP Financial Measures In addition to disclosing financial results in accordance with GAAP, this document contains references to the non-GAAP financial measures below.
Dutch Bros Inc. | Form 10-K | 82 Table of Contents Non-GAAP Financial Measures In addition to disclosing financial results in accordance with GAAP, this document contains references to the non-GAAP financial measures below.
The discount rate is subject to fluctuation based on market interest rates and our credit risk profile. Dutch Bros Inc. | Form 10-K | 78 Table of Contents We also estimate the lease term at commencement. The lease term commences on the date when we take possession of the leased property, irrespective of the contractual lease payments schedule.
Management uses a specialist to determine the discount rate, which is subject to fluctuation based on market interest rates and our credit risk profile. We also estimate the lease term at commencement. The lease term commences on the date when we take possession of the leased property.
Dutch Bros Inc. | Form 10-K | 80 Table of Contents Adjusted selling, general, and administrative (in dollars and as a percentage of revenue) Definition and/or calculation Selling, general, and administrative expenses, excluding equity-based compensation expense, expenses and donations associated with equity offering, COVID-19: prepaid costs not utilized, costs incurred for company-wide milestone events, and executive transitions costs.
Adjusted selling, general, and administrative (in dollars and as a percentage of revenue) Definition and/or calculation Selling, general, and administrative expenses, excluding equity-based compensation expense, expenses and donations associated with equity offerings, COVID-19: prepaid costs not utilized, costs incurred for company-wide milestone events, executives transitions, estimated expense related to certain legal disputes, and organization realignment and restructuring costs.
Company-operated Shop Gross Profit and Contribution 1 2 Year Ended December 31, (in thousands; unaudited) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Company-operated shop gross profit 121,327 86,701 $ 60,546 $ 34,626 39.9% $ 26,155 43.2% As a percentage of company-operated shop revenues 19.0% 21.5% 24.8% N/A (250) bps N/A (330) bps Company-operated shop contribution 1 157,633 102,992 $ 70,283 $ 54,641 53.1% $ 32,709 46.5% As a percentage of company-operated shop revenues 24.6% 25.5% 28.7% N/A (90) bps N/A (320) bps Year Ended December 31, 2022 v 2021 The Company-operated gross profit and contribution impacts for the year-over-year comparison were driven by the following (in basis points): (in thousands; unaudited) BPS Higher ingredient costs (380) Higher shop operating expenses (90) Legislated minimum wage increases and higher minimum staffing standards (70) Costs increases (540) Menu price increases 430 Higher promotional discounts 40 Pricing and discounts 470 Higher preventative maintenance programs (40) Higher pre-opening expenses 40 New shop impact (80) New shop related items (40) Lower COVID-19 leave expenses 30 Leverage (deleverage) (80) Loyalty points breakage 2021 2 50 Loyalty points and rewards breakage 2022 3 20 Other (120) Total change in Company-operated shop gross profit (250) Depreciation and amortization 160 Total change in Company-operated shop contribution 1 (90) _________________ 1 Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part I, Item 2 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. 2 Recognition of $4.9 million of revenue from the loyalty points collected prior to January 1, 2022 that expired on December 31, 2022, which is included in company-operated shop gross margin and contribution.
Dutch Bros Inc. | Form 10-K | 75 Table of Contents Company-operated Shop Gross Profit and Contribution 1 Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Company-operated shop gross profit $ 180,235 $ 121,327 $ 86,701 $ 58,908 48.6 % $ 34,626 39.9 % As a percentage of company-operated shop revenues 21.0 % 19.0 % 21.5 % N/A 200 bps N/A (250) bps Company-operated shop contribution 1 $ 242,323 $ 157,633 $ 102,992 $ 84,690 53.7 % $ 54,641 53.1 % As a percentage of company-operated shop revenues 28.2 % 24.6 % 25.5 % N/A 360 bps N/A (90) bps _________________ 1 Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Year Ended December 31, 2023 v. 2022 The Company-operated shop gross profit and contribution impacts for the year-over-year comparison, presented in basis points (as a percentage of current year company-operated shop revenues), were driven by the following: (unaudited) BPS Ingredient costs (50) Labor costs 70 Costs decreases 20 Menu prices 360 Pricing and discounts 360 Pre-opening costs 120 New shop related items 120 Leverage (deleverage) 20 Loyalty points breakage 2 (60) Other (260) Total change in Company-operated shop gross profit 200 Depreciation and amortization 160 Total change in Company-operated shop contribution 1 360 _________________ 1 Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part I, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”. 2 Recognition of $4.9 million of breakage revenue from the loyalty points collected prior to January 1, 2022 that expired on December 31, 2022.
Our principal uses of liquidity for the year ended December 31, 2022 were to pay off our prior revolving credit facility and fund our new shop builds and working capital needs.
Our principal uses of liquidity for the year ended December 31, 2023 were the payoff of our revolving credit facility, and to fund our new shop builds and other working capital needs. For additional information related to the Follow-On Offering, see below.
The number of shops included in the systemwide and company-operated comparable bases for the respective periods are presented in the following table.
Management uses this metric as an indicator of shop growth and future expansion strategy. The number of shops included in the systemwide and company-operated comparable bases for the respective periods are presented in the following table.
The purpose of the floating-to-fixed interest rate swap was to fix the interest base rate charged on the term loan at 2.67% for the $70 million notional amount. The interest rate swap matures on February 28, 2027.
The interest rate swap has a notional amount of $70 million and hedges interest rate risk on the term loan under the 2022 Credit Facility. The purpose of the floating-to-fixed interest rate swap is to fix the interest base rate charged on the term loan at 2.67% for the $70 million notional amount.
Dutch Bros Inc. | Form 10-K | 63 Table of Contents Impact of Global Events Inflation and Minimum Wage Increases Similar to many of our peers in our industry, we encountered current commodities inflation, including dairy, coffee, fuel, and packaging, and experienced continuing legislated minimum wage increases that took effect this year in certain states.
Impact of Global Events Inflation and Minimum Wage Increases Similar to many of our peers in our industry, we continued to experience the effects of elevated commodity costs due to inflation, including in dairy, coffee, fuel, packaging, and continuing legislated minimum wage increases that took effect this year in certain states.
Refer to NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies within the consolidated financial statements, included elsewhere in this Form 10-K, for further information on our critical accounting estimates and policies, which are as follows: Dutch Rewards Loyalty Program In February 2021, Dutch Rewards was established.
Refer to NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies within the consolidated financial statements, included elsewhere in this Form 10-K, for further information on our critical accounting estimates and policies, which are as follows: Leases At the commencement of each lease, we evaluate the lease agreement to determine whether it is an operating or finance lease.
In addition, the section of this “Management’s Discussion and Analysis of Financial Condition and Dutch Bros Inc. | Form 10-K | 62 Table of Contents Results of Operations” generally discusses 2022 and 2021 items and year-to-year comparisons between 2022 and 2021.
Further, the section of this “Management’s Discussion and Analysis of Financial Condition and Results of Operations” generally discusses 2023 and 2022 items and year-to-year comparisons between 2023 and 2022.
For the year ended December 31, 2022, we generated $739.0 million of revenue, $(19.3) million net loss, and $(0.09) loss per diluted share.
For the year ended December 31, 2023, we generated $965.8 million of revenue, $10.0 million net income, and $0.03 income per diluted share.
Dutch Bros Inc. | Form 10-K | 68 Table of Contents Company-operated Shop Results The results for our company-operated shops segment were as follows: Year Ended December 31, 2022 2021 2020 (in thousands; unaudited) $ % $ % $ % Company-operated shop revenues 639,710 100.0 403,746 100.0 244,514 100.0 Beverage, food, and packaging costs 171,864 26.9 102,222 25.3 54,820 22.4 Labor costs 182,861 28.6 122,161 30.3 71,473 29.2 Occupancy and other costs 109,366 17.1 63,570 15.7 38,611 15.8 Pre-opening costs 17,986 2.8 12,801 3.2 9,327 3.8 Depreciation and amortization 36,306 5.6 16,291 4.0 9,737 4.0 Company-operated shop costs and expenses 518,383 81.0 317,045 78.5 183,968 75.2 Company-operated shop gross profit 121,327 19.0 86,701 21.5 60,546 24.8 Company-operated shop contribution 1 157,633 24.6 102,992 25.5 70,283 28.7 _________________ 1 Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations”.
Management uses this metric as an indicator of customer loyalty adoption of our Dutch Rewards mobile app and future promotional plans. 7 Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Company-operated Shop Results The results for our company-operated shops segment were as follows: Year Ended December 31, 2023 2022 2021 (in thousands; unaudited) $ % $ % $ % Company-operated shop revenues 857,939 100.0 639,710 100.0 403,746 100.0 Beverage, food, and packaging costs 230,133 26.9 171,864 26.9 102,222 25.3 Labor costs 230,505 26.9 182,861 28.6 122,161 30.3 Occupancy and other costs 140,895 16.4 109,366 17.1 63,570 15.7 Pre-opening costs 14,083 1.6 17,986 2.8 12,801 3.2 Depreciation and amortization 62,088 7.2 36,306 5.6 16,291 4.0 Company-operated shop costs and expenses 677,704 79.0 518,383 81.0 317,045 78.5 Company-operated shop gross profit 180,235 21.0 121,327 19.0 86,701 21.5 Company-operated shop contribution 1 242,323 28.2 157,633 24.6 102,992 25.5 _________________ 1 Reconciliation of GAAP to non-GAAP results is provided in the section “Non-GAAP Financial Measures” in Part II, Item 7 “Management’s Discussion and Analysis of Financial Condition and Results of Operations.” Dutch Bros Inc. | Form 10-K | 72 Table of Contents Company-operated Shops Segment Performance Company-operated Shop Revenues Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Company-operated shop revenues $ 857,939 $ 639,710 $ 403,746 $ 218,229 34.1% $ 235,964 58.4% Year Ended December 31, 2023 v. 2022 The Company-operated shop revenue increase was primarily driven by the following: + $208.6 million from company-operated shops opened in the last 15 months. + $9.6 million from an increase in same shop sales in the comparable shop base. 1 _________________ 1 For purposes of calculating company-operated same shop revenue, the revenue for 246 company-operated shops was included in the comparable shop base. _________________ 1 The comparable shop bases were 120, 173, and 246 for the three years ended December 31, 2021, 2022, and 2023, respectively.
We expect these inflationary pressures to continue to affect our operating results in the foreseeable future. While these cost increases have impacted our operating results, we have taken measures to gradually increase our menu prices to help offset these pressures. Such price increases may lead to decreases in consumer demand.
While these pressures have impacted our operating results, we have taken measures over the past year to gradually increase our menu prices, adjust our Dutch Rewards loyalty program, and make operating adjustments that increase productivity to help offset them. Menu price increases may lead to decreases in consumer demand.
Income Tax Expense (Benefit) Year Ended December 31, (in thousands; unaudited) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Income tax expense (benefit) $ 2,599 $ (1,628) $ 843 $ 4,227 (259.6)% $ (2,471) (293.1)% Effective tax rate (15.6)% 1.4% 12.2% N/A N/M N/A N/M Year Ended December 31, 2022 v 2021 The increase in tax expense was primarily driven by mix of income earned by state tax jurisdiction and lower loss attributable to non-controlling interests, partially offset by adjustments to the outside basis differences as a result of the 2021 tax filings and higher tax credits.
Income Tax Expense (Benefit) Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Income tax expense (benefit) $ 6,967 $ 2,599 $ (1,628) $ 4,368 168.1 % $ 4,227 (259.6)% Effective tax rate 41.2 % (15.6) % 1.4 % N/A N/M N/A N/M Year Ended December 31, 2023 v. 2022 The increase in tax expense was primarily driven by increased current year pre-tax income and changes in the state earnings mix, partially offset by increased credits.
We also established a catastrophic leave policy that provided paid leave to employees who were required to quarantine due to in-shop exposures and could not work their regular hours. All COVID-19-related protocols, including catastrophic leave, will remain in effect until the end of the COVID-19 pandemic as determined by the appropriate government agency.
We also established a catastrophic leave policy that provided paid leave to employees who were required to quarantine due to in-shop exposures and could not work their regular hours. The catastrophic leave program was retired in May 2023.
Leases At the commencement of each lease, we evaluate the lease agreement to determine whether it is an operating or finance lease. The evaluation requires significant judgments in determining the fair value of the lease right-of-use asset and the lease liability and appropriate lease terms.
The evaluation requires significant judgments in determining the fair value of the lease right-of-use asset and the lease liability and appropriate lease terms.
Dutch Bros Inc. | Form 10-K | 70 Table of Contents Beverage, Food, and Packaging Costs Year Ended December 31, (in thousands; unaudited) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Beverage, food and packaging costs $ 171,864 $ 102,222 $ 54,820 $ 69,642 68.1% $ 47,402 86.5% As a percentage of company-operated shop revenues 26.9% 25.3% 22.4% N/A 160 bps N/A 290 bps Year Ended December 31, 2022 v 2021 The beverage, food, and packaging costs impacts for the year-over-year comparison were driven by the following (in dollars and basis points): (in thousands; unaudited) $ BPS Shop weeks $ 52,907 N/A Higher ingredient costs 22,040 350 Volume (3,690) N/A New shop impact (424) (10) Pricing impacts N/A (150) Promotional discounts N/A (20) Other (1,191) (10) Total change $ 69,642 160 Labor Costs Year Ended December 31, (in thousands; unaudited) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Labor costs $ 182,861 $ 122,161 $ 71,473 $ 60,700 49.7% $ 50,688 70.9% As a percentage of company-operated shop revenues 28.6% 30.3% 29.2% N/A (170) bps N/A 110 bps Year Ended December 31, 2022 v 2021 The labor costs impacts for the year-over-year comparison were driven by the following (in dollars and basis points): (in thousands; unaudited) $ BPS Shop weeks $ 60,973 N/A Legislated minimum wage increases and higher minimum staffing standards 6,115 100 Volume (1,502) N/A Lower COVID-19 leave expenses (2,024) (30) New shop impact 21 — Pricing impacts N/A (180) Promotional discounts N/A (10) Other (2,883) (50) Total change $ 60,700 (170) Dutch Bros Inc. | Form 10-K | 71 Table of Contents Occupancy and Other Costs Year Ended December 31, (in thousands; unaudited) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Occupancy and other costs $ 109,366 $ 63,570 $ 38,611 $ 45,796 72.0% $ 24,959 64.6% As a percentage of company-operated shop revenues 17.1% 15.7% 15.8% N/A 140 bps N/A (10) bps Year Ended December 31, 2022 v 2021 The occupancy and other costs impacts for the year-over-year comparison were driven by the following (in dollars and basis points): (in thousands; unaudited) $ BPS Shop weeks $ 35,654 N/A Occupancy cost escalation 8,733 140 Higher preventative maintenance programs 2,816 40 Rent/CAMS 2,232 30 New shop impact 1,086 20 Volume 36 N/A Reinstitution of accepting cash at shops (3,080) (50) Leverage/deleverage N/A 90 Pricing impacts N/A (100) Promotional discounts N/A (10) Other (1,681) (20) Total change $ 45,796 140 Pre-opening Costs Year Ended December 31, (in thousands, except shop data; unaudited) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Pre-opening costs $ 17,986 $ 12,801 $ 9,327 $ 5,185 40.5% $ 3,474 37.2% As a percentage of company-operated shop revenues 2.8% 3.2% 3.8% N/A (40) bps N/A (60) bps New company-operated shops opened 120 82 59 38 46.3% 23 39.0% Pre-opening costs per new company-operated shop $150 $156 $158 $(6) (3.8)% $(2) (1.3)% Year Ended December 31, 2022 v 2021 The increase in pre-opening costs was primarily driven by opening 38 more company-operated shops in the year ended December 31, 2022 as compared to 2021, while also realizing cost and operational efficiencies.
Beverage, Food, and Packaging Costs Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Beverage, food and packaging costs $ 230,133 $ 171,864 $ 102,222 $ 58,269 33.9 % $ 69,642 68.1 % As a percentage of company-operated shop revenues 26.9 % 26.9 % 25.3 % N/A — bps N/A 160 bps Dutch Bros Inc. | Form 10-K | 73 Table of Contents Year Ended December 31, 2023 v. 2022 The beverage, food and packaging costs impacts for the year-over-year comparison, in dollars and basis points (as a percentage of current year company-operated shop revenues), were driven by the following: (in thousands, except BPS; unaudited) $ BPS Shop weeks $ 49,089 N/A Ingredient costs 4,241 50 Volume 971 N/A Timing N/A 30 Pricing impacts N/A (130) Other 3,968 50 Total change $ 58,269 — Labor Costs Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Labor costs $ 230,505 $ 182,861 $ 122,161 $ 47,644 26.1 % $ 60,700 49.7 % As a percentage of company-operated shop revenues 26.9 % 28.6 % 30.3 % N/A (170) bps N/A (170) bps Year Ended December 31, 2023 v. 2022 The labor costs impacts for the year-over-year comparison, presented in dollars and basis points (as a percentage of current year company-operated shop revenues), were driven by the following: (in thousands, except BPS; unaudited) $ BPS Shop weeks $ 52,966 N/A Staffing management (8,276) (100) Volume 517 N/A Timing N/A 20 Pricing impacts N/A (130) Other 2,437 40 Total change $ 47,644 (170) Occupancy and Other Costs Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Occupancy and other costs $ 140,895 $ 109,366 $ 63,570 $ 31,529 28.8 % $ 45,796 72.0 % As a percentage of company-operated shop revenues 16.4 % 17.1 % 15.7 % N/A (70) bps N/A 140 bps Dutch Bros Inc. | Form 10-K | 74 Table of Contents Year Ended December 31, 2023 v. 2022 The occupancy and other costs impacts for the year-over-year comparison, presented in dollars and basis points (as a percentage of current year company-operated shop revenues), were driven by the following: (in thousands, except BPS; unaudited) $ BPS Shop weeks $ 31,747 N/A Timing N/A 10 Pricing impacts N/A (80) Other (218) — Total change $ 31,529 (70) Pre-opening Costs Year Ended December 31, (in thousands, except shop data; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Pre-opening costs $ 14,083 $ 17,986 $ 12,801 $ (3,903) (21.7) % $ 5,185 40.5 % As a percentage of company-operated shop revenues 1.6 % 2.8 % 3.2 % N/A (120) bps N/A (40) bps New company-operated shops opened 146 120 82 26 21.7 % 38 46.3 % Pre-opening costs per new company-operated shop $ 96 $ 150 $ 156 $ (54) (36.0) % $ (6) (3.8) % Year Ended December 31, 2023 v. 2022 The decrease in pre-opening costs was primarily driven by opening a higher proportion of shops in existing markets, which do not require as much support, in the year ended December 31, 2023 as compared to 2022.
Dutch Bros Inc. | Form 10-K | 73 Table of Contents Franchising and Other Segment Performance Year Ended December 31, (in thousands; unaudited) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Franchising and other revenue $ 99,302 $ 94,130 $ 82,899 $ 5,172 5.5% $ 11,231 13.5% Franchising and other gross profit $ 59,589 $ 66,602 $ 55,389 $ (7,013) (10.5)% $ 11,213 20.2% As a percentage of franchising and other revenue 60.0% 70.8% 66.8% N/A (1,080) bps N/A 400 bps Year Ended December 31, 2022 v 2021 The Franchising and other gross profit impacts for the year-over-year comparison, were driven by the following (in dollars and basis points): (in thousands; unaudited) $ BPS Higher net costs of products sold to franchisees (10,674) (1,080) Shop weeks 1,580 N/A Same shop sales 866 N/A Other 1,215 N/A Total change (7,013) (1,080) Selling, General, and Administrative Year Ended December 31, (in thousands; unaudited) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Selling, General and Administrative $183,528 $ 264,529 $ 104,935 $ (81,001) (30.6)% $ 159,594 152.1% As a percentage of total revenues 24.8% 53.1% 32.0% N/A N/M N/A N/M Year Ended December 31, 2022 v 2021 The selling, general, and administrative impacts for the year-over-year comparison were driven by the following (in dollars and basis points): - $116.1 million or 1,570 bps from lower equity-based compensation charges related to one-time awards vested as of the IPO. - $10.3 million or 140 bps from non-recurring costs and donations associated with our IPO in the prior year. + $31.6 million from investments in human capital, processes, and systems to support our revenue growth. + $8.3 million or 110 bps from higher costs incurred as a result of being a public company. + $2.4 million or 30 bps from company-wide event costs celebrating 30 years serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE to our customers.
Selling, General, and Administrative Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Selling, General and Administrative $ 205,074 $ 183,528 $ 264,529 $ 21,546 11.7 % $ (81,001) (30.6)% As a percentage of total revenues 21.2 % 24.8 % 53.1 % N/A N/M N/A N/M Year Ended December 31, 2023 v. 2022 The selling, general, and administrative impacts for the year-over-year comparison, presented in dollars and basis points (as a percentage of current year total revenues), were driven by the following: + $20.6 million from investments in human capital, processes, and systems to support our revenue growth. + $2.2 million or 20 bps in consulting fees related to our long-term growth strategy and associated changes to our organizational structure to support growth. + $2.0 million or 20 bps in estimated expense for certain legal disputes. - $2.4 million or 30 bps from prior year company-wide event costs celebrating 30 years serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE to our customers. - $2.4 million or 30 bps from lower equity-based compensation charges. - $1.2 million or 10 bps from prior year write-off of prepaid expense for our virtual corporate engagement platform built in response to COVID-19 pandemic as a substitute for in person Dutch Bros Inc. | Form 10-K | 77 Table of Contents engagement practices pre-pandemic.
The increase in other income (expense) was primarily driven by the recognition of a remeasurement gain related to the TRAs liability and sales of previously written off Dutchwear inventory.
The decrease in other income (expense), net was primarily driven by a decrease in remeasurement gains in the current period related to the TRAs liability.
Dutch Bros Inc. | Form 10-K | 77 Table of Contents Obligations under the 2022 Credit Facility are guaranteed by Dutch Bros OpCo and its subsidiaries, and secured by a first priority perfected security interest in substantially all of the assets of the guarantors.
Principal payments for the term loans are required on a quarterly basis in accordance with an amortization schedule up through and including the Maturity Date. Obligations under the 2022 Credit Facility are guaranteed by each of Dutch Bros Inc.’s subsidiaries, and secured by a first priority perfected security interest in substantially all of the assets of the guarantors.
Milestone events Costs incurred for company-wide events to celebrate 30 years of serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE to our customers. Dutch Bros Inc. | Form 10-K | 81 Table of Contents Executives transition costs Employee severance and related benefit costs, as well as sign-on bonus(es) for several executive-level transitions occurring in 2022 and 2023.
Executives transition Employee severance and related benefit costs, as well as sign-on bonus(es) for several executive-level transitions occurring in 2022 and 2023. TRAs remeasurements (Gain) loss impacts on consolidated statements of operations related to adjustments of our TRAs liabilities. Dutch Bros Inc. | Form 10-K | 84 Table of Contents Legal proceedings Estimated loss accrual related to certain legal disputes.
Other Expense Year Ended December 31, (in thousands; unaudited) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Interest expense on finance leases $ (9,296) $ (4,145) $ (2,115) $ (5,151) 124.3% $ (2,030) 96.0% Other interest expense, net 1 (8,722) (2,948) (1,621) (5,774) 195.9% (1,327) 81.9% Interest expense, net 1 $ (18,018) $ (7,093) $ (3,736) $ (10,925) 154.0% $ (3,357) 89.9% Other income (expense) 3,976 (1,240) (363) 5,216 N/M (877) 241.6% Total other expense $ (14,042) $ (8,333) $ (4,099) $ (5,709) 68.5% $ (4,234) 103.3% _________________ 1 Effective as of the second half of 2022 and on a prospective basis, we recorded commitment fees for the unused portion of the revolving credit facility as interest expense.
Other Expense Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Interest expense on finance leases $ (17,516) $ (9,296) $ (4,145) $ (8,220) 88.4% $ (5,151) 124.3% Other interest expense, net (14,805) (8,722) (2,948) (6,083) 69.7% (5,774) 195.9% Interest expense, net $ (32,321) $ (18,018) $ (7,093) $ (14,303) 79.4% $ (10,925) 154.0% Other income (expense) 3,018 3,976 (1,240) (958) (24.1)% 5,216 N/M Total other expense $ (29,303) $ (14,042) $ (8,333) $ (15,261) 108.7% $ (5,709) 68.5% Year Ended December 31, 2023 v. 2022 The increase in interest expense, net was primarily driven by increased borrowings and higher interest rates associated with our credit facility, and additional finance leases for new shop builds.
The platform was developed as a substitute for in person engagement practices used pre-pandemic. The platform has been determined ineffective, particularly as we shift back to in-person events with the easing of restrictions related to the COVID-19 pandemic.
The platform has been determined ineffective, particularly as we shift back to in-person events with the easing of restrictions related to the COVID-19 pandemic. Milestone events Costs incurred for company-wide events to celebrate 30 years of serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE to our customers.
Liquidity and Capital Resources Cash Overview We had cash and cash equivalents of $20.2 million and $18.5 million as of December 31, 2022 and December 31, 2021, respectively.
Liquidity and Capital Resources Cash Overview We had cash and cash equivalents of $133.5 million and $20.2 million as of December 31, 2023 and December 31, 2022, respectively. For the year ended December 31, 2023, our principal sources of liquidity were cash flows from our Follow-On Offering in September 2023, our revolving credit facility, and operations.
Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, (in thousands; unaudited) 2022 2021 2020 2022 v. 2021 2021 v. 2020 Net cash flows provided by operating activities $ 59,883 $ 80,375 $ 53,549 $ (20,492) (25.5)% $ 26,826 50.1% Net cash flows used in investing activities (192,572) (121,089) (45,570) (71,483) 59.0 (75,519) 165.7 Net cash provided by financing activities 134,361 27,580 8,077 106,781 N/M 19,503 N/M Net increase (decrease) in cash $ 1,672 $ (13,134) $ 16,056 $ 14,806 (112.7)% $ (29,190) (181.8)% Cash and cash equivalents at beginning of period 18,506 31,640 15,584 (13,134) (41.5) 16,056 103.0 Cash and cash equivalents at end of period $ 20,178 $ 18,506 $ 31,640 $ 1,672 9.0% $ (13,134) (41.5)% Operating Activities The decrease in operating activities cash flows was primarily driven by: - Higher cost of sales and inventory due to increases in the number of shops and raw material costs - Higher lease costs as a result of a increase in the number of company-operated shops Investing Activities The increase in investing activities cash outflows was primarily driven by: + Investment in capital expenditures as a result of new company-operated shop openings Financing Activities The increase in financing activities cash flows was primarily driven by: + Higher net proceeds from our credit facilities - Non-recurring net IPO related activities in the prior year Cash Requirements We believe that cash provided by operating activities, cash and cash equivalents, and proceeds from our 2022 Credit Facility are adequate to fund our debt service requirements, lease obligations, and working capital obligations for at least the next 12 months.
Dutch Bros Inc. | Form 10-K | 78 Table of Contents Cash Flows The following table summarizes our cash flows for the periods presented: Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Net cash provided by operating activities $ 139,915 $ 59,883 $ 80,375 $ 80,032 133.6% $ (20,492) (25.5)% Net cash used in investing activities (227,280) (192,572) (121,089) (34,708) 18.0 (71,483) 59.0 Net cash provided by financing activities 200,732 134,361 27,580 66,371 49.4% 106,781 N/M Net increase (decrease) in cash and cash equivalents $ 113,367 $ 1,672 $ (13,134) $ 111,695 6680.3% $ 14,806 (112.7)% Cash and cash equivalents at beginning of period 20,178 18,506 31,640 1,672 9.0 (13,134) (41.5) Cash and cash equivalents at end of period $ 133,545 $ 20,178 $ 18,506 $ 113,367 561.8% $ 1,672 9.0% Operating Activities The increase in operating activities cash flows was primarily driven by: + Working capital management and efficiencies with new shop openings.
The 2022 Credit Facility has a total capacity of $500 million, consisting of a $250 million revolving credit facility, a term loan facility of up to $100 million, and a delayed draw term loan facility of up to $150 million.
The 2022 Credit Facility consists of a $350 million revolving credit facility, a term loan facility of up to $100 million, and a delayed draw term loan facility of up to $200 million. The 2022 Credit Facility also includes sublimits for letters of credit and swingline loans of up to $50 million and $15 million, respectively.
The summation of the impact of the specific items above would have decreased selling, general and administrative expenses from prior year by 1,540 bps to be 37.7% of revenue. However, leverage from revenue growth reduces that percentage by 1,290 bps to be 24.8% of revenue.
The platform was determined ineffective, particularly as we shifted back to in person engagement and easing of restrictions related to the COVID-19 pandemic. The summation of the impact of the specific items above would have decreased selling, general and administrative expenses from prior year by 30 bps to be 24.5% of revenue.
Credit Facility JP Morgan Credit Facility On February 28, 2022 (the Effective Date) we amended our Senior Secured Credit Facility with JPMorgan Chase, N.A.
Credit Facility JP Morgan Credit Facility On August 4, 2023, the Company amended its senior secured credit facility, dated February 28, 2022 with JP Morgan Chase Bank, N.A. (as amended, the 2022 Credit Facility) to increase borrowing capacity by $150 million to a total of $650 million.
For additional information, refer to NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies and NOTE 20 — Segment Reporting in our consolidated financial statements, included elsewhere in this Form 10-K. The following tables provide our operating results and explanation of changes for the periods presented.
Dutch Bros Inc. | Form 10-K | 68 Table of Contents Results of Operations The following tables provide our operating results and explanation of changes for the periods presented.
Removed
Key Highlights • Opened 120 company-operated shops across multiple new operating areas in the year ended December 31, 2022, bringing total company-operated shops to 59.0% of our total shops, an increase of 46.1% over 2021. • Celebrated 30 years of serving high QUALITY, hand-crafted beverages with unparalleled SPEED and superior SERVICE to our customers in 2022. • Surpassed 5.2 million registered users on our Dutch Rewards mobile app, and enhanced the customer experience by providing the opportunity for customers to share their rewards with friends and family.
Added
Key Highlights • In February 2023, welcomed new Dutch Bros President, Christine Barone, who, in January 2024, assumed the role of CEO, in addition to President. • Opened 146 company-operated shops across multiple new operating areas in the year ended December 31, 2023, bringing total company-operated shops to 65% of our total shops, an increase of approximately 37% over 2022. • In September 2023, completed the first follow-on offering since our IPO, resulting in net proceeds of approximately $331 million.
Removed
We will continue to evaluate further pricing actions to protect our operating results. COVID-19 The effects from the COVID-19 pandemic continue to evolve, and we cannot easily predict the future potential impacts of the pandemic on our business and operations, or on the United States and global economy in general.
Added
We expect these inflationary pressures to continue to affect our operating results in the foreseeable future. For example, California’s minimum wage will increase to $20 per hour beginning in April 2024 for covered employees in our industry.
Removed
This also may include any recurrence of the disease, actions taken by governmental authorities in response to the evolving pandemic, any ongoing effects on consumer demand and spending patterns or other direct and indirect impacts of the pandemic, such as supply chain disruptions.
Added
We will continue to evaluate further pricing actions to protect our operating results, however, if there is a time lag between increasing commodity prices and our ability to increase menu prices or take other action in response, or if we choose not to pass on the cost increases by increasing menu prices, our operating results could be negatively affected.
Removed
Whether these or other currently unanticipated consequences of the pandemic are reasonably likely to materially affect the continued and future impacts on our results of operations, cash flows or financial condition is yet to be determined. Due to our drive-thru shops model, we have not experienced materially negative impacts to the same degree as others in our industry.
Added
General Macroeconomic Uncertainties As a retailer that is dependent upon consumer discretionary spending, our results of operations are sensitive to changes in macroeconomic conditions. A continued economic downturn may have a material adverse effect on our business, financial condition or results of operations.
Removed
Nevertheless, we have been affected by global shipping delays that have impacted deliveries of supplies to our shops. Russia and Ukraine War To date, the war between Russia and Ukraine has not had a material direct impact on our business, financial condition, or results of operations.
Added
Our customers may have or in the future have less money available for discretionary purchases and may stop or reduce their purchases of our products. On a macro level, conditions (including bank failures and other events affecting financial institutions, rising interest rates, and the impacts of the Russia-Ukraine and Israel-Hamas wars) have created significant uncertainty in the global economy.
Removed
Indirectly, this conflict and resulting sanctions may have caused or contributed to increases in oil and gas prices. Because of our drive-thru shops model, we are monitoring closely the impact of recent volatility in oil and gas prices on our customers’ behavior and believe such increases may contribute to decreased demand, which we believe is likely to continue.
Added
While we are not able to fully predict the potential impacts of these conditions, we do not currently believe any potential impacts of these macroeconomic conditions would be material to our business.
Removed
We are also monitoring any broader economic impact of the current war, including its effect on commodities (including oil and gas), transportation costs, liquidity and credit availability, declines in consumer confidence, declines in global economic growth, inflation, uncertainty about economic stability, and increases in unemployment rates.
Added
Consolidated Statements of Operations Year Ended December 31, (in thousands) 2023 2022 2021 REVENUES Company-operated shops $ 857,939 $ 639,710 $ 403,746 Franchising and other 107,837 99,302 94,130 Total revenues 965,776 739,012 497,876 COSTS AND EXPENSES Cost of sales 714,480 558,096 344,573 Selling, general and administrative 205,074 183,528 264,529 Total costs and expenses 919,554 741,624 609,102 INCOME (LOSS) FROM OPERATIONS 46,222 (2,612) (111,226) OTHER EXPENSE Interest expense, net (32,321) (18,018) (7,093) Other income (expense) 3,018 3,976 (1,240) Total other expense (29,303) (14,042) (8,333) INCOME (LOSS) BEFORE INCOME TAXES 16,919 (16,654) (119,559) Income tax expense (benefit) 6,967 2,599 (1,628) NET INCOME (LOSS) 9,952 (19,253) (117,931) Less: Net loss attributable to Dutch Bros OpCo prior to the Reorganization Transactions — — (67,374) Less: Net income (loss) attributable to non-controlling interests 8,234 (14,500) (37,878) NET INCOME (LOSS) ATTRIBUTABLE TO DUTCH BROS INC. $ 1,718 $ (4,753) $ (12,679) Dutch Bros Inc. | Form 10-K | 69 Table of Contents Segment Financials Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 Revenues: Company-operated shops $ 857,939 $ 639,710 $ 403,746 Franchising and other 107,837 99,302 94,130 Total revenues 965,776 739,012 497,876 Cost of sales: Company-operated shops 677,704 518,383 317,045 Franchising and other 36,776 39,713 27,528 Total cost of sales 714,480 558,096 344,573 Segment gross profit: Company-operated shops 180,235 121,327 86,701 Franchising and other 71,061 59,589 66,602 Total gross profit 251,296 180,916 153,303 Depreciation and amortization: Company-operated shops 62,088 36,306 $ 16,291 Franchising and other 5,398 5,706 6,263 All other ¹ 1,649 2,716 2,663 Total depreciation and amortization $ 69,135 $ 44,728 $ 25,217 Segment contribution: Company-operated shops 242,323 157,633 102,992 Franchising and other 76,459 65,295 72,865 Total segment contribution $ 318,782 $ 222,928 $ 175,857 Selling, general and administrative (205,074) (183,528) (264,529) Interest expense, net (32,321) (18,018) (7,093) Other income (expense) 3,018 3,976 (1,240) Income (loss) before income taxes $ 16,919 $ (16,654) $ (119,559) __________________ 1 I ncluded in selling, general and administrative expenses and not part of segment contribution calculation.
Removed
Dutch Bros Inc. | Form 10-K | 64 Table of Contents Results of Operations Our historical results have been retroactively revised to reflect an immaterial error correction related to the accrual of employee sick leave. These revisions ensure comparability across all periods reflected herein.
Added
Dutch Bros Inc. | Form 10-K | 76 Table of Contents Franchising and Other Segment Performance Year Ended December 31, (in thousands; unaudited) 2023 2022 2021 2023 v. 2022 2022 v 2021 Franchising and other revenue $ 107,837 $ 99,302 $ 94,130 $ 8,535 8.6 % $ 5,172 5.5 % Franchising and other gross profit $ 71,061 $ 59,589 $ 66,602 $ 11,472 19.3 % $ (7,013) (10.5) % As a percentage of franchising and other revenue 65.9 % 60.0 % 70.8 % N/A 590 bps N/A (1,080) bps Year Ended December 31, 2023 v. 2022 The Franchising and other gross profit impacts for the year-over-year comparison, presented in dollars, were driven by the following: + $6.0 million primarily from products sold to franchisees, net of costs and adjustments. + $3.1 million from shop weeks, driven by shop openings during the period. + $2.4 million from same shop sales.
Removed
Management uses this metric as an indicator of customer loyalty adoption of our Dutch Rewards mobile app and future promotional plans. 7 Our historical results have been revised to reflect immaterial corrections related to the accrual of employee sick leave.
Added
However, leverage from revenue growth reduces that percentage by 330 bps to be 21.2% of revenue.
Removed
For additional information, refer to NOTE 2 — Basis of Presentation and Summary of Significant Accounting Policies and NOTE 20 — Segment Reporting, included elsewhere in this Form 10-K. The impacts of the immaterial error corrections on our non-GAAP measures, not included elsewhere in this Form 10-K, are presented below for the years ended December 31, 2021 and 2020, respectively.
Added
Investing Activities The increase in investing activities cash outflows was primarily driven by: + Investment in capital expenditures as a result of new company-operated shop openings. - Shop acquisitions in the prior year compared to n o acquisitions in the current year.

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Item 7A. Quantitative and Qualitative Disclosures About Market Risk

Market Risk — interest-rate, FX, commodity exposure

9 edited+3 added−1 removed2 unchanged
Biggest changeIn the future, we may or may not be able to offset these cost increases with operational efficiencies or menu price increases. As of December 31, 2022, we employed approximately 13,000 hourly workers in our company-operated shops. Interest Rate Risk We have historically been exposed to interest rate risk through fluctuations in interest rates on our debt obligations.
Biggest changeAs of December 31, 2023, we employed approximately 15,000 hourly workers in our company-operated shops. Dutch Bros Inc. | Form 10-K | 86 Table of Contents Interest Rate Risk We have historically been exposed to interest rate risk through fluctuations in interest rates on our debt obligations. Our 2022 Credit Facility carries interest at a floating rate.
We have been able to partially offset cost increases resulting from several factors, including market conditions, shortages or interruptions in supply due to weather or other conditions beyond our control, governmental regulations and inflation by increasing our menu prices as well as making other operational adjustments that increase productivity.
We have been able to partially offset cost increases resulting from several factors, including market conditions, shortages or interruptions in supply due to weather or other conditions beyond our control, governmental regulations, and inflation by increasing our menu prices over the past year, adjusting our Dutch Rewards loyalty program, and making operational adjustments that increase productivity.
However, substantial increases in costs and expenses, including dairy, coffee, fuel, and packaging commodities pricing during the year ended December 31, 2022, could impact our operating results to the extent that such increases continue and cannot be offset by menu price increases.
However, sustained inflation of or substantial increases in costs and expenses, including dairy, coffee, fuel, and packaging commodities pricing, as we experienced during the year ended December 31, 2023, could impact our operating results to the extent that such costs and expenses remain elevated or increase and cannot be offset by menu price increases.
Specifically, increases in sitework and permitting, construction materials, labor, and equipment may increase our overall development costs and capital expenditures, and potentially result in higher rent expenses of new shops.
Finally, the total cost to build our shops is impacted by inflation. Specifically, increases in sitework and permitting, construction materials, labor, and equipment may increase our overall development costs and capital expenditures, and potentially result in higher rent expenses of new shops.
While these cost increases have impacted our operating results, we have taken measures to gradually increase our menu prices to help offset these pressures. Price increases and other inflationary pressures may lead to decreases in consumer demand. Dutch Bros Inc. | Form 10-K | 84 Table of Contents
While these cost increases have impacted our operating results, we have taken measures to gradually increase our menu prices, adjust our Dutch Rewards loyalty program, and make operating adjustments that increase productivity to help offset these pressures. Price increases and other inflationary pressures may lead to decreases in consumer demand.
Increases in the minimum wage requirements directly affect our labor costs. Our leases require us to pay taxes, maintenance, repairs, insurance, and utilities, all of which are generally subject to inflationary increases. Finally, the total cost to build our shops is impacted by inflation.
Impact of Inflation The primary inflation factors affecting our operations are commodity and supplies, energy costs, labor costs, and construction costs of company-operated shops. Increases in the minimum wage requirements directly affect our labor costs. Our leases require us to pay taxes, maintenance, repairs, insurance, and utilities, all of which are generally subject to inflationary increases.
A hypothetical increase of interest rates up to 1% on our outstanding term and revolving loans as of December 31, 2022 would result in an increase in our annual interest expense of approximately $2.1 million.
A hypothetical increase of interest rates up to 1% on our outstanding term loan as of December 31, 2023 would result in an increase in our annual interest expense of approximately $1.0 million, excluding any potential impacts of interest rate swaps.
Additionally, if there is a time lag between increasing commodity prices and our ability to increase menu prices or if we choose not to pass on the cost increases, our operating results could be negatively affected. Dutch Bros Inc. | Form 10-K | 83 Table of Contents Labor and Benefits Costs We have experienced minimum wage increases in several states.
Additionally, if there is a time lag between increasing commodity prices and our ability to increase menu prices or take other action in response, or if we choose not to pass on the cost increases by increasing menu prices, our operating results could be negatively affected.
From time to time we may use interest rate swaps to mitigate the potential impacts of changes in benchmark interest rates on interest expense and cash flows. Impact of Inflation The primary inflation factors affecting our operations are commodity and supplies, energy costs, and construction labor costs of company-operated shops.
We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities, including through the use of interest rate swaps to mitigate the potential impacts of changes in benchmark interest rates on interest expense and cash flows.
Removed
Our 2022 Credit Facility carries interest at a floating rate. We seek to manage exposure to adverse interest rate changes through our normal operating and financing activities. As of December 31, 2022, $98.1 million and $112.7 million were outstanding on our term loan and revolving loans, respectively.
Added
Labor Costs We have experienced minimum wage increases, which increases directly affect our labor costs, and other upward pressure on wage rates in several states. In the future, we may or may not be able to offset these cost increases with operational efficiencies, menu price increases, or other adjustments.
Added
As of December 31, 2023, we had no revolving loans outstanding, and $95.6 million was outstanding on our term loan.
Added
Dutch Bros Inc. | Form 10-K | 87 Table of Contents

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