Dutch Bros is a popular coffee chain with over 400 locations, mostly in the western United States. What draws the crowd to a Dutch Bros is not the regular cup of coffee, but specialty and iced drinks. Dutch Bros is well-known for iced coffees, milkshakes, sodas, and energy drinks served up in a welcoming drive-thru environment.
How much does it cost to open a Dutch Bros in 2022? Dutch Bros is open for franchising but only to people already affiliated with the coffee franchise. This includes existing franchisees and employees only. The franchise fee is $30,000 and the initial investment is around $150,000 to $500,000. The liquid cash requirement is $150,000. Take our franchise quiz to find out if Dutch Bros is the right choice for you.
I think limiting this franchise opportunity to current franchisees or employees is a smart idea by Dutch Bros. If you plan to invest $150,000 – $500,000 of liquid capital, I think it would be beneficial to you to work inside a Dutch Bros first. This practical work experience will give you an abundance of insight into the day-to-day operations of this business, understanding of the clientele, and line of beverages. Not only will you learn a lot as an employee of Dutch Bros, you’ll be paid to find out whether or not you’d like to invest.
But keep in mind you can’t just join Dutch Bros as a barista for a few months and expect to be able to invest after a few weeks of training. You’ve got to serve at least three years in a Dutch Bros franchise location with one year minimum as a manager. On the bright side, after three years of paying your dues you should have a clear perspective on whether or not you want to join the coffee franchise. And I suppose that’s the point.
In today’s franchise report, I evaluate the profitability of the Dutch Bros coffee shop and outline the requirements you should be aware of before opening the business. Below is my breakdown on the details I’d want to know before opening a Dutch Bros.
- Financial Requirements and Fees of Dutch Bros
- Average Sales / Revenue per Year
- Dutch Bros Franchise Facts
- How Much Does Dutch Bros Make in Profit?
- Advantages of a Dutch Bros Franchise
- Challenges of a Dutch Bros Franchise
- Is the Dutch Bros Franchise Right For You?
Financial Requirements and Fees of Dutch Bros
Before settling on a business to franchise, be sure to sit down and study the total cost including fees about the business. Some franchise opportunities offer low franchise fees, but might add on other expenses like payroll fees, technology fees, or training fees on the backend. Don’t rush the process of understanding costs and be sure to reach out to existing franchisees to get their perspective on operating the business if possible.
Not only does this help you prepare for what’s ahead, but this also lets you weigh in whether or not the opportunity fits your budget and estimate if you’ll be able to turn a profit after expenses.
Fees / Expenses Financial Amount Liquid Capital $150,000 Net Worth $500,000 Total Investment $150,000 – $500,000 Franchise Fee $30,000
You may also wondering if Dutch Bros has an ongoing royalty fee. Dutch Bros require an ongoing royalty fee of 5% of the gross sales or $1,300 monthly. The corporate office will collect whatever amount is greater each month.
To put it simply, royalty fees are sort of like membership fees you’ll be paying to Dutch Bros to remain a franchise operator in good standing. This is a separate fee from the franchise fee.
Average Sales / Revenue per Year
Dutch Bros has an estimated annual revenue of $494 million in system wide sales with only 328 locations. This means the average revenue per store at the time was around $1.5 million in gross sales per unit.
Despite the pandemic, Dutch Bros had a 7.7% sales growth in 2020. It’s safe to say the drive-thru model benefitted this franchise during this challenging time period. Back in 2018, an operator of a Dutch Bros reported that selling around 1,500 drinks daily to give you an anecdotal example of potential sales volume in terms of beverages.
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Forbes has named Dutch Bros “the largest privately-owned coffee chain” in the United States. In 2020, they opened another 53 outlets which is another reason why sales grew in spite of many other businesses slowing down.
In short, Dutch Bros was setup to perform well in an environment where on-site dining was limited or fully restricted. This continues to be an appealing aspect of the business operations as there’s still plenty of consumers that do not feel comfortable dining in close quarters yet.
Dutch Bros Franchise Facts
Total Units Over 400 Incorporated Name Dutch Bros. Coffee Franchising Since Only open to existing franchisees and employees Industry Coffee Shop Subsector Small Coffee
As mentioned above, Dutch Bros is only open for franchise to people affiliated with them which includes existing franchisees and employees. The requirements, aside from the fees mentioned above, are:
- The employee must be an existing employee of Dutch Bros.
- The employee must have worked with them for a minimum of 3 years with at least a year of experience as a manager.
- The employee must have at least a credit score of 675.
- A 250-word written essay must be submitted on why the employee is interested in franchising a Dutch Bros.
- A short video essay describing the employee’s personality must also be submitted.
You’re probably wondering if non-employees can own a Dutch Bros. franchise. Well, you just can’t unless you know someone who is approved to franchise it and would like to invest in their operations. Essentially, you’d need to apply for a position with them first.
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But if you think about it, this is why Dutch Bros is considered to be a popular and successful chain because everyone who owns it has experienced what it’s like working with them before operating a franchise of their own. This means that these franchise owners are already familiar with the working environment and understand what the Dutch Bros service is all about.
How Much Does Dutch Bros Make in Profit?
A Dutch Bros store generated about $1.5+ million in revenue based on 2018 metrics. The average profit that a franchise owner can make annually is estimated at $124,000. However, keep in mind that these numbers can also be affected depending on the location and management of the operation.
Advantages of a Dutch Bros Franchise
Let’s say you can franchise a Dutch Bros. Here’s what you can expect the advantages of operating this popular coffee chain are:
Most Dutch Bros stores function as a drive-thru. It’s what made them well-known. People can get good quality and delicious tasting coffee without ever leaving their cars.
In addition, some Dutch Bros locations are open 24/7. Your store can cater to the people who are looking for a good coffee place at night or in the wee hours of the morning. If you’re always open, you can capture more sales that other chains miss out on because they’re closed.
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You don’t just get a simple coffee menu when you franchise a Dutch Bros. You get their cold brews, energy drinks, teas, shakes, smoothies, sodas, and even baked treats which include muffins and granola bars. Your customers can have a variety of drinks to choose from which makes Dutch Bros quite an interesting coffee shop.
One of the things customers enjoyed at Dutch Bros was the stamp cards they used to receive. Once a customer completes the stamps, they’re rewarded with a discount or a free drink. However, starting April 2021, Dutch Bros no longer honored stamp cards but still offer rewards via their app. This just makes it more convenient for customers to keep track of their rewards. This is no doubt in part a response to the popular and profitable Starbucks app.
Dutch Bros rewards system is a great way to get customers to keep on coming back to purchase drinks over and over again. Not a lot of coffee chains offer such a reward that’s fun and engaging.
Challenges of a Dutch Bros Franchise
Businesses pose challenges and even a franchise like Dutch Bros that has been around for years will come with its own set of challenges. Here are some you can expect:
As mentioned above, the requirements for opening a Dutch Bros franchise can be a little difficult. One of those is to become one of their employers. That just seems to take up too much of your time when all you want to do is open up a business, not work more hours for it.
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Dutch Bros have high standards when it comes to their franchises. Because of this, they’ll be able to buy out your franchise if they notice that it’s not performing very well.
It’s not enough that you’ve paid the initial costs and franchising fee for Dutch Bros. You’d also have to think about the ongoing royalty fees too.
In case you haven’t heard there’s a shortage of workers in the food service space. Depending on where you live, getting qualified candidates to work for you could be difficult. With that being said, I think Dutch Bros is competitive and allows employees to accept tips as an added incentive.
Is the Dutch Bros Franchise Right For You?
Dutch Bros is an ideal coffee shop franchise for someone who has the budget and can put in more hours and effort to work for them. They have an interesting menu and rewards program that can drive in customers. Dutch Bros also has several foundations they support which you as a business owner can be proud of.
From my own personal experience, I hadn’t even heard of Dutch Bros until moving to Idaho recently. I kept seeing this blue coffee shop with cars in line around the block. Literally through both drive-thru lanes even in the afternoon. If you live around Meridian, Idaho, it’s not uncommon to see lines of 10 – 20 cars deep waiting for cold brews and other flavors drinks in the afternoons. This demand really caught my attention and I can vouch for consumers love of this brand.
Any alternative coffee house franchises?
If you’re looking for a small coffee shop chain, you can consider The Human Bean. They also have the same drive-thru concept but they don’t offer any royalty fees when you franchise them. The franchising fee for The Human Bean is $30,000. This is another small franchise with a strong following in my area.
Another option would be to participate in the brand license program with Starbucks. Starbucks has more than 70 million customers, global brand recognition, and a powerful distribution system. Keep in mind you’ll need $700,000 in liquid capital to even be considered for this option.
I hope this guide was able to help you understand what it takes and how much to open a Dutch Bros this year. Overall, I think this is a promising concept with plenty of room to expand in the United States.