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Dutch Bros. vs. Starbucks: What Investors Need to Know

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Here's how this recent IPO differentiates itself.

Recent IPO Dutch Bros (BROS -0.86%) is a rapidly growing coffee chain that often draws comparisons to Starbucks (SBUX 0.04%), but the reality is that they aren't exactly targeting the same customers. In this Fool Live clip, recorded on Sept. 27, Fool.com contributors Danny Vena, Matt Frankel, CFP, and Jon Quast discuss the major differences between the two coffee companies that investors need to know.

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Jon Quast: Danny, can I say there's a couple of differences that I see between Dutch Brothers and Starbucks. Maybe it's not so profound now in the age of the pandemic, but Starbucks really prioritizes its dining space, it really wants to be a community hub. Whereas Dutch Brothers, it's really a drive-through optimization machine, they're trying to get people through that line as fast as they can.

Danny Vena: Absolutely.

Quast: In a way, I almost wonder if they're going after a slightly different market, not that there's not overlap because of this coffee, so there is overlap there, but sometimes I wonder if maybe that it's just a little bit of enough of a distinguisher that they're not going to be competing as much directly as Dutch Brothers is going to be competing with other coffee chains that are also optimized for the drive-through.

Here in North Florida, South Georgia, we have a chain called Eliana's. Eliana's actually looked into the franchising information and it is really interesting, the unit economics on those things are really good. I would assume the little bit that I did look at Dutch Brothers, very similar, and so there's a lot going for the structure of Dutch Brothers that I do like.

My question is, are they going to be able to come over here to the East coast where we have some other chains that are a lot like that, and already established and well-known, so that's why I put it where I did in The Rank. Not so much because of Starbucks, but because of other chains that are a lot like Dutch Brothers.

Matt Frankel: The recent progress is definitely impressive. I know they are expanding somewhat geographically, I want to say into Texas is where they just recently expanded, but they're slowly making their way East. I'm hoping to be able to try their product, maybe that's one of the reasons I ranked lowest because never actually tried the coffee, and I'm a coffee guy, but I like Dutch Brothers.

I heard about them a while ago when they did an episode of Undercover Boss, I don't know if you saw that one, but the CEO is certainly a character that I could see why as Danny mentioned, they pride themselves as being like fun-loving coffee company, and corporate culture really seems to reflect that. I definitely recommend watching that episode if you haven't already.

Quast: To your point, Matt, I did look up this company on Glassdoor, I was really surprised how high the Glassdoor ratings were for this. Glassdoor is just company perception of its own company or employee perception of its own company. For a primarily franchise restaurant chain, I just wasn't expecting very much, but a lot higher than what I was expecting, so it seems like people do love working there.

Matthew Frankel, CFP has no position in any of the stocks mentioned. The Motley Fool owns shares of and recommends Starbucks. The Motley Fool recommends the following options: short October 2021 $120 calls on Starbucks. The Motley Fool has a disclosure policy.

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Stocks Mentioned

Dutch Bros Inc. Stock Quote
Dutch Bros Inc.
BROS
$35.83 (-0.86%) $0.31
Starbucks Stock Quote
Starbucks
SBUX
$99.56 (0.04%) $0.04

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