Dutch Bros (BROS -1.04%) is an Oregon-based chain of coffee shops that's growing in popularity as it expands across the country. With 831 locations at the start of this year, Dutch Bros is still much smaller than the current industry leader, Starbucks, which has over 16,000 U.S. stores.

However, there's another company that managed to quickly dethrone Starbucks in a major market, and Dutch Bros might already be following the same playbook. As it continues along this trajectory, Dutch Bros could grow enough to eventually rival Starbucks as well -- investors should pay attention.

A different cup of coffee

Dutch Bros currently operates in 16 U.S. states, mostly on or near the West Coast. It's developed a growing base of loyal customers by cultivating a fun and friendly culture with a focus on speed and customer service.

To that end, it has drive-thrus in many of its locations with its "broistas" coming through the lines to take orders. It also has a robust membership program to build its brand and community.

It doesn't differ from Starbucks in fundamental ways, but as a smaller, faster-growing company that's still somewhat regional, it's taking the time to determine what drives its customers and how it can harness that information to generate and meet demand.

Taking a page from the Luckin playbook

Investors may remember industry upstart Luckin Coffee from the massive hype it enjoyed a few years ago. Shares of the China-based coffee chain soared before an an accounting scandal in 2020 eventually saw the company file for bankruptcy and become delisted from the Nasdaq.

But the business hasn't gone anywhere. In fact, it's moved way past those struggles to overtake Starbucks as the top coffee shop in China by sales and store count. It has about 13,300 locations, almost all of which are in China, versus 6,975 Starbucks stores in that region.

Founded in 2017, Luckin has grown sharply by establishing quick delivery services and a strong mobile app. Its menu offers interesting flavors to resonate with its market, all while being cheaper than Starbucks too. Since its focus is on rapid service and delivery, it's been able to open up new stores faster than Starbucks, which previously focused on larger, eat-in-style stores. Under the leadership of a new CEO, Starbucks has changed its strategy too, not just in China but worldwide, to provide faster service and to enhance its digital offerings.

Dutch Bros is already on this path

Dutch Bros might not be opening thousands of locations per year like Luckin Coffee did, but it has ambitions to reach at least 4,000 stores while expanding to new states. It had targeted 150 store openings annually, but it surpassed that in 2023 and plans to open up to 165 new shops this year.

The company has demonstrated that it understands its target market, providing innovative beverages and an atmosphere that brings them back for more. Like Luckin, its drinks are slightly cheaper than comparable Starbucks beverages. Its expansion will have a focus on drive-thru and convenience with many locations boasting multiple drive-thru lanes and walk-up windows.

Dutch Bros recently named a new CEO, who is growing the management team with industry veterans to take the company to the next level.

Take note of this winning coffee shop chain

Investors might consider Dutch Bros a bit risky. It's relatively small and has only recently started to report positive net income. But it's posting strong growth with revenue up 33% year over year in Q3 2023, and it has a huge market opportunity in the U.S. alone.

If you have an appetite for risk, now is a great time to buy Dutch Bros stock. It's down 30% over the past year and trades at a price-to-sales ratio of only 1.7. If you're not ready to take the plunge, at least keep this growth stock on your watch list.