Investing in rapidly growing companies can help you build tremendous wealth over time. Market volatility is not a risk but an opportunity to buy shares of these businesses at better values. Below are two emerging restaurant brands that are in the process of expanding across the U.S. Buying these growth stocks today could pay off big in another 10 years.
1. Dutch Bros
Dutch Bros (BROS +6.28%) is a standout drive-thru beverage chain. The stock doubled last year as the company continues to spread across the U.S. with 982 locations in 18 states as of Dec. 31, 2024. The market sell-off pulled the stock 24% off its recent highs, offering investors a good opportunity to start a position.
NYSE: BROS
Key Data Points
A key advantage for the company is its culture. Since 2017, it has focused on a company-operated store strategy, which allows management to promote new shop managers from its own ranks.
Some of its franchise partners started out as an employee, or "broista," at one of its shops. Dutch Bros believes its practice of promoting from within will help maintain quality service and generate long-term returns for shareholders.
"We make big investments in seeding our culture as we expand, and we are pleased with how this is translating into strong service," CEO Christine Barone said recently on the company's fourth-quarter earnings call.
It's a great sign that amid a choppy consumer spending environment, Dutch Bros increased same-shop sales while Starbucks struggled. Systemwide, Dutch Bros same-shop sales grew 2.8% in 2023 and improved to 5.3% in 2024. After opening 32 new shops in Q4, total revenue grew 35% year over year last quarter.
The stock trades at a price-to-sales (P/S) ratio of about 5.3, which is fair considering its record of strong growth with many untapped markets across the U.S. Given the stock's previous volatility, dollar-cost averaging might be a smart way to invest. Dutch Bros is building a strong brand that should make it a monster winner over the long term.
2. Cava Group
Cava (CAVA +6.49%) is another explosive growth stock to consider buying on the dip. The shares soared last year but recently were trading 53% off their 52-week high. Cava's impressive business performance suggests there is tremendous demand for Mediterranean-based, fast-casual dining. Its strong margins, unique brand, and lower valuation make the stock an attractive buy right now.
NYSE: CAVA
Key Data Points
The average restaurant profit margin ranges between 3% to 5%, but Cava's exceptional restaurant-level economics has translated to a stellar profit margin of 13% over the last year. This is by design. Cava's strategy focuses on using technology to streamline food preparation to make running its restaurants very efficient.
It's becoming even more efficient as it expands. Management updated its two-year, cash-on-cash returns for its restaurants from 35% to 40%, implying a quick payback return for each new location. This follows strong momentum last year, with same-restaurant sales growing 13.4%. The company's adjusted net profit jumped from $13.3 million in 2023 to $50.2 million in 2024.
These results point to outstanding return prospects for investors, since Cava is just getting started on its nationwide expansion. It ended the year with 367 restaurants in 25 states, in addition to Washington D.C. There are still highly populated areas without a Cava restaurant. It plans to enter south Florida and other mid-Atlantic areas this year. The company's goal is to have 1,000 restaurants open by 2032.
The stock trades at a price-to-sales (P/S) multiple of about 10.5, which is expensive for a restaurant stock, but Cava may have the growth and margins to justify paying up. Starting a small position and filling it out over time could leave investors with a sizable return down the road.
