Dutch Bros (BROS 0.59%) is taking its caffeinated persona seriously these days.
The coffee and energy drink vendor has bounced around on the stock market in the last year. The company's market cap swung from $3.5 billion to $9.9 billion before dropping back to $6.1 billion on Oct. 7. With a lofty beta value and sky-high valuation ratios, many investors wonder if they already missed Dutch Bros' best buy-in window.
At the same time, patient investors with a long-term focus might argue that the shifting volatility and rich valuation don't matter -- the stock has earned a price premium from Dutch Bros' high-octane business growth.
Spoiler alert: Dutch Bros won't be your favorite stock to buy today if you prefer steady, low-risk progress. For those who don't mind unpredictable quarter-by-quarter results and higher share prices, however, Dutch Bros might just be your favorite cup of Wall Street Caramelizer.
Welcome to Florida, Dutch Bros
I'll admit that I'm not very familiar with Dutch Bros from a customer's perspective. I only have one 9-1-1 (six shots of Espresso and Irish cream) under my belt so far, bought last week with a "welcome to Dutch Bros" coupon on the grand opening of a nearby location. According to the company's store finder, that's just the third Dutch Bros shop to open its drive-through window within a two-hour drive from my Tampa-area home.
That's actually part of my buying thesis for this stock. You see, Dutch Bros is leaning mighty hard into expanding its market reach right now. The company had 1,043 locations in 19 states by the end of June, 2025. Two years earlier, it had 754 stores in 14 states. That works out to a 38% location increase in two years -- and Dutch Bros is building this growth record the hard way.
Dutch Bros does expansion the expensive way
Many restaurant chains build large store networks by franchising their brand to lots of local partners. Dutch Bros prefers a more expensive but arguably higher-quality method. The company added 131 new shops between June 30, 2024 and June 30, 2025. Only 18 of these were franchise deals, and the rest are directly owned and operated by Dutch Bros.
And it's easy to see why Dutch Bros is using this strategy. Company-owned stores consistently deliver stronger financial results than franchised locations. So Dutch Bros spends a lot of money on building and operating new coffee shops, financed by a combination of operating cash flows and debt papers. But the cash investment tends to pay off quickly, as people line up in circles around the new drive-up window.
Image source: Dutch Bros.
Small drive-through shacks, big ambitions
In the long run, Dutch Bros aims to challenge coffee-shop superstar Starbucks (SBUX -1.49%) in many ways. That's an ambitious goal, given Starbucks' massive market footprint with 41,000 stores in 80 countries. But those little Dutch Bros shacks can pop up surprisingly quickly, and I suspect that they come with affordable construction bills. Running a small shop without sit-down tables may sound like a challenge, but it's a hyper-efficient business model with reasonable costs. Without this cost-saving quality, the company might have gone down the franchise-driven expansion route instead.
Going back to the freshly opened Dutch Bros around the corner, I'm surprised that it took this long before the company started exploring Florida. Sales of its cold beverages are rising 5 times as fast as the hot coffee revenues, and customized energy drinks already account for about one-quarter of Dutch Bros' top-line sales. That sounds like a business tailor-made for hot Florida summers, and I can't wait to see how this new market affects Dutch Bros' financial results over the next few quarters.
Plenty of room to grow from here
Long story short, Dutch Bros has plenty of business growth left to explore in the huge coffee service market. After that, I see international opportunities and a broader menu, perhaps including breakfast sandwiches or donuts. And, the company comes with a unique customer service approach that sets its "Broistas" apart from your average coffee-slinging Barista.
I'm starting to feel silly for not having Dutch Bros in my own portfolio yet. A price-to-earnings ratio of 101 can throw cold water on that stock-buying idea, but the stock is also down by 26% over the last month. This could be the perfect time to build a small Dutch Bros position for the long haul, as long as you don't mind the company's debt-based growth strategy.
