Consumers increasingly want their morning caffeine fix from the comfort of their car. Coffee quick-service restaurant (QSR) chain Dutch Bros. is aiming to raise over $421 million in its initial public offering (IPO), going for a valuation of more than $3.3 billion, per a filing with the U.S. Securities and Exchange Commission (SEC) on Tuesday (Sept. 7).
The chain’s drive-thru model allowed it to thrive during the first year of the pandemic, while other restaurant brands struggled to pull through. The brand’s revenue grew 37% during 2020, which the filing attributes to its drive-thru focus.
“Our drive-thru operating model proved highly resilient by providing our customers with a safe and convenient way to visit, buy a beverage and make a personal, human connection in a time of crisis,” stated the filing.
The Industry Landscape
QSRs saw drive-thru sales surge during the pandemic, as contagion-concerned consumers stayed out of dining rooms, opting for the safety of staying in their own vehicles. The coffee away-from-home channel struggled with the turn to remote work, making Dutch Bros.’ positive sales growth more impressive.
However, with its speed and convenience value proposition, Dutch Bros. has stiff competition, forced to stand out against QSR giants such as Starbucks, Dunkin’, McDonald’s and others.
“We expect competition in this market to continue to be intense as we compete on a variety of fronts, including convenience, taste, price, quality, service and location,” Dutch Bros. acknowledges in the filing. “If our company-operated and franchised shops cannot compete successfully with other beverage and coffee shops, including Dunkin Donuts, Starbucks, other specialty coffee shops, drive-thru QSRs and the growing number of coffee delivery options in new and existing markets, we could lose customers and our revenue could decline.”
What Consumers Are Saying
The drive-thru channel remains attractive to consumers whose primary pandemic-related concerns pertain to their health, a group that accounts for four in 10 U.S. consumers, per a PYMNTS survey of over 2,200 respondents published in our May 2021 Delivering on Restaurant Rewards report, created collaboration with Paytronix. In the survey, 38% of these health-concerned consumers report that they would be encouraged to spend more if a given restaurant offered drive-thru pickup. Additionally, about 3 in 10 consumers whose primary pandemic concerns pertain to their finances or their social connections say the same.
Read more: NEW DATA: Pandemic-Related Health Concerns Shape Consumers’ Food Ordering Habits
What Experts Are Saying
Many brands have been entering the drive-thru space or upgrading their existing drive-thru offerings, noting the demand for the channel.
“The demand for consumer accessibility has played an influential role in our focus in expanding Auntie Anne’s outside of our traditional mall locations, and we know the emphasis on drive-thru access has staying power,” Alisa Gmelich, chief brand officer for Auntie Anne’s, told PYMNTS in an interview. “In fact, we hope to open four additional drive-thru locations across the country this year alone.”
If Dutch Bros. can work mobile ordering into the drive-thru channel, as it plans to in the future, it can take advantage of the digital ordering boom to offer a seamless, touch-free experience.
“We now consider [mobile lanes] that digital drive-thru of the future,” Chipotle Chief Restaurant Officer Scott Boatwright told Karen Webster, as part of PYMNTS’ ConnectedEconomy™ series. “And I know there are a lot of brands today that are larger that have your traditional drive-thru experience that are entrenched … and I think they’re going to struggle.”
See also: Auntie Anne’s Pivots To Drive-Thrus Vs Malls For Its Pretzels
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