Dutch Bros’ traffic growth meets higher food and occupancy costs

Dutch Bros Inc.’s first-quarter sales growth came with more transactions, but a smaller gross margin at its company-operated shops. Systemwide same-shop sales rose 8.3%, including 5.1% transaction growth and 3.2% ticket growth. Company-shop gross margin fell to 20.0% from 21.9%.

The May 6 earnings release shows the company-owned comparable shops outperforming the broader system: sales rose 10.6%, with transactions up 6.9%. Company-shop gross profit still increased in dollars, reaching $85.8 million from $71.5 million. More revenue produced more profit, but each sales dollar retained less after shop costs.

Systemwide sales measures include franchise locations; the company-shop margin covers Dutch Bros’ own restaurants. Even company transaction growth and gross margin have different bases: comparable shops for transactions, the entire company portfolio for margin. The quarter ended with 844 company shops, including a 645-shop comparable base.

Where the extra revenue went#

The same-day quarterly filing gives specific reasons for the margin movement. Beverage, food and packaging costs rose to 26.2% of company-shop revenue from 25.0%. Dutch Bros attributed the increase primarily to coffee costs and its expanding food program, whose cost ratio is higher than beverages’.

Labor moved favorably, falling to 26.2% of revenue from 27.4%. Management credited higher sales and pricing for spreading that expense across a larger revenue base.

Dutch Bros reported occupancy and other costs at 17.8% of company-shop revenue, up from 16.5%. It cited higher new-shop rent from more build-to-suit leases, plus higher repair and maintenance expense. Depreciation and amortization rose to 8.3% of revenue from 7.5%. Dutch Bros attributed higher expense dollars to more shops and revised useful lives for existing assets.

Breakfast expands the occasion and changes the costs#

Dutch Bros had already set out the reason for expanding food in its 2025 annual filing. It wanted to reach morning customers who choose somewhere else because they want breakfast with their drink. The filing paired that food ambition with order-ahead plans aimed at customers pressed for time in the morning. Both initiatives seek occasions the existing beverage offer and ordering process might miss.

The food initiative seeks more morning purchases. Its higher ingredient-cost ratio is disclosed, but the filing does not isolate food’s contribution to transaction growth or profit.

Coffee and lease pressures also predated the quarter. The annual filing identified 90 basis points of coffee-cost pressure in 2025. Pricing partly offset that pressure, leaving the beverage, food and packaging ratio up 40 basis points, to 25.9%. It linked occupancy pressure to a greater proportion of build-to-suit arrangements. Q1 extended those issues while adding the expanding food program to the explanation.

Dutch Bros also reports company-shop contribution, a non-GAAP measure that adds depreciation and amortization back to gross profit. Its margin fell to 28.3% from 29.4%. The 80-basis-point rise in depreciation’s share explains why gross margin fell 190 basis points while contribution margin fell 110.

The quarterly filing also separates revenue growth: new shops outside the comparable base supplied $70.3 million, while comparable shops added $32.3 million. More visits at established shops and a larger portfolio contributed through different routes.