Dutch Bros Inc. (NYSE:BROS) Q3 2023 Earnings Call Transcript

Christine Barone: Yes. So, I think when we look at our overall priorities, it was — it’s to align our shop managers to those overall priorities. And we’re certainly very focused right now on driving traffic and driving revenue. So that is the biggest piece. And then we also look at some of the shop level profitability things like looking at labor. Again, it’s a very delicate balance. We also don’t want our shops to under schedule in labor. So, we’re thoughtful about making sure that they hit just the right balance on that line.

Operator: Our next question is from Andrew Charles with TD Cowen.

Unidentified Analyst: This is [indiscernible] on for Andrew. Could you give us an update on where the new shop volumes are tracking relative to that $1.7 million you last disclosed? And then separately, is there anything you can do to reaccelerate those volumes outside of some of those broader sales drivers you’ve been talking about?

Christine Barone: Yes. Thanks so much, . So, we don’t actually share that. We did that, I think, for the offering that we just did, but we don’t share those figures on an ongoing basis. What I would say is we think we have a number of different levers that we can use to drive AUVs. So, a number of the things that I talked about just in general of what we’re doing to drive traffic. We’re also focused on building volume in new markets. And so, thinking through ways to build brand awareness. So, we’re tracking sentiment in these new markets. We feel really good about how the customers and new markets are behaving as compared to customers in existing markets. And we really believe it’s a brand awareness opportunity that we can go after.

So, we’re doing all kinds of things to really further invest in the communities, make sure that people know that we’re there, thinking through how we can partner with the local high schools and make sure that we have some visibility, like, let’s say, in their sports stadiums, things like that. So, we’re excited about the things that we can do in these new markets.

Unidentified Analyst: Okay. And then as you look towards 2024, are you going to run Fill-A-Tray around once a quarter again or are you going to mix that or replace it with separate promotions? Anything on the promotional cadence for next year would be helpful.

Christine Barone: Yes. Look, we haven’t planned our promotional cadence for next year yet. We are really looking at our sales kind of on a daily and weekly basis as we decide which things to do and what we’ll most benefit from. The reason why we like Fill-A-Tray so much is it really is a deal on four separate drinks. And so, we think, especially in new markets where we’re building just so much customer love that it’s a great way to share with your friends when you come into Dutch Bros, and it also just feels a lot like us. I think the broistas just continue to comment that, hey, this is what it really feels like to be at Dutch Bros when I’m at a Fill-A-Tray day. And so, we like to have those parties in our shops. But I think that’s not the only thing that we do. We love that promotion. I think we’ll continue to look at it, but we have a number of other things that are working really well as well.

Operator: Thank you. Our next question is from Nick Setyan with Wedbush Securities.

Nick Setyan: Just to clarify, the 8% to 9% pricing in Q3, that’s the system price, right? Can you just tell us what the company;s own pricing was in Q3 and what that should be in Q4?

Charley Jemley: We don’t disclose that company price, but there’s not a lot of difference between company price action and the franchise action.

Nick Setyan: Got it. And then just up the EBITDA guidance, obviously, with the breakage last year, it would imply a pretty big deceleration in the amount of leverage, not just in the labor line, but in occupancy and other, even with the investments in labor, I guess, what’s the driver behind occupancy and other in terms of the deceleration to leverage?