Good morning. Good morning, everyone, and welcome. My name is Paddy Warren, and I lead Investor Relations and Capital Markets here at Dutch Bros. I'm honored to welcome you to our Inaugural Investor Day right here on our support center in Tempe, Arizona. I'd also like to welcome everyone joining us on livestream, which is available on our website at investors.dutchbros.com. Here's the schedule for the day. We'll begin our prepared remarks shortly and break around 9:30 A.M. Pacific. For those of you in attendance here, we'll take shop tours and have lunch. We'll pick back up with our prepared remarks around 12:10 P.M. and continue until about 1:00 P.M. We will have 30 minutes reserved for Q&A with our management team.
If you're viewing on the livestream and would like to ask a question, please submit your question to investors@dutchbros.com at any point today or in the question box of the webinar platform. Before kicking off the day, I'd like to remind you of a few disclaimers. Please be aware that all statements in our prepared remarks and in response to your questions, other than those of historical fact, are forward-looking statements and are subject to risks, uncertainties, and assumptions that may cause our actual results to differ materially. They are qualified by cautionary statements in our most recent annual report on Form 10-K. We assume no obligation to update any forward-looking statements, and we will also reference non-GAAP financial measures. As a reminder, non-GAAP financial measures are neither substitutes for nor superior to measures that are prepared under GAAP.
Please review the reconciliation of non-GAAP measures to the comparable GAAP results in the appendix of today's presentation. Finally, we will reference estimates and information concerning our industry. This information involves assumptions and limitations. Please do not put undue weight on these estimates. The industry in which we operate is subject to a high degree of risk and uncertainty, and we have not independently verified the accuracy or completeness of the underlying data contained in these industry reports or publications. Now, with that out of the way, I'd like to turn it over to a man that needs no introduction, our Co-founder and Executive Chairman, Travis Boersma.
Oh, wow. So cool to be here. So great to have you all here. Thank you for making the trip. It's a wild one for some of you, I'm sure. I'm just curious if anybody else pulled an all-nighter like I did. I take the red-eye over from Maui, so I wouldn't miss this day. This is something special for us as Dutch Bros. As we look to the future, gosh, I can't even come close to describing the potential and where we're going and the team that we have. I am so ecstatic about the future and the white space and the growth opportunities. When I think about what moves the needle for me, it's certainly the culture of the company is our differentiator.
Providing opportunities for people within the organization to climb a ladder and see a dream come true, that's what the whole growth rate has been predicated upon, is a pipeline of people that we have that are qualified, that grew up in the company, that have the fire in the belly, the operational expertise, and the ability to cultivate culture and develop leadership. I think of all the things going on in the world around us and all the different moving parts and what we put value on. The one thing that I think is really important about Dutch is we put value on our people. At the end of the day, that's the game-changer piece of the company. When you have good leadership and you've got a great team, for me, that's what it's all about.
I think sometimes we get lost into some of the data and the analytics and stats, and you see it in sports. There is no easy way to measure heart. I think that this organization, with the heart, the mind, and the soul, can challenge any business out there. I really believe that we have a superior team. I just want to take a moment to think about what makes Dutch Bros Dutch, what makes us us. I think the soul of the company, the gut, has always been a part of it. The mind and the science is something that we have more data than we've ever had before. I think when we took the company public, it really helped us to sharpen our game with the disciplines of the business and what it takes to really go next level.
I think that the mind plays such a critical role in our result. The heart, the heart of the company is the thing that gets my juices flowing. When we talk about beverages and potential and we talk about all the different pieces to the company that can be extraordinary, you never lose sight of the heart, the muscle, the love, the dignity that the company has. I'm so thrilled to have had the opportunity to have the journey we've had. The journey to get here has been problems, challenges, sometimes painful. Those things serve us in our quest, and I think we've gotten better as a result of those challenges, of those problems. Our team finds the seedling of the equivalent advantage, and we press on, and we keep on figuring out how to do it better.
What are we going to be able to do next? How are we going to do it better? It's great to be here. My brother, Dane, without him, I don't think Dutch Bros ever happens. I had the great fortune of having a brother 17 years older than me as a mentor. I can't express my gratitude enough to all the people over 33 years that have helped to make Dutch Bros what it is today. The list is thousands of people. I'm eternally grateful to all of the people that have made the company what it is today. I'll share this with you and transition into a little dub shot, if you will. I'll share my personal mission statement with you.
As I, Travis Boersma, see here, know and feel that the purpose of my life is to enjoy the journey, to maximize the moment, to be a loving, passionate, inspirational leader that defies the odds, to be a force for God and a force for good. I will meet the man that I am someday when I die, not the man that I could have been. I just feel so blessed, so honored to still be Chairman of the Board. I'm involved with our team regularly, and I care about them deeply. I really care about the people that started Dutch Bros as a first-time job or people that are in the organization and in that pipeline hoping for an opportunity because they've put four or five years into this point, maybe six or seven. That's key for our growth rate.
To love and let love reign and making sure that as we forge through this life, we do it with class, we do it with dignity and humility. Let's take this company to a whole nother level because I think it deserves it. Cheers. I would like to introduce somebody who is ne ar and special, near to my heart. I work with this woman every day, almost, and she is incredible. I'd like to introduce our President, CEO, Christine Barone. Christine joined Dutch Bros in February of 2023 as President with over 15 years of food and beverage experience. She immediately made an impact in her focus on real estate strategy and driving transactions, laying the groundwork for our strategic focus areas. She has been incredible. In 2024, she was elevated to CEO, January of 2024. Before joining Dutch, she was CEO of True Food Kitchen.
Prior to True Food, she was the SVP at Starbucks for licensed stores and food in North America and Canada, I believe. Needless to say, we're very excited to have Christine here at Dutch. Please join me in a warm welcome. Please join me welcoming Christine Barone.
All right. Good morning. Thank you, Trav. Welcome, everyone, to our first-ever Investor Day. We are thrilled to welcome you to our brand new support center here in Tempe, Arizona, which actually just opened on Monday. If you see blue tape, do not take it off the wall. As Paddy mentioned, we have a great day planned for you, including time with our leaders and a tour of a couple of our shops here in Arizona. Before I start, I did want to say a few words about how special it is to work with Trav. He sees the world in a really special way. He raises the bar for how we approach every single decision.
He spends time with the full leadership team to ensure that we understand the past and see the future path in serving our customers, broistas, and communities in an even more compelling way than we are today. It is the great privilege of my career to work with someone that uplifts me so much every day. Thank you, Trav. With our time here today, we have five key objectives. First and foremost, we want to show you what makes Dutch Bros unique and what motivates us all to get up early, stay up late, and change the world one cup at a time. Second, we want to bring this mission to life by highlighting the experience of our customers and our broistas. Third, we want to introduce you to our senior leadership team and have each team member walk you through our growth strategy.
Many of you may know Josh and me pretty well, but you may not appreciate just how experienced and deep our team is. Fourth, we want to provide more details on our financial outlook, including an update on our total addressable market, long-term algorithm, and a discussion of our cash flow dynamics. Finally, we want to provide an opportunity for you to personally experience Dutch Bros. Between the dub shots, the team-building ritual with which we start each week here in this building and at our shops, and the shop tours this morning, we will make sure you are well-caffeinated and leave with a great understanding of our culture, operations, and people. We really believe that experiencing Dutch Bros is the best way to understand our brand. We are thrilled to be able to do that today. Culture is not just something we say.
It is something we live every single day, and it is grounded in our vision and mission. Our vision and mission stretch back to the very beginning of our story, to Trav and Dane Boersma dreaming big about building a business centered on relationships and making a difference one cup at a time. Their vision to create a better future for every employee, customer, and community we meet, and mission to be a fun, loving, mind-blowing company that makes a massive difference one cup at a time, provides us with our why. As time goes on and our business has grown and evolved, we have never lost that why. If anything, our business has definitely grown. It all started in 1992 when Trav and Dane opened their first location, which was actually a small push cart on 6th Street and Grants Pass, a town of 39,000 in southern Oregon.
On their very first day, they sold about $65 worth of lattes, mochas, and cappuccinos. They turned a profit, and they were hooked. Slowly but surely, they laid the groundwork to build a phenomenal business that now stretches from coast to coast. Eleven years later, in 2003, Dutch Bros opened its first shop outside of Oregon. In 2007, we opened shop number 100. In 2012, Dutch Bros introduced Rebel and created the customized energy category, which now makes up approximately a quarter of our menu mix. Our business continued to evolve, and we made the decision to focus on company-operated growth, no longer accepting new franchisees as of 2017. Dutch Bros installed our first POS system in 2018. Believe it or not, the company was utilizing cash boxes for the first 26 years of its history.
We began collecting data and analyzing point of sale and menu mix data for the first time. Later, in 2018, Dutch Bros received its first outside equity investment from TSG Consumer Partners, providing a catalyst to accelerate company-operated shop growth. In February of 2021, we launched our highly successful Dutch Rewards program, which rapidly scaled to approximately 71% of transactions by Q4 of 2024. We achieved a major milestone with our 500th shop opening in Temple, Texas, in 2021. This was 14 years after opening shop number 100 and 29 years after our founding. Later that month, we went public, listing on the New York Stock Exchange. As of February 2025, we are in the top 1% of all IPOs of the class of 2021 by share price performance.
In March of 2023, we updated our Dutch Rewards program to allow for a more personalized experience and unlocked our ability to use this program as a key traffic driving lever. In August of 2024, we launched Mobile Order. Finally, last month, we opened shop number 1,000 in Orlando, Florida. This comes less than four years after opening shop number 500. This opening pace leads to an interesting fact. Although we were founded over 33 years ago, our average shop is only six years old. What is really remarkable is that since our IPO, we have grown our units, AUVs, and adjusted EBITDA simultaneously. Between 2020, the year before our IPO, and 2024, we have more than doubled our unit count from 441 to 982 shops. During this same time period, we have driven AUVs from $1.7 million to $2 million, even as we entered nine new states.
The combination of these two factors has enabled us to supercharge our growth. Since 2020, we have more than tripled our revenue from less than $350 million to more than $1.25 billion, which has translated to massive increases in adjusted EBITDA, growing from $70 million in 2020 to $230 million in 2024. We are extremely proud of what we have been able to achieve, and we are excited about the road ahead. Simply said, we are a growth company, and we have delivered top-tier growth. We have been an industry leader in both revenue and unit growth. Over the past five years, we have delivered a revenue CAGR of 40% and a unit growth CAGR of 22%. This demonstrates that we can consistently drive top-line growth as we scale. Our growth focus has shifted towards company-operated development since 2017.
When we isolate this segment of the business, our growth is unmatched, with 50% revenue growth and 42% company-operated shop growth, truly impressive numbers. How have we done it? Dutch Bros has broken the compromise between speed, quality, and service. It is our goal to deliver on all three aspects simultaneously. We believe we are uniquely positioned with effectively 100% of our shops operating drive-throughs, a robust people pipeline and differentiated people systems, and our commitment to customization with the systems to back it up. Fundamentally, our strategy is to translate emotional loyalty into behavioral loyalty by removing those structural barriers to frequency. Our customers have unbelievably high emotional loyalty to Dutch Bros. We call this brand love. We believe there is an opportunity to enhance behavioral loyalty or frequency.
Our focus is eliminating the structural barriers that prevent these high brand love customers from visiting us more often. Our customers are telling us that they would love to come to a Dutch Bros if they had a shop closer to them, convenience, if they could get their drinks quicker, speed, and if we better met their needs in the morning, food. As we will discuss today, our growth plan addresses these core considerations so that we can drive frequency and position Dutch Bros to keep winning in the years to come. Our strategy leans into what makes Dutch Bros great and addresses opportunities to drive frequency. This strategy focuses on four key pillars: grow our people, grow our shop base, grow our transactions, and grow our margins. As I start every single earnings call, our people are the cornerstone of our strength.
Our strategy recognizes that when we enhance compelling futures for our people, from broistas to shift leads to operators and support staff, we get one step closer to changing the world one cup at a time. We recognize the huge opportunity we have in front of us, and we look forward to opening new shops and executing on our massive white space. Opening more shops will make it even more convenient for customers to visit us and make Dutch Bros part of their routine. We have terrific unit-level economics and great returns, which support our shop growth objectives. We remain focused on serving more customers and developing sales layers. We have had great success recently with establishing a foundational core of initiatives and have multi-year visibility into exciting new opportunities to grow transactions. We believe we can deliver long-term margin expansion.
As we grow our top line, we see opportunity to deliver meaningful adjusted SG&A leverage and drive expanded adjusted EBITDA margins. As we remove structural barriers, we see a multi-year opportunity to drive transaction growth. We have done terrific work on the three core foundational transaction driving initiatives: innovation, Dutch Rewards, and paid media. There is a lot of gas left in that tank. As we look forward to 2025 and beyond, we are excited about Mobile Order, which we expect to make visiting Dutch Bros even more convenient, especially in the morning. We are also excited about accelerating our throughput, recognizing that we sometimes have long lines and an opportunity to more consistently deliver on our anchor tenet of speed.
Looking forward into 2026, we are excited about rolling out an expanded food program where we can better meet the needs of customers looking for a quick bite in the morning. For the first time today, we are announcing the launch of a line of Dutch Bros packaged coffee products to be sold in retail outlets as the next step in growing our brand. We are incredibly excited about this opportunity as it allows us to reach customers for more of their beverage occasions. We believe a Dutch Bros CPG offering will build brand awareness, especially in newer markets, by providing exposure to new potential customers. It can also help us deepen our commitment to philanthropic giving, as we will be donating a portion of the proceeds from the CPG business to the Dutch Bros Foundation to help support compelling futures in the communities we serve.
We are still in the early stages, but plan to launch a comprehensive offering of roast and ground coffee and K-cups and additional formats, which we anticipate will be distributed in grocery, mass, and club channels beginning in 2026. Our signature shop flavors and unique brand positioning will give retailers a whole new way to serve the at-home coffee customer. Our distribution approach will allow customers to first meet our brand through our shops and incredible broistas, and then follow with our CPG products to reinforce that experience at home. We have entered into a licensing agreement with Trilliant Food and Nutrition. Trilliant is one of the largest coffee manufacturers of single-serve cup and ready-to-drink coffee in the United States and has products available in more than 50,000 retail stores across the country.
We believe this partnership will allow us to be the only major player to go to market in a cohesive way across all our coffee-based product lines. We have been impressed by the market research and taste testing and are blown away by the potential we have in this market. With all this exciting opportunity surrounding us, I am encouraged that I have such a wonderful team with me every step of the way. I believe we have a best-in-class team in place, ready to lead Dutch Bros into this next phase of growth. This group of leaders has terrific experience operating multi-unit concepts at scale. We are committed to adding the routines, processes, analytics, and systems needed to drive continued success inside and outside the four walls.
Simultaneously, we recognize the importance of nurturing the heart-led culture that is the core of who we are and what has made Dutch Bros what it is today. Today, in addition to myself and Josh, you will be hearing from Jess Elmquist, our Chief People Officer; Tana Davila, our Chief Marketing Officer; and Sumi Ghosh, our President of Operations. I'd also like to welcome Victoria Tullett , our Chief Legal Officer, who joined Dutch Bros about two and a half years ago, as well as two new team members: Brian Cahoe , our new Chief Development Officer; and Venki Krishnababu , our Chief Technology and Information Officer. Both Brian and Venki joined the team in the last three months. You'll hear more about them later today. One final point, I wanted to comment on the composition of our Board of Directors and highlight its depth and experience.
Our 10-member Board of Directors includes six independent directors, all of whom were at it since our IPO. We have worked hard to make sure we have the right skill sets and experiences on our board to help us navigate this exciting period of growth. Just last month, we added Kory Marchisotto , and in 2024, G.J. Hart and Todd Penegor joined our board. Dave Cohen, Ann Miller, and Stephen Gillett joined our board in 2023, 2022, and 2021, respectively. These additions have enabled us to be in a position where all of our board committees are independent. We are in for an exciting day. Thanks for spending this time with us to learn more about Dutch Bros. I'm now going to turn it over to Jess Elmquist, our Chief People Officer. Jess brings with him over 20 years of people leadership.
As the former CHRO of Phenom and the Chief Learning Officer of Lifetime Fitness, Jess is going to walk through our culture, what really makes Dutch Bros tick. First, here is a video highlighting the unique connection that our team creates with our customers one cup at a time.
Thank you. Hey, everyone. If you could just watch this video all the way through and then share it, that would really mean a lot to me. The more people that engage with this video and share this video, the more likely it is that the person that I'm making this video for will actually see this video. Several weeks ago, I received a really terrifying phone call 15 minutes prior to me leaving work, where they told me I was being referred to an oncologist and that I basically had cancer. I was in a complete state of shock. I couldn't get a hold of my mom, my best friend, and my boyfriend, and I was falling apart. I decided to leave work. I get in my car, and as I'm driving, I'm going in the opposite direction of my house, which was a little weird. I had this very strong intuitive thought, and that gut feeling told me I needed to go to Dutch Bros, which, again, is really odd because I'm not the type of person that even frequents Dutch Bros. In fact, I mostly make coffee at home. I pull into the Dutch Bros. I roll down my window. There's a young man standing there. That young man's name is Finn.
Finn kneels down right next to my window, and he looks directly at me and he says, "How are you doing today?" Now, I'm the type of person that tries to live my life with rigorous honesty today. When he asked me how I was doing, I wasn't going to lie, but I didn't think that I was going to do what I did next. I looked at him and I said, "Well, I'm not doing great." He proceeds to ask me, "What's going on?" with this really kind, sweet, soft tone to his voice. It felt incredibly genuine and sincere. I proceeded to trauma dump on poor Finn. I unloaded everything. I told him that I just got this phone call. I'm being told I have cancer. My brother already has stage four cancer. I have multiple sclerosis. I don't know how I can deal with all of this. I feel like my life is falling apart. I was just bawling my eyes out to this perfect stranger. Finn very easily could have just dismissed me or brushed me off or thought that I was a crazy person, but he didn't do that. He was kind and compassionate. He allowed me to talk. He listened to me. He validated my feelings. He commiserated with my experience. He even prayed for me. He also gave me a free coffee. I don't know if they're supposed to do that, but that was super sweet. When he did that, that made me cry more because I felt bad and I felt guilty that he was giving me a free coffee.
He reassured me that's what he wanted to do, that he wanted me to know that there was somebody out there. Oh my God, I'm going to cry again. That there was somebody out there that cared and that was in my corner and supported me. He also proceeded to tell me that everything was going to be okay, that he believed that, and he didn't have to do that because Finn took a few moments out of his day to love on and support a complete stranger. I just don't have words for that. It was incredibly meaningful and impactful to me, and I just really appreciate him for being there at a time when I needed someone. I'm not kidding. I just read the cap, and it says, "Change the world." Finn, you may not have changed the whole world, but you changed my world that day.
Thank you. This is not sponsored by Dutch Bros, but hey, Dutch Bros, if you wanted, that's cool. I just wanted to say thank you, Finn. You're incredible, and I appreciate you. When I first saw the video, it, as a shop lead, too, like having Finn be a part of something so cool, it just like meant so much to us as a whole. When I watched it, to me, it just kind of reminded me that who Finn is as a character and as a person. You sucker, sucker. You're getting talked about. This video couldn't have happened to a more deserving and better person. I mean, he loves everybody to the max. Don't doubt a single word she's saying and like the compassion that she was able to express that she felt that Finn gave to her. I'm like, yeah, that's just Finn.
The super cool thing about it was the second that she said Finn's name, I knew it was a positive interaction. How are you? I feel like he radiates so much kindness and positive energy. I think that it's cool that a place like Dutch Bros has interactions like that happening, and I'm sure it's more often than we probably think, but that's even better because that's more change and more impact that we're making to everyone in every location as a whole. I think it just comes with having the structure, starting with kind of the upper management, shout out Matt Long. Be consistent with the core values of why we're here. Know your whys. Why do you want to work here? Why are you pouring this cup of coffee to excellence every single time?
Why do you talk to customers, even if they might not seem like they want to talk to you? I think that's like knowing your whys and showing you care through action is like a big thing here and holding each other accountable to a high level and knowing that's all about growth, like knowing that that accountability for each other is only for the best for each other and for the customer. Educating, demonstrating, guide, and empower, and empower, and empower, and empower. I just wanted to say we love Finn. We come here every time because Finn works here, and he is the most genuine person that you will ever meet, the best guy in the entire world. Finn, yay for this. We're so proud of you.
Love that video. Welcome. Thank you for joining us today. When we talk about our company, we like starting any discussion with our people. We sell a lot of beverages, don't get me wrong, and we think we're actually pretty good at it. At the fundamental level, we are in the relationship business, and those relationships are fueled by our people. We understand that to execute on our strategic anchors of speed, quality, service, we need great people, and that at Dutch Bros, our people are our source of strength. As we begin our discussion today, let me give you just a few facts. Along with our franchise partners, we have over 25,000 employees at the 1,000-plus shops in the Dutch Bros system. Our broistas largely mirror our customers in terms of age as well as their enthusiasm for the brand. In fact, many of our broistas were customers before they started working in our shops.
By industry standards, we enjoy low turnover at 77% annually, which we believe is a result of the culture we have created based on the core values we strive to live every single day. Our shop manager turnover is less than 15%. At Dutch Bros, our mission is to be a mind-blowing, fun-loving company that makes a massive difference one cup at a time. At Dutch Bros, it begins and it ends with our culture. Our culture is manifested in everyday actions, and it shows up in how we interact internally with each other and how we externally treat our customer. Before we teach a new hire to pull a shot of espresso, we embrace them into our culture. The first two days of anyone's training, of any new broista, is focused on purpose and motivation.
We find these to be fundamental in how we invest our time in creating the foundation to invite the right people to grow with us for the long term. This commitment of the culture, it shows up. It shows up with close alignment to our core values. We currently score highly in internal surveys when the team is asked if they see our values come to life with the people that they work with. This score rings true across all of our values of radiating kindness, get up early, stay up late, changing the world, and extremely high on overall job satisfaction. Our employees rank us about a four out of five on all of these metrics, which demonstrates to us the people are living the values in their day-to-day. This makes us extremely proud as an organization.
This commitment to our culture shows up externally too, with Dutch Bros being recognized as one of America's best employers for new grads in 2024 by Forbes magazine and for our culture being highlighted by Entrepreneur magazine. This culture is the foundation of our business model, as happy engaged employees enable us to deliver speed, quality, and service at scale while offering an amazing overall experience. It's hard to describe what makes Dutch Bros special as our culture feels a little bit like magic. People are drawn to work here, and we are honored to be an employer of choice. For example, in 2024, we received over 500,000, yes, a half a million applications for only 14,000 new and backfill roles at our shops. Once people join us, we believe it's important to promote from within. For field positions, we only hire broistas.
Let that sink in for just a minute. As we have been growing across the country, all these new shops have been staffed by experienced operators and managers who started at Dutch Bros as a broista. They know the culture. They have the needed operational skills and embody who we are. We take pride in this, and it enables us to create compelling futures for our people who choose to get up early, stay up late, and radiate kindness every single day. Together, we're on a mission, and we're on a mission to change the world. We talk about this concept of compelling futures here at Dutch Bros. It's the idea that our growth is predicated on our people to whom we're committed to training and supporting and caring for.
As we continue to open shops at scale, we will create even more opportunities for those people who choose to grow with us. I want to introduce you to two amazing leaders at Dutch Bros, Gabe Oleari and Bryce Schneider. Both Gabe and Bryce are prime examples of how our broistas can develop into leaders and make a massive difference in their communities inside and outside of Dutch Bros. Gabe's story starts as a 10-year-old customer grabbing a drink with her mom and feeling seen, seen for the first time and cared for by a broista. Why? Because that broista took the moment to lean in, look Gabe in the eyes, and connect with her, something that made a lasting impact. Eight years later, Gabe started as a broista, became an operator, then a business coach, and was recently promoted to area vice president this last December.
Bryce's story started in Oregon in 2012, where he joined Dutch Bros to help pay for school. After graduation, he stayed with the company and worked his way up. He was tapped to lead in 2020 when he began serving as the very first operator in the state of Texas. In 2024, he joined us at HQ when he was promoted to regional activation coach. I'd like to welcome Gabe and Bryce to share their journey with Dutch Bros with you today. Will you welcome them?
Thank you, Jess. Thank you, everyone, for being here in Arizona. Are we on? Check, check. There we go. Thank you, Jess. Thank you, everyone, for being here in Arizona. My job started long before I became a broista. Let's use this mic. I think that mic is maybe breaking out. Are we on? There we go.
As Jess said, my Dutch Bros started long before I became a broista. I was 10 years old when I visited my first Dutch Bros with my mom, and I didn't even know what this place was. Initially, I just thought they sold smoothies. When we pulled up to the window, the broista working there gave me, a 10-year-old, attention that I didn't get elsewhere, and it made my day by making me feel seen. At that point, I was inspired that this is the place I wanted to be. I started as a broista and quickly was given more responsibilities as a shop leader. A few years later, I was promoted to operator, where I scaled our culture in another area. A few years after that, I had a chance to coach operators in the state of Texas. On the screen right now, you see a picture of me. This was at a leadership event a few months ago. At that point and on stage, it was announced in front of leaders at the company that I was promoted to Area Vice President. I was listless, thought to myself that a culture like this just doesn't exist elsewhere. Trav was standing behind me in tears as he watched another leader in this company grow. This company has given me countless opportunities, and you just don't see this everywhere. We are people forward here, and we like to uplift people. I'm extremely thankful I get to talk to you all about my experience today, and I look forward to joining some of you later during our shop tour and can't wait to show you the culture at all of our shops.
Thank you, Jess. Great job, Gabe. As Jess said, I started as a broista when I was 17 years old, and I just have to give a big shout out to the leadership in Oregon for believing in me. As a broista, I made a lot of connections. I had interaction after interaction, and I just truly made an effort to get to know all of my customers. Early on in my career, I was incredibly inspired to actually hear from Trav say that we were only going to grow from within. At that point, I still very much remember calling my parents and saying, "This is it. This was the only job I've ever wanted." More than a decade later, here I am. To make a long story short, a few years after I was inspired, I had the opportunity to open our very first shop in Texas.
I have the opportunity to be a coach. I get to mentor and inspire the next wave of leaders and operators for this great company. For me, discipline has gone a long way, discipline in both my leadership and my coaching style. I just truly believe that that discipline has shaped me into who I am today. Gabe and I are both extremely thankful that the senior leadership team has invited us here today to share our stories with you all. As Gabe said, we really look forward to getting all of you into our shops because I can't say this enough, but that's absolutely where the magic happens. Thank you all for listening.
Thanks, Bryce.
Thank you.
Thanks, Gabe. Let me give you that. All right. We really appreciate both of you and everything that you do for Dutch Bros and all of our teams out in the field. This just scratches the surface. As we continue to grow, we are excited about creating opportunities for many, many more people who, just like Gabe and Bryce, have chosen Dutch Bros as a place to grow their careers. Why do we do what we do? We love serving people. We love making connections. We love making a massive difference one cup at a time in all of the communities that we serve. We want to make massive differences in our broistas' lives as well. We tend to attract broistas who are motivated by service. We aspire to create an environment that enables the people to do just that and to teach young people the gift of giving. It's a really important piece.
Giving is a part of our DNA, and we've established the Dutch Bros Foundation to help support compelling futures for those in our communities we serve. Our giving is primarily focused on the local level, where we can create genuine connections with our communities and enable broistas to make a real impact. Our signature events in our giving include Dutch Love, where we support local organizations that promote compelling futures for the communities that we serve. Buck for Kids, where we donate to nonprofits creating brighter futures for local kids, and Drink One for Dane, our signature event to honor our co-founder, Dane Boersma, where we donate to the Muscular Dystrophy Association to find a cure for ALS.
What is so encouraging in seeing how this impacts our community and how it can scale as Dutch Bros scales, creating thousands of opportunities to make massive differences while fulfilling our growth aspirations. Outside of these singular events, I'm also touched by the desire of our broistas and operators to support the communities in times of need. That desire was on full display earlier this year as wildfires devastated the LA area. A local operator named Cassie and her crew quickly put together a plan to donate and deliver cold brew, Rebel drinks, and sparkling water to firefighters and to evacuation shelters. In addition, more than 30 shops held a local give-back day, raising more than $50,000 for the Red Cross. This story makes me incredibly proud to be a part of Dutch Bros and what we're building here.
Now that you have a strong sense of our culture and what drives us and how important it is for us to create compelling futures and make a massive difference on scale and as we scale our company, it's time to meet Tana. It's my pleasure to introduce Tana Davila, and she's our Chief Marketing Officer, who will share details of how we love our customers and will actually talk about the strategy to drive transactions in 2025 and beyond. Tana brings over 15 years of marketing leadership, having served as the CMO of CKE Restaurants, the parent company of Carl's Jr. and Hardee's, and as the CMO of PF Chang's. Before Tana joins us, I'd like to share a video with you. Throughout the day today, you're going to see a highlight of all of our core values. Our first value that you're going to see today is radiate kindness. Thanks.
Thank you for bringing radiate kindness. Can you unpack that for me a little bit? It's more than your words. It's that smile, that eye contact, that body language that just opens up and is inviting. Being there for the hard days and being there just to listen. Sometimes that's all they need. You never know if you're the only person that that customer gets to interact with all day. I think it's so important to be in the moment and be intentional. I feel like what you put out is what you get back. I think it's leaning on the side of empathy. It's an embodiment of how you are. I think grace and intentionality follow it. I think it is just so important to pass kindness on. People can't help but see it and feel it in your actions, your words, and your presence. Being a light in someone's life. People already expect service industry to be kind. That kind of like it comes with the name. For us, when we radiate kindness, it's more of a real, authentic kindness. We put people in a position to be real with everyone every single day. There's no script. It's just, "Hey, come as you are. We love you for you, customer or employee." You get to be that every single day. Radiating kindness is so much bigger than just serving your neighbor. It's being honest. It's being clear. It's being vulnerable. Radiating kindness definitely comes with those tough love conversations sometimes, especially being higher up in a company and you have to have those conversations with your crew.
You know, putting yourself in their position, we were all once in their troops, barista level. It's being able to connect with them and showing them like, "Hey, what you did might not be the right thing, but how can we grow from it? How can we be better? How can we be better together?" I'm on the mod team. I travel for Dutch. On my first trip, I've had a lot going on back home. Just like first trip dinners really caused me to be reserved on the trip.
My lead, he sat me down and he looked at me and he was like, "Do you feel like back at home you get walked on?" And I was like, "Yeah, I do feel like I get walked on back home." He sat there and he looked at me and he goes, "You know what you're doing. You are a kind person to everyone around you and you are a ray of light. Don't let people walk over you. Being kind is like a good thing to have to everybody, but don't let people take advantage of it." When I came back, it made a lot of positive changes in my life.
Now when I'm leading someone else, I get to put that forward and I get to tell them, "Yes, you can be that person for someone, but don't let them take advantage of it because you need the stability just as much as everybody else does." Radiate kindness because everybody needs a little bit more kindness in their lives. If you're the person to give that, then you're just doing good. You're doing what you need to do.
Thank you, Jess. When I joined Dutch Bros in June of 2023, it was immediately evident that this company was special. As Christine mentioned, the brand enjoys extremely high emotional loyalty. People love Dutch Bros. We have raving fans in a way that I have not seen elsewhere. It is clear to me that we are winning with the customer.
Today, I want to start by showing you how we know we are winning. Then I will show you why we think we are winning with the customer and walk you through what else we are working on to keep winning for many years to come. At a fundamental level, we believe our customers have an incredible emotional connection with the brand. We see this emotional connection in the thousands of requests for new shop openings, which come from all over the country. When our shops open in new markets, the customer response is unbelievable. The opening day wait is often hours long. Here is a clip of just one of our opening day lines. What is remarkable is that we are seeing this response all over the country, 33 years after our founding in Grants Pass, Oregon. We see this emotional connection in response to our merch drops.
Even stickers are gone within hours. We actually see that merch often gets resold on eBay for what seemed to me, at least, like insane prices. That's how valuable they are for our customers. If you look on the table, you will find a very rare collectible sticker designed exclusively for Investor Day. Hopefully, we won't see these pop up on eBay too. We utilize merch drops in connection with special days and events like National Dog Day and National Coffee Day. Me? Obsessed with you? Yes. Yes, I am. Just for fun, like with our Passenger Princess Drop Topper, where we see terrific response from our customers. We see customers express this emotional connection in all sorts of ways. People have Dutch Bros-themed birthday parties. People have Dutch Bros tattoos, Dutch Bros-themed dorm parties, Dutch Bros-themed baby gender reveals.
We are ingrained in many aspects of our customers' lives in a highly unique way. We see this emotional connection in our Dutch Rewards loyalty program. Our customers are highly engaged and see the value that it brings. In fact, in Q4, approximately 71% of transactions were from loyalty members. This is up 500 basis points in just one year. One thing that makes our loyalty program different is that it is almost entirely points-based. Said differently, we rarely offer dollar discounts in our app because that's not what we want our brand to be about, and that's not what our guests get most excited about. They do like to complete app-based challenges and collect points. They also come for that daily dose of positive energy that our broistas deliver.
We believe we are incentivizing the right type of behavior and building strong relationships with our customers for the long term. We believe this emotional connection is why we are gaining market share. In fact, we have gained more market share than any other coffee player in the past five years. There is space for many to win, and it's encouraging to see that our share gains outpace the pack. I would like to spend a few minutes discussing why we are winning with the customer. As I just mentioned, there is space for many to win in this industry. Dutch Bros is at the intersection of consumer trends, and we have a front-row seat to how they continue to evolve. Most importantly, we believe we have a clear path to win. Here is what we see in the market. The market values convenience.
80% of beverage occasions are to-go, and drive-thrus account for more than 50% of QSR customer traffic. The market is moving towards cold. From 2016 to 2023, cold coffee spending doubled, outpacing hot coffee spending by five times. The market is tilting towards energy, with the energy drink market growing significantly faster than the overall coffee market, which we believe sets Dutch Bros up phenomenally well. We are nearly 100% to-go and a drive-thru business. Speed and convenience are core to what we do. We are known for iced beverages, and we are a leader in iced. In fact, 87% of our beverages are cold. Customized energy is 25% of our business. We are extremely well-positioned to capture growth in this market. Furthermore, we are in the sweet spot for the most attractive demographic, Gen Z.
45% of Americans aged 18 to 24 drank cold coffee within the past day, compared to 30% of Americans aged 25 to 39. Gen Z customers over-index on to-go occasions, have a higher share of iced beverages. They also have more beverage occasions overall, love to customize, and highly value friendly service. Perhaps most importantly, Gen Z loves Dutch Bros, and we love Gen Z. With that said, the appeal of our brand extends far beyond our youngest generation. Our frequent customer base over-indexes with millennials just as much as with Gen Z. These two groups represent only half of our frequent customer base, meaning we are well-represented by the older age cohorts as well. As I noted, about 87% of our beverages are served cold. That is either iced or blended. About a quarter of our beverages are energy-based.
When we look at our Gen Z customers specifically, 94% of their beverages are cold, and one-third of their beverages are energy-based, which we believe bodes well for us in the future, given our focus and our positioning. Our value for the dollar is the highest in the sector. We've been known for this. We protect and nurture it. We don't consider ourselves a value brand, but we are extremely focused on giving customers terrific value, which to us means not just zeroing in on what customers pay, but seeking ways to deliver and even elevate the high level of service, connection, quality, and customization that we are known for. When we take this mindset, we set ourselves up well to maintain and grow our value perception in the industry.
In combination with our positioning and value leadership, over the past 18 months, we have been focused on building out foundational initiatives to jump-start transaction growth. These efforts are working. We are seeing great traction with innovation, loyalty, and paid media, and we think we have considerable runway with each. We are using strategic innovation to capture share in target occasions. Last year, we launched protein coffee and pop and boba with great success. Protein coffee gives us an opportunity to provide protein in the morning, something that many of our customers want before rolling out an expanded food program.
We're on the box today because Dutch Bros launched a protein coffee. I am so intrigued by it. I got a package from them in the mail today, and they talked all about it, and I was like, "We have to go get that right now." Supposedly it has 20 plus grams of protein in it, and I am a protein girl, but we're going to head there. We're going to give it a try, see what we think, see if it's good. I've tried to make my own at-home protein coffee, and it always tastes like okay, but it's never like the best. I'm hoping there's a lot better than that. 20 grams of protein, and look how good they look. Are you kidding me? Yes, Dutch Bros. Look at this. 20 grams of protein. That's good. That's like creamy. It honestly just tastes like a normal latte, but like a little bit creamier, but not like thicker and not proteiny.
This is going to be my new go-to. It's literally just a latte, but then you know you're getting in protein with it. That's literally what this is. This is genius. This is genius. Dutch Bros, you've done it again. You've done it again. Pop and boba unlocked group purchasing in the afternoon and was extraordinarily relevant and on-trend. Dutch Bros now has a popping boba. I couldn't be more excited. Of course, I had to get all four of their new popping boba drinks, so let's try them out. First, we're going to try a popping boba vanilla freeze with vanilla honey. Popping boba. The coffee is so good, but the burst of the boba's flavor is what makes this even better. Popping boba fire lizard rebel with strawberry popping boba. This is so, so good. Popping boba caramel chai. So much flavor in one little sip.
Last but not least, popping boba berry lemonade. Choose everything you want on a warm, sunny day. These drinks are only here for a limited time, so make sure you stop by your local Dutch Bros to try these for yourself. Sweet cereal sips provide a nostalgia-driven treat. Come with me to Dutch Bros to try the new cereal sweet sips inspired drinks. In case you didn't know, Dutch Bros released their sweet cereal sips inspired drinks at all their locations. Head to your local Dutch Bros to try them out and share your nostalgic moments while enjoying your drink with Dutch Bros. I got a cinnamon swirl iced protein latte and a marshmallow dream freeze. Now let's give them a try. That is so good. It literally tastes like you're drinking milk from the bottom of your cinnamon cereal bowl.
Let's try the Marshmallow Dream Freeze. That is so good. Wow. When I was a kid, I would pick these little marshmallows out of the cereal box and eat them like that. It literally reminds me of eating my favorite cereal as a kid, except now with caffeine for that extra energy boost. If you haven't yet, make sure to check out your local Dutch Bros because they are a 10 out of 10.
As we think about innovation, we have our eye towards both platforms where we can extend product lines and build incremental layers of our business and product drops where we can deliver culturally relevant, on-trend bursts of innovation. Our customers love our Dutch Rewards loyalty program. This program has been enormously successful, ramping to approximately 71% of total transactions since launch in 2021.
Dutch Rewards serves an effective megaphone, allowing us to connect directly with our customers and amplify messages. We get immediate feedback from these campaigns, allowing us to optimize as we go and build a strong bench of transaction-driving opportunities. We are still in the early innings, having just moved to a recency, frequency, and spend-based model in late 2023 and initiated even more sophisticated segmentation work throughout 2024. I'm very excited about the opportunities that lay before us in the years to come. We employ a suite of marketing levers, starting with social media to drive brand awareness. In late 2023, we changed our marketing strategy and began upsizing our paid media spend. Historically, the majority of our marketing dollars were non-working spend. In late 2023, we shifted that strategy to dramatically increase the proportion of working media dollars.
We refocused our efforts on not only increasing frequency among our existing customers through our loyalty efforts, but also on specifically acquiring new customers to the brand. We recognized we had an opportunity to drive top-of-mind awareness, particularly in new markets where you have a large, addressable market that was relatively unfamiliar with Dutch Bros. We knew that through advertising, we could drive trial and repeat for the brand. Recently, we began expanding our brand awareness efforts with the launch of targeted connected TV spots in select markets, like this one called Wanna Go to Dutch.
Time and places are all in. Who you share them with. It's like partings, joy is who you share it with.
Here, in endless energy, we introduce Dutch Bros in new markets as more than just a coffee company.
We speak a lot about paid media, but I wanted to quickly highlight the breadth of our marketing program aimed at increasing brand awareness. Given the brand love we enjoy, we leverage this with strong collaborations and ambassadors. We also partner with brands that are complementary to Dutch Bros, like Awalla, which sold out in just three minutes. As we enter new markets, our goal is to be pillars of the community. We invest in strong field marketing campaigns, particularly with high schools and colleges. This overall strategy shift has paid off in spades. We have seen tremendous success with these strategies in new markets. As you can see from this graph in Texas, we saw a clear inflection point when we turned on our digital spending. We got immediate traction, moving quickly from a highly negative traffic trend to significant traffic growth.
As Josh mentioned in last quarter's call, new vintage performance was a key driver in total same-shop sales outperformance in Q4. We believe this paid media and brand awareness-building strategy played a pivotal role in this outcome. Our unique customer relationship has set the stage for multi-year opportunities for Dutch Bros. I want to spend some time sharing what else we are working on to keep winning, notably our rollout of mobile order and the expansion of our food program. Maintaining customer intimacy while removing structural barriers informed our approach to mobile order. When we launched mobile order, our goal was to maintain customer connection while providing a channel for those customers who wanted to interact with us in a way that better suits their needs.
When a customer places a mobile order, they are able to customize their beverage and are provided a time window for pickup. On the back end, we work hard to ensure our broistas are set up for success. We want our resources to be aligned with demand. Customers have the option to pick up their mobile order at the drive-thru or the walk-up window. Most decide to park and use the walk-up window. Either way, our customers are greeted by a broista where we make a quick moment of connection. When the drink is ready, we utilize a personal handoff, allowing for a second moment of connection with the customer. You won't see a shelf of drinks at Dutch Bros with a mob of people waiting to grab and go. That's not who we are.
For customers using the drive-thru, after being checked in, a broista will run a beverage out to the car, and the customer can exit the line via an escape lane, or the customer will receive their beverage at the window. Either way, we prioritize connection in these interactions and aspire to have mobile order enhance our service experience and remove structural barriers for those customers who may want something slightly different. Here is a video to show you what I mean. Hi, how are you doing? Good. Do you know your drinking list? Yeah. Oh, perfect. What was the name? Bethany. Bethany? Awesome. I'll get you all checked in. I'll go check on it, okay? Okay. Yeah. Order for Bethany. Thank you for your day. We believe removing these structural barriers is generating incrementality in the morning day part.
About one-third of all transactions take place in the morning, and about half of mobile order transactions are in this day part. One of our key goals with mobile order is to make Dutch Bros more convenient in the morning, and we see this play out in the numbers. Mobile order is growing penetration and driving frequency. Currently, mobile order penetration is approximately 10%, up from about 7% at the end of Q3, the quarter of launch. We are seeing mobile order users keep using this channel. In fact, more than 50% of mobile order users have used the channel more than once, a great start given the recency of launch. We are seeing an increase in the Dutch Rewards registrations, up more than 20% on a per-shop basis year over year in the last few months, which is impressive given the current 71% Dutch Rewards transaction rate.
As we scale mobile order, we are noticing a shift in the percentage of customers who choose to use our walk-up window. Before launch, about 10% of customers used this channel. Now, this figure is almost 15%. As we continue to scale this program, I am excited to partner with Venki Krishnababu , our Chief Technology and Information Officer, who joined us in December. Venki has nearly 30 years of experience leading transformational enterprise shaping strategies and joins us from Lululemon Athletica. I look forward to working with Venki as we leverage technology to enhance our customer experience. Welcome, Venki . Just like mobile order, we think food can generate incrementality in the morning and drive frequency.
As we think about the opportunity food presents, our focus is primarily on capturing incremental beverage occasions in the morning from those would-be customers who needed breakfast with their morning coffee and did not want to stop at two places. We are moving forward with food deliberately, and we have a few guardrails in place to help increase our chances of success. First, the program must be minimally complex. We must achieve our goal with the fewest number of SKUs possible. We are not trying to be everything to everyone. Second, we must not hinder speed of service. Preparation times must be short. Third, we must elevate broista satisfaction. Our people are our power, and we believe happy employees are the most enthusiastic advocates for new products. We believe that food represents a massive opportunity for Dutch Bros. Currently, less than 2% of our menu mixes food.
As we look across the industry, we see many of our peers mixing at about one-quarter food. Our mix is unlikely to be this high, as I noted our assortment will be much tighter and our goal slightly different. Also, we continue to see opportunity in the morning day part, where many of our peers see a full half of their sales versus our one-third of sales. Our goal with food is to utilize a focused assortment to fulfill needs days and drive frequency. While we are just in assortment testing now, it is becoming clear to us that hot food will very likely play a role at Dutch Bros. We intend to have a mix of hot items as well as an extended bakery selection, and we are targeting approximately eight SKUs.
Again, our goal is to meet the needs of the greatest number of customers that we can in the morning with the least complexity possible while having a unique perspective. I want to leave you with our confidence in Dutch Bros' positioning and our plan to continue driving brand relevancy and transaction growth in the years to come. We are winning with the customer, and we have terrific brand love. Our foundational transaction-driving initiatives are working, and we have confidence in the future as we roll out mobile order and expand our food program. We are excited for those in attendance to join us on a shop tour and get to experience Dutch Bros firsthand.
All right, all right. Thank you, everyone. Let's take a break. For those of you joining us online, we're planning to resume at approximately 12:10 P.M. Pacific.
We'll have a countdown video on the screen to help assist with timing. Now, for everyone in attendance here, we'll be taking a tour of some of our shops. Everyone has been assigned a tour group, so check your lanyards and then find your way to the buses. The buses will depart in about 15 minutes out the front door right behind you. If you have any questions or need any help, just please see a Dutch Bros team member. When we get back from the tours, we'll be having lunch. It will be served right here in this room. As we're walking out, we'd like to spotlight our second core value: get up early, stay up late. Thanks.
Yeah, so for me, get up early, stay up late is really like a lifestyle. Our shop is 24 hours, so we get to be there around the clock for people. I think it's cool to be there for people who decide at 2:00 A.M. they need to pull that all night every four to seven A.M. class. Get up early, stay up late. It's just a timestamp, love all, serve all. We're here to serve the customer. We're here any time of the day to be here for the customer and make those relationships and create those experiences. They can come here in the morning, start their day off. Honestly, most people end their day here as well. Getting up early and staying up late means that you're willing to do the hard work, willing to make a difference, and really look at the opportunities that are in front of you and seizing on them.
Getting up early, staying up late, I would say is all about being ready to serve your community and your people, getting ready to do the hard things. I would say for me, it's staying till the job is done. That could be putting away stock or making time for a conversation with someone who might be having a stressful day. Get up early, stay up late means we show up. We show up for our crew. We show up for our people. Showing up means striving for excellence in all that we do. Whether that's with our crew or with our customers, just being there for them and giving our 100% no matter what, whether it's 5:00 A.M. in the morning or 11:00 P.M. at night, and you're having to stay a little bit later.
You get to be the first face of a lot of people's days, which is so cool because you can start that day right for every single person you interact with. I love it. I'm gonna spend a skill of Charley, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charley, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charley, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charley, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charley, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charley, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charley, a special technique of Shadow Box. I love it.
I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it.
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I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it.
I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box. I love it. I'm gonna spend a skill of Charlie, a special technique of Shadow Box.
All right, welcome back, everyone. I hope that you all enjoyed the tour. As we kick off the afternoon, we wanted to bring out another special guest, our Vice Chairman, Brian Maxwell. Brian has been instrumental in building the Dutch Bros you see today, joining the company over 25 years ago and shaping many of the elements of culture, people, systems, and operations that make Dutch Bros one of a kind. Brian is going to make sure we are well caffeinated for the afternoon with a second dub shot. Welcome, Brian.
Thank you, Christine, and thank you, everybody. I think this stuff's addicting. We're going to do it again. I don't know if you have all had enough yet. I don't know that it's possible that you can. After touring the shops, it probably became very clear that all of the cool things that we do come from the field. One of the fun things they do is the dub shot. It's just a simple way to interrupt you from the head down grind and just remind ourselves why we show up every day. Obviously, all of you came a long way to be here, and most likely it's an important job you're doing, and you probably left something far more special to you at home. Just take a quick moment. They should be lined up. They should be filled up. Grab those cups.
Line them up. Knock them back to a better future. That's good. Okay, I just wanted to take a few minutes to share some insights for the future from the heritage of Dutch Bros. Over the last three decades, we've been evolving with discipline, staying inspired and locked in on the mission. The early days didn't look a lot different than they do today. We were throwing parties. All were welcome. Come as you are, and everybody is somebody when you came to Dutch Bros. As Gabe said earlier, she felt seen, and we worked really hard to make you feel like, hey, you're in the club. It was infectious, and it was magnetic. Family and friends, customers all wanted to be part of it. As the 1990s carried on, plenty of sharks wanted a piece of it. The opportunity was huge.
There was a large competitor that had been creating a market, a whole new market, specialty coffee away from home. Back then, the barrier to entry was quite low, and the margins were incredible. It would have been very simple to sign deals with large resource groups capable of just taking us national. The formula, the business thesis was simple and clear. Just race to market with a quality product, fair price, and average service. There is just so much white space. As you heard from Trav earlier, we were obsessed with leading a mission around that customer experience and not so interested in fighting against the delusion or, worse, the pollution of our DNA. The mission was creating fun-loving environments and making a difference. Our difference makers were our people. Our people were not just delivering average service.
They were delivering mind-blowing service, creating raving fans, and building the brand one cup at a time. We designed our system in those first 10 years of the three decades with an incredible amount of empowerment to get that result. With that much empowerment, we needed to be very selective with who we were growing with people we knew, people we liked, people we wanted to spend time with, people we trusted to carry the culture. Not only was that fun, it was so much more fulfilling. Investing in that bloodline was proving to be the smartest leverage for a long-term healthy future. We were fortunate towards the 2000 range to have a very good family of franchisees coming in that really bought into what we were doing and sold out to a way of doing it differently.
That was to create those raving fans and know that the numbers were going to follow. Our franchisees were incubators for us, thought partners, and over the course of those 10 years, we really worked hard to refine the best practices into replicable systems. Along the way, we had several of our existing operators today that were working alongside of those franchisees and now finally got their own store. In 2010, 2015 became very clear that this was the direction that we wanted to go. Just three and a half, not even four years ago, summer of 2021, we met with many of you pre-IPO, and the economics were sexy, the clear runway, lots of white space, and a very attractive TAM.
All the story was cool, but the hero of the story was that real differentiator, the healthy people pipeline that was prepared to go and open and operate those locations. Now, at that time, we had about half the locations that we do today, and the farm league had produced over 200 top candidates ready to go, meaning that they were internally developed with an average of over six and a half years at Dutch Bros. Today, I'm happy to report not only do we have north of 200 ready, but the bench is more than doubled. More importantly, they are even more prepared to go and perform at a higher level and carry the culture forward. Much of this is thanks to the leadership team that Christine has assembled to go and execute at scale. You got to meet Jess earlier to talk about our people programs.
I know you were taking notes when Tana was up here. And now I get to introduce Sumi, our new President of Operations. Sumi Ghosh came to us with 30 years of operational leadership experience. His last stint was with Nike as the Global Vice President of Nike stores. Prior to that, he was with Starbucks as the SVP of Cyren Retail, Roastery, and Reserve. And before that, he was the CEO of Tata Starbucks Joint Venture in India. So please welcome Mr. Sumi Ghosh.
Thank you, Brian, and good afternoon. When I joined Dutch Bros just over a year ago, I quickly realized that this is a very special company. As I began on my shop training, everything that Jess shared earlier about our incredible culture was evident. As I toured the system and met more broistas and leaders, it was clear that people loved to work here. That became evident in every interaction with the team, as well as their service to our customers. This is not something a brand can do and create overnight. It is something that very few companies can do consistently in broad geographies, and especially at this scale. I am super encouraged at this level of love and at the scope and scale of what our teams are capable of. It is unbelievable, and I've never experienced anything like this before.
Speed, quality, and service are anchor tenants for Dutch Bros. We lead the industry across all three of these metrics with the most separation in our service levels. Hopefully, you experienced that today during your shop tour. Having the best people allows us to deliver the best customer service. We are honored to be recognized for providing industry-leading customer service for the last three years by Newsweek and in 2025 by Forbes magazine, as well as USA Today. For us, it is not about getting it right here and there. To be successful, we have to do it consistently and at scale. How do we do that? It starts with broista training. To share exactly how we do it, I want to bring up our SVP of Field Operations, Levi Ayriss . Levi started as a broista at shop number 35 over 25 years ago, and he's been instrumental in our growth to 1,000-plus shops. Welcome, Levi.
Thank you, Sumi. We build the foundation from the ground up in each broista and every shop. It's impossible to build a brand that stands the test of time without a strong foundation. We invest heavily in setting our broistas up for success. Our broista training program is intense and demanding. We take tremendous pride in our work, starting with our orientation. We believe in handcrafted. We hand-pull every shot, which means no automatic machines. Each shot has to be extracted from 15 to 26 seconds. We're committed to quality standards and the quality of our training. When a broista steps up to the line each morning, they can have the confidence that the person beside them is well-qualified, skilled, and experienced. It allows our crews to get into what we refer to as the flow and execute speed, quality, and service in a really high-quality way.
Hopefully, you saw that. I know you saw that on your shop visits today. All our broistas are cross-trained in all shop roles, giving us tremendous flexibility to adapt throughout the day and offer a variety and enhanced job design. As a leadership team, we believe it's important to walk the walk before you talk the talk. All members of our senior leadership team must be certified broistas and complete our two-week training in live shops. Here's a picture of Christine and Tana at a shop in Arizona. As a Dutch veteran, I believe this is critical in orienting our leaders to our brand, and I think it's something that makes our culture truly special. We have an incredible resource in our collective strength of our broistas. Early in our company's history, we made a choice to harness this strength.
We require that all regional operators who are the linchpin employees running on average from three to seven locations start their career as broistas. This approach enables us to create compelling futures for hundreds of broistas as they advance in their careers within Dutch Bros. It also helps ensure that the person leading the Dutch Bros region is steeped in our culture, our customer service ethos, and our systems. As we enter new markets where customers and potential employees are unaware of what Dutch Bros is all about, it's a huge strength. We believe in the long run, this sets us apart from our competition. Our pipeline of regional operator candidates is robust, which gives us tremendous confidence in our future growth prospects. We've said time and time again, our shop growth is predicated on our people.
What that means is that we won't open new shops unless and until we have great people to operate them. We have over 450 regional operator candidates in our pipeline. With an average span of three to four shops per operator, our current pipeline gives us the ability to support approximately 1,500 new shops. What's even more exciting is that pipeline continues to grow even as we open new shops. As Brian mentioned earlier, in 2021, our operator pipeline had 200 people in it. Since then, we've opened almost 450 new shops, while more than doubling our operator pipeline. We're in great shape. On average, candidates in the pipeline have about seven years of tenure. This is a tremendous advantage as we are expanding into new markets. We're sending highly experienced people to represent our brand.
As candidates continue to advance, we want to expose them to higher-level leadership and business training beyond the skills needed to just make a drink, including planning, scaling, running their business, and succession pathing. As we scale our culture, we have a force multiplier in our opening team, Masters of Broistas, who we affectionately call the MOB for short. This group of 500 opening team members travels around the country to help open the new shops. Our MOB will spend several weeks on-site operating, training, and hiring all of the new employees. Depending on how the new market is, the team can spend up to 12 weeks on the ground. We believe this is a critical competitive advantage and a competitive differentiator. When we enter new markets, we want to put our best foot forward and show new shop customers and potential employees what Dutch Bros is all about.
Having a team of culture carriers helps set the tone, developing strong brand loyalty from customers and attracting employees who want to be part of something magnetic. Here's a video of one of our coaches, Jordan Gonsalves, empowering the next wave of shop leaders at a shop in California.
Yo, there's two types of people in this world when they see a blank canvas. Ones, they get anxiety, and ones, they get inspired. There's some people, right? Sometimes we are who we are at the moment, right, naturally. Then there's opportunities that we can choose to be the people we want to be. That's what this shop is. It looks like coffee. It smells like coffee. It's about human connection, and it's about love. Don't get it twisted, okay? Serious about that one. As much as you put in in the shop, you guys will receive. I just can't tell you when you will receive it. That's how the universe works. I don't control that.
We hired Jordan at 16 years old in Meridian, Idaho, and now he is the business coach of our busiest market in California. It is an incredible leadership story. This is how we set the tone and ensure we can scale the culture with the right people. Our MOB program also allows us to develop an alternative career path for operator candidates who may be looking for new sets of experiences as they make their way through the pipeline. It is a terrific way to see the world, meet new people, and have a ton of fun. For our broistas who aspire to be operators, we provide two career paths, one through the shops and one with our group of traveling opening team members. We believe this provides a terrific opportunity to experience several parts of our business as these qualified operator candidates advance through the pipeline. With that, I'll turn it back to Sumi.
Thank you, Levi. Our people, our training, and our opening systems have positioned Dutch Bros for growth for years to come. Thank you, Levi. Our operating system enables us to scale our culture and create brand love. That said, we also recognize that there's also opportunity. Our customers tell us that there are a few structural opportunities that, when solved, would unlock greater visit frequency by making it easier for Dutch Bros to be a regular part of their routines. One of these key opportunities is speed. I would like to share with you our plan to increase speed by driving throughput. We believe that getting customers through our lines faster positions us to drive more transactions. This provides us visibility to our growth for multiple years as these initiatives scale.
We believe that we have an opportunity to improve our labor deployment with better technology to ease operational bottlenecks. Our focus is on making sure that we have the right people in the right place doing the right thing at the right time. We have opportunity in our labor model. Historically, we have focused on weekly labor deployment with an emphasis on minimizing the costs of overstaffing. When we reviewed our performance, we historically evaluated broad system-wide metrics. Going forward, we can be more granular. With a greater focus on hourly performance management in our shops, we are shifting our focus to minimizing absolute variance, reducing over and understaffing. Perhaps most importantly, we are empowering our operators to achieve shop-specific targets. We also have an opportunity in how we utilize technology to help us achieve our staffing goals. Historically, we've used a manual sales forecasting process for each shop.
Shop managers would then take this forecast and determine their staffing levels. Also, labor reporting has historically been ad hoc, which has limited our ability to recognize deviations quickly. Going forward, we're leveraging machine learning and AI technology to forecast sales at every shop, considering a variety of factors. Using higher fidelity sales forecasting, we are also better positioned to use data-driven labor scheduling and automated labor tracking. Finally, we see an opportunity in easing operational bottlenecks. We have a great team of broistas who are innovative and creative problem solvers. Our opportunity lies with translating many of their own best ways, defining the system-wide best way, while leaving room and flexibility for broistas to continue to think critically and solve problems as they arise. Our initial goal will be driving throughput at peak.
While we track many metrics, we believe that there's power within simplicity and focus. Our entire team is focused on driving improvement within customers for peak hour. Similarly, we believe that there's power in granularity as well as ownership. Every shop has an individualized throughput goal based on its own baseline performance. We are challenging every shop to exceed their specific best by day and by month by at least 10%. With better labor deployment enabled by technology and supported by enhanced reporting and resources to ease bottlenecks, we are confident in our ability to move throughput higher and enhance speed across our fleet. Early test results show improvement.
In a test of five shops, which also happened to be led by Gabe, who you met earlier, test shops showed a 3.5% improvement in customers per peak hour above the control group, which had already showed impressive improvements over their baseline. These results, while early, are encouraging, and they demonstrate that there are numerous quick wins that can help accelerate our throughput. We know we have work to do, and we're excited about continuing pushing forward. We have tremendous opportunity at Dutch Bros, and I'm so excited to build upon this terrific culture and systems to help drive throughput and operate with excellence. Next, I'd like to introduce Josh Gunzer. Many of you already know Josh, who joined Dutch Bros in February of 2024.
Josh has over 20 years of finance leadership, most recently serving as CFO of MOD Pizza, and he previously served as an SVP of finance at Starbucks. With that, I'll turn it over to Josh after this video that highlights our third core value, change the world.
Change the world is a hugely ambitious goal. When I think about Dutch Bros, it makes me think of our people-focused ambitions and our people-focused culture. I think a prerequisite to changing the world is creating a community of people-focused people.
We were given a world that was made for a previous generation, and we want to leave it better than we found it.
Changing the world, to me, and I think to Dutch Bros as a whole, means just meeting people where they're at, whether they're having a really bad day or having an incredible day.
When we talk about changing the world at the Dutch Bros level, that one cup of coffee is an opportunity to make small change. That small change compounds over another cup, over the next day, over another cup, over another smile, over another interaction. It compounds over time. I feel like that's how we can change the world on a massive scale together is through those little pushes together.
I think sometimes we can't change our circumstances, but it's about the attitude that you have about it and how you approach something. When it comes to changing the world, I feel like being able to practice a lot of gratitude.
We want to change the world with one coffee at a time. There are a lot of people that will not talk to anyone their whole day, and they come to us. It is very important to leave that impression like, "Hey, it is a great day. It is a new day.
Treat all of our customers like we want to be treated, and hopefully they carry that on with them for the rest of the day and give it to someone else.
I think it's really cool to see that customer in a week or a month and have them have that conversation with you and have them say, "Thank you. You don't know what that meant to me." Yeah, I think changing the world just really starts at the smallest level, the smallest act of kindness, making me that little domino to changing someone's life.
All right. Thank you, Sumi. As Christine stated, we are a growth company. A substantial part of this growth has come and will continue to come from identifying, building, and operating great new shops. Having strong processes and systems in place to support these efforts is critical. Over the past 24 months, we took a deep dive into our processes and made sure we really understood the key variables to drive success in a given location. Coming out of this exercise, we began standing up an enhanced market planning function, which placed some guidelines on our development process, particularly surrounding our infill strategy and a more deliberate focus on entry into new contiguous markets. Market entry timing is critical, and we generally prefer to give a shop 9-12 months to mature before infilling nearby trade areas.
We've established tiered seed points and adjusted our development cadence in new markets to align with entering in a tiered approach. For example, our preference is to plant a flag in a suburban or light suburban trade area before expanding into rural markets. We also refreshed our real estate model to incorporate data for a substantial number of new shops. Given the pace of our growth, it remains important to continue to feed the model more and more data as we open new shops. We revamped our real estate process to incorporate these key changes and enhance our overall sophistication as we make these important capital allocation decisions. To further bolster our team, I'm super excited to introduce Brian Cahoe , our new Chief Development Officer. Brian joined Dutch Bros last month, having most recently served as Chief Development Officer for KFC US in his 25 years at Yum Brands.
If it wasn't his first month on the job, we'd asked Brian to come up here and share his perspective, but we needed to let him get his sea legs first and, of course, pass his broista training. I speak for the rest of the leadership team and Christine when I say that we can't wait to have Brian drive our real estate strategy as we capture this massive opportunity that lies ahead of us. Welcome to the team, Brian.
Taken collectively, our investments and the results they have driven give us confidence to update our total addressable market to 7,000 shops. At the time of the IPO, we provided a time-bound figure, 4,000 shops in the following 10 to 15 years as a way to size the opportunity, but also to provide insight into our development cadence.
Our results and most recent experiences allow us to remove that restriction and look further out into the future. We're using a similar but enhanced model in our updated 7,000 shop TAM as we did at the time of the IPO. As a reminder, we utilize a bottom-up approach when we calculate the total addressable market, where we identify sites that meet a certain set of criteria. We assess an array of inputs, including demographic, psychographic, and market-specific data, including consumer spending, competitive dynamics from both traditional and alternative data sources. Based on these factors, the model estimates sales volume at various site points, which informs our TAM. Since 2021, we have enhanced the process with new data sources and actual performance data from shops in newer markets.
While our updated TAM includes some recognition of the mobile order rollout, we may be able to realize upside as we see this in our expanded food initiative actualize. Additionally, the updated model includes a discount for lack of brand awareness in new markets. It is likely that this discount will dissipate as we mature and achieve higher sales levels of brand awareness compared to today's low baseline. I'd like to double-click on one element in particular, the enhancement of our data sets. We've transitioned from the old-school one, three, and five-mile fixed rings to the more flexible trade areas you see on the right. Using alternative data sources like cell phone data, we can better understand where our customers work and live within trade areas and how our trade areas might overlap between multiple locations.
We've also developed proprietary tools with loyalty penetration, competitive intensity, and other internal data to more fully evaluate a trade area's potential. In combination, this approach allows us to be more surgical in the placement of our shops and gives us elevated confidence in each site we choose to pursue. As we think about our growth prospects, we recognize that we operate in a competitive market, but we are encouraged that the market is large and growing. We estimate the coffee market is $74 billion and the energy market is $52 billion, and that these markets will grow over the upcoming years, particularly energy. With our shop growth prospects, we anticipate that we will be a share taker and grow well in excess of the overall market growth rates.
As we look towards our 7,000 shop TAM, we recognize we have an enormous opportunity in states in which we already have footholds. We see an opportunity for about 3,500 total shops in these 18 states where we already have a presence. We view this as de-risking our TAM as we know these markets well and we feel confident in our ability to compete here. As you see here, our brand travels very well. Our confidence in our TAM is bolstered by the portability of our brand. We have strong shop-level economics across regions as we expand. You'll see that performance in our newest regions, shaded in yellow and light blue on this map, have AUVs in line with those in our traditional core of the Pacific Northwest.
Generally, as we move eastward, we're entering into lower wage markets, which is also an important factor to consider as it relates to shop-level margins and our shop return profiles, which to date are similar for us across regions. This portability gives us confidence to enter new geographies. We are very encouraged by the reception we've received as we've entered new markets, including Tennessee, Kentucky, and especially Florida. We believe we have a tremendous opportunity to continue growing in these markets, as well as the broader Southeast region for years to come. Our development strategy focuses on entering contiguous markets, which you will see play out here in 2025 and beyond as we plan to enter five new states this year. We believe this expansion sets us up well for our goal of 2,029 shops in 2029.
As Christine called out earlier today, it took us 33 years to open our first 1,000 shops. We're challenging ourselves to open 1,000 more within the next five years. This is not going to be a walk in the park, but given the investments we made into people, processes, and insights, and the strong results we've seen in new shops, we're optimistic as we work towards this goal. Given the size and profitability of our existing shop base, it is our expectation to fund this growth entirely from cash flow from operations. I mentioned how pleased we are with the performance of our new shops and how that is elevating our confidence to grow as we look forward to the future. I want to share with you some of the insights we've captured and hopefully have you feel the same confidence we do.
Same-shop sales growth in 2024 was strong across the board, with the newest vintages demonstrating outperformance. We attribute this largely to the work we have done in refining our real estate strategy and investing in paid media to drive brand awareness in new markets. Needless to say, we are pleased and encouraged with this trend, which, as I noted last month, contributed to our strong fourth-quarter results. Our system AUV stands at $2 million as of year-end 2024, and we consider this to be healthy and strong. AUVs dipped slightly in 2023, but recovered in 2024 as we began realizing the benefit of our enhanced market planning and paid media efforts. This gives us great confidence as we consider our long-term growth prospects. The class of 2023's average unit volume improved 7% in 2024, and the class of 2024 sales performance was extremely strong.
In fact, first-year performance for our 2024 shops was 20% higher than first-year performance for the class of 2023. These results are very encouraging and give us confidence in our refined real estate strategy. As we look forward, we're targeting a year-two AUV of $1.8 million. Now, as we discuss shop economics, lease type is a key factor. We primarily utilize two lease types in our arrangements. Build-to-suit, where Dutch Bros leases both the land and the shop, with a development partner contributing upfront capital, for which we pay elevated rent expense throughout the lifetime of the lease. Ground lease, where Dutch Bros leases the land and builds a shop on top of it. While the total cost to develop a shop is about the same in each arrangement, Dutch Bros' contribution ranges from about $750,000 for a build-to-suit lease to about $2 million for a ground lease.
Our lease mix has varied over time, but has weighted more heavily towards ground leases over the past four years. In 2024, about 15% of our leases were build-to-suit. Becoming a self-financing business and generating cash flow is a key goal for us. We have an opportunity to achieve this milestone more rapidly by shifting our lease mix more towards capital-efficient build-to-suit arrangements. In 2025, we're targeting about 40% build-to-suit mix. As we shift our focus to more build-to-suit leases, our future goal is to increase that number to 60%. This lease mix has a direct relationship with the average CapEx we contribute per shop. As our ground lease mix percentage grew, so did our average CapEx contribution. Absent lease mix, underlying development costs rose about 40% during this period, driven primarily by increased site work expenses and sustained pressure in skilled trade labor.
We will continue to look for ways to mitigate these increases with thoughtful prototyping, cost engineering, and other approaches. We see an opportunity to materially reduce the average CapEx per unit by shifting our lease strategy to more capital-efficient build-to-suit leases. We believe we hit a high- water mark in 2024 at about $1.7 million per shop for the year. In 2025, we anticipate this number will be about $1.5 million, roughly a 10% improvement over 2024. We see further opportunity in the long term with a future goal of $1.25 million per shop, which would be a reduction of approximately 25% from 2024 levels. Our strong shop-level economics drive our incredible returns. A combination of strong AUVs and margins, along with a reasonable per-shop capital investment, drive these strong returns.
We are confident in our brand performing in newer markets, and we believe we have demonstrated strong shop-level margin performance, which is approaching 30% in 2024. Both our build-to-suit and ground leases provide excellent cash-on-cash returns, and we are fortunate to be in a position where multiple development strategies work for our brand. That said, we recognize that we will be able to enhance our blended portfolio return by shifting a greater portion of our leases to more capital-efficient build-to-suit arrangements without compromising site selection or trade area positioning. To provide context, our class of 2022 generated a blended year-two cash-on-cash return of approximately 40%. Our class of 2023 generated a blended year-one cash-on-cash return of approximately 35%. These figures are encouraging as they demonstrate the strength of our model to deliver strong returns in classes that are significantly tilted towards more capital-intensive ground leases.
We expect to drive cash-on-cash returns towards our targeted level of approximately 45% as our lease mix shifts back towards more build-to-suit leases. Now, our performance in 2024 was outstanding. We drove 33% total revenue growth and opened 151 new shops. This represented 18% new shop growth year over year. We also delivered 5.3% system same-shop sales, a 250 basis point acceleration year over year. We continued to invest in capability while scaling our G&A, delivering 70 basis points of leverage year over year. These drivers combined to deliver a terrific 44% growth in adjusted EBITDA. Given where we are in the quarter, we want to provide the following updates for Q1. Quarter to date through Monday, we've opened 27 shops, and we expect to open up to three additional shops before the end of the quarter. We remain confident in our opening at least 160 shops in 2025.
Quarter to date through Monday, our system same-shop sales were 4.6%. Finally, we would expect adjusted SG&A to be approximately $56 million in Q1, which is in line with the statements I made last month regarding our SG&A having a flatter shape throughout the year. Now for my nerdy slide, as Christine referred to it. I want to highlight some tax-related information for your modeling considerations. As our business continues to grow and perform, tax and tax-related distributions will become more and more relevant. A note on our structure: Dutch Bros utilizes an Up-C structure where the operating company is an LLC and is in turn owned by Pubco and pre-IPO members. For tax modeling purposes, there are two key components to consider: our Pubco or corporate tax payments and our obligations under the LLC agreement.
First, for modeling purposes, Pubco's tax rate can be approximated by multiplying the blended tax rate of approximately 25% by Pubco's ownership of the LLC. Please see footnote 15 in our financial statements for this figure, which is approximately 65% at the end of 2024. We have a tax receivable agreement with the LLC's pre-IPO owners. The agreement effectively allows Pubco the ability to utilize deductions that are created when a pre-IPO owner reduces their position out of the LLC. At the time, tax attributes are created that can be applied against future earnings of Pubco and therefore reduce cash payments to the taxing authorities. When the savings are realized, Pubco instead makes these payments to the pre-IPO owners for 85% of the actual savings and retains the remaining 15%. These TRA distributions do not impact our income tax expense. We're simply saving on cash tax payments.
Now, second, since the operating company is an LLC, the members of the LLC are subject to personal income tax on their share of the LLC earnings. The operating company is required to make quarterly cash distributions to its members to cover their tax obligation resulting from the LLC's earnings. The LLC agreement calls for these distributions to be made at a marginal tax rate of approximately 54%. Distributions are not included in the company's P&L and are accounted for as an equity reduction on the balance sheet and in the cash flow from financing section on our cash flow statement. Now, with that out of the way, I'd like to spend some time discussing our growth algorithm. We think of this in three pieces: revenue, company-operated shop contribution margin, and adjusted EBITDA.
Our growth algorithm goals for these pieces are approximately 20% revenue growth, approximately 30% company-operated shop contribution margin, and adjusted EBITDA growth of 20% plus. I'll walk you through the key components. We are targeting approximately 20% total revenue growth, which is comprised of annual new shop growth in the mid-teens and same-shop sales in the low single digits, which would incorporate the impact of sales transfer. As I noted, we delivered approximately 18% new shop growth in 2024, and we're targeting 2029 shops in the year 2029, implying we maintain a roughly similar growth rate over the next five years, squarely in line with our mid-teens expectations. Our optimism in our ability to achieve this goal lies in the changes to our real estate strategy, emphasis on market planning, and the bolstering of our four-wall unit-level economics.
It's worth noting that our revenue growth expectations remain unchanged from the time of our IPO. We are targeting approximately 30% company-operated shop contribution margin over time. In 2024, we achieved 29.7% shop contribution margin. As we guided earlier this year, we do expect margin compression in 2025, primarily driven by coffee price escalation. We know we have excellent margins, and it is not our intention to continue to scale shop-level profitability beyond this 30% level. As we drive transaction growth, our intention is to reinvest in the four walls, especially in our people. We believe our people are a key factor in maintaining a lasting competitive advantage. Finally, we're targeting adjusted EBITDA growth of 20% plus per year, which is in excess of our revenue growth target of approximately 20%.
Since 2020, we have delivered a compounded annual growth rate for adjusted EBITDA of 35%, well in excess of our prior long-term algorithm of 20% plus. Going forward, we believe our biggest lever in driving adjusted EBITDA growth faster than revenue growth is how we manage the SG&A line. We believe we have long-term opportunity to continue to achieve leverage through disciplined, smart SG&A investments. Now, to close, I'd like to spend a minute discussing our free cash flows. In 2024, our cash flow from operating activities was $246 million, and our purchases of PP&E was $222 million, indicating that we were free cash flow positive for the year and generated $25 million in free cash flow.
As I noted last quarter, we did benefit from working capital timing, but we believe the size and productivity of our shop base has reached a sufficient scale such that we expect to be able to finance future shop growth with cash flow from operations. We do anticipate that as our profitability increases, our cash tax distributions will also naturally increase. While this could result in net cash usage in 2025, all else being equal, we would expect to consistently add cash to the balance sheet beginning in 2026 and beyond. We are very proud of this milestone, which has been a key goal for our company since our IPO, and we believe it demonstrates the strength and the underlying performance in the business and the health of our model. With that, I'd like to welcome Christine, Jess, Tana, and Sumi to the stage to conduct a Q&A session.
Thank you, Josh. Thank you all very much again for joining us today. While the team sets up, I want to quickly discuss logistics. We plan to hold a 30-minute Q&A session with management. Following this session, we have provided transport back to the hotel and airport. As a reminder, if you want to partake in any more caffeinated beverages, please head to the back of the room. We will try to answer questions in the room first and then try to get to a few questions online as well if we have time. If you have a question, please raise your hand and we will run a microphone to your table. Also, please state your name and the name of your firm. For those of you online, you can submit a question through the questions tab on the webcast screen.
In the interest of time today, we're going to be prioritizing questions from analysts with a particular focus on long-term strategy. Thanks.
Great. Thank you. Andrew Charles from TD Cowen. Very encouraging presentation. Thanks for all the thoughts. Josh, I just want to know, how do you ensure you can get enough built-to-suit sites to ensure you can maximize ROI and amplify free cash flow? Over the last few years, clearly they've skewed more towards ground leases. How are you ensuring you have enough supply to build-to-suit? I have a follow-up.
Yeah. What I'd say is we've got a really strong pipeline of new shops as we're looking at the best possible sites. I will always qualify that we're first going to start with the best possible site, making sure we're not compromising site selection. There's plenty of opportunity out there. The shift to ground lease was a deliberate decision as we shifted that way, and we're making that decision to pivot back towards more build-to-suit leases going forward. I think there's plenty of opportunity in that white space that we outlined ahead of us.
I would add to that, as you saw on the slide, we are already into that transition. In 2025, we're already beginning to make that shift. We know what's out there. We're building the pipeline for 2026 right now. We have a lot of confidence in our ability to make that shift.
My follow-up is, how do you ensure longer term that you can reach that year two AUV of $1.8 million? I know obviously if you're going to be prioritizing white space over infill, but when the brand is doing about $1.6 million, $1.7 million in those expansion markets at the Sun Belt, you're ultimately going to have to come back and infill more. How do you ensure you can hit that $1.8 million longer term?
Yeah. I mean, what that really comes back to is the work we've put into our real estate modeling, our market planning efforts. I think we've incorporated a lot of really good data and insights into that model that allow us greater visibility to an ability to project what sites will do in that year two. A reminder that that is a year two target that we're targeting for the shops, but we do feel confident in that increased insight in the market planning efforts we put into everything we're doing around our real estate strategy today to be able to allow us to hit those targets.
Again, I think you saw the first impacts of what we were doing from a modeling perspective in 2024. The ability to increase AUVs in one year by 20% of new shops really shows the transition and the changes we were making in those market planning efforts.
Hello. It's David Tarantino from Baird. I had a question about the geographic expansion that you showed for even this year. It looks like you're kind of moving into some northern-tier markets, Ohio and Indiana.
I think at least at the time of the IPO, there was a view that you'd stay kind of in the south of the Mason-Dixon line. I guess my question is kind of what prompted you to make that move in the northern tier? Does the operating model need to change at all when you enter some of these colder weather markets, or are you envisioning it being very similar to execute?
Yeah. I mean, listen, I think as we've incorporated more data, incorporated more insight from our performance in new markets, and then the continued performance in those markets we operate, that's what's given us the confidence to be able to expand and really remove that restriction. I think a lot of that restriction was really a matter of focus in where initial growth was going to be over that time-bound horizon.
As we think of the opportunity farther on, we certainly believe there's plenty of white space ahead of us in all regions. I like to remind people that it's not especially warm in the Pacific Northwest where we're founded. I think we certainly have a model that works well in cooler climates, and we've seen, as you can see there, we see that really perform across all geographies and across the country today.
Thank you.
Thanks, guys. Just kind of wondering some of the thought process into. Keeping Same-store sales at low single digits when you kind of had a bunch of proof points and a bunch of things coming up, continuing to drive with mobile order and pay and eventually food and operations with speed and throughput. Is there something more with sales transfer, different than the 200 or 250 basis points, or just provide us a little thought in terms of kind of keeping that same part of the algo?
Yeah. I mean, as you pointed out, I think we have a lot of really good long-term growth drivers, and we feel really good about our ability to continue to drive sustained growth. I think what's important is, as we think about our growth algorithm, we're looking over the long term. We're not talking about a specific year or the next in the near term, but we do believe there's, over the long term, ability to continue to drive that sustained growth. All the great work that Tana's team is working on really is leading to that confidence in our ability to continue driving that positive momentum. I'd take it back to the fact that this is a long-term view that we're taking on the world.
Nothing different on sales transfer?
Yeah. Nothing specific different on sales transfer.
Thank you. Jeff Bernstein from Barclays. Just had a question on the restaurant margin outlook. I think you said you approached 30% in 2024, a little bit of pressure in 2025, hopefully transitory with coffee costs. As you think over the next few years, kind of sticking with that 30, I noticed it was not like a 30-plus or anything along those lines. How do you think about that? Because presumably, with your potential comp growth, low single digit or even better, and the leverage you can get on fixed costs, it would seem like there is an opportunity that you have not necessarily reached a ceiling at 30%, especially so early in your stage of growth. I would think there are more leverage opportunities. I'm just wondering the components that go into that 30%, whether you're assuming food, labor, occupancy, whether there's any unusuals in either direction that kind of keeps you steady there rather than further expansion. Thank you.
Yeah. The way I think about it, and I'd point back to a lot of the points I made, which is, as we generate expansion, our goal is to be able to reinvest back into our people. Our focus will be making sure we're continuing to create a differentiated experience for the baristas that you guys got to meet today and that you get to experience across our system. Certainly, there's an opportunity to generate leverage as we grow volumes. We'd expect that, absent any other decisions made that could create upside. We want to put that back into our people. I feel that is what differentiates our brand. We believe it's really what creates the special Dutch experience. We want to make sure we continue providing that momentum going into the future.
Hi. Anthony Trainor, Wells Fargo. I wanted to ask a couple of questions on the CPG business. First off, can you talk through what strategically you're trying to accomplish with that announcement this morning? Maybe talk about how that fits in with the TAM that you ultimately see that you can accomplish.
Yeah. The CPG business, as we started to think about it, and we were thinking about it quite some time ago, the thought was to build brand awareness. One of the things that's really different about the beverage occasion in the beverage market is it is super high frequency. That consistent reminder of the brand and of what you do, especially as we're expanding, is really important. It also is really a different occasion at home than it is within a retail shop. As we've done research on the CPG market, about 95% of our customers are already buying coffee at home. They are buying it just from other brands and not our brand, and they wish that our brand was in the market.
As we look at these opportunities, it is a very big way to actually build that brand awareness, which we have been so successful with as we've entered new markets like Texas. You think of our scale here, the scale that we can achieve by entering the CPG market and having our brand on shelves is really going to be important as we grow and develop this brand. The other really important point, I think, to take on the CPG business is we are building this brand with our baristas and through our retail shops. As we have worked with our new partner, and this is fully a royalty and licensing agreement where they are doing all of the manufacturing, all of the packaging, all of the distribution, all of the work with our partners, we are providing the brand. We are providing the tasting to make sure that the product fits. All of these things are just incredibly important as we continue to build this brand out.
Thank you. Brian Mullan, Piper Sandler. Just wanted to ask about the overall beverage market. One thing you discussed today was energy growing faster than coffee. Can you give a sense maybe how much quicker it's growing in the data you're looking at, how long that's been going on? From here, presumably, you'd expect that to continue. Just talk about how much runway there is for energy to keep taking share. What ending are we in of that trend?
Yeah. As we look at the overall energy market, it truly is high growth. We are also the category creator of customized energy. Largely, what people are doing out there is they're buying energy drinks within CPG. That ability to come and customize, make it your own flavor, add soft top to it, add boba to it, is really something that's truly unique and something that we're creating. As we've shared in the past, we actually have higher penetration in energy in our legacy markets. Because this is a market that we are creating, we do believe this is a big opportunity for us as we continue to expand across the country. Maybe Tana can comment a little bit on how we're growing the energy brand with each of our kind of promotion periods.
Yeah. We see it as an opportunity. As we think about innovation, it's a foundational transaction-driving strategy. We're very focused on making sure we're delivering innovation across our three core product platforms. Energy is certainly one of them. We know that energy today is about 25% of our business. As Christine mentioned, it's all about customizable energy. We feel like that is a differentiator. I think you'll see us continue to lean in. As the market grows, I think Dutch is extremely well-positioned to capitalize on the opportunity.
That's everything. Sure. Brian Harbour from Morgan Stanley. Hi, guys. I guess just on the kind of throughput initiatives that you discussed, there's obviously some systems stuff that needs to be on there. I mean, how quickly does that kind of happen? Is that also going to happen in the franchise stores concurrently? Just on food, how fast do you think you can roll that out as you think about kind of '26? What are sort of the supply chain considerations associated with getting that in place?
On the throughput question, we really have found through my time, three months spent in the field when I first began, seeing the real strength of our brand through our culture and how we serve each other and serve the customer, and we're blessed with incredible lines. We do see an opportunity to help the baristas' job to make it easier and find efficiency there. First, as we mentioned, it begins with labor and how we deploy our people, as well as finding the way, the consistent way to approach the work and refining efficiency, like we mentioned before. We do see that both in our company shops as well as franchise taking that opportunity. We do see that this is going to lay out a growth for years to come. This is literally blocking and tackling that we're doing every day.
I can take a quick question. We see food as a massive opportunity. As we look across the industry, we know we have an opportunity, particularly in the morning day part, and we mix much lower than some of our peers. We are very focused on food. The role of food at Dutch Bros is going to be to drive an incremental beverage occasion. That is how we are thinking about it. We are very much in the early innings. We are in assortment testing and certainly are looking to expand the test in 2025, but do not really have any other updates to share at this point. Other than that, we feel that food is going to play a role at Dutch Bros long-term.
Hi. Thanks. It's Sharon Zackfia with William Blair. I think we started off talking about barriers to increased frequency for your customers, and clearly units are part of that. Thank you for the update there. I guess I'm curious on where your average frequency currently compares to your peers and where you've been able to address throughput or market density. How does that look relative to the rest of your markets for Dutch?
Yeah. We haven't released that specifically, but it's something we're really focused on because as much opportunity we have to introduce ourselves to new customers, we have an incredible amount of opportunity with customers that already love us and wish they were coming to us more often instead of others by solving some of those barriers. I think that has been one of the things as we've really looked into how our customers behave and what they're sharing with us is super encouraging because when you already have customers that love you and they want to come more often, and they're telling you specifically, "Well, if you had mobile order and if you had food and if you put a shop closer to me, I would actually come more often because I love you more than anyone else." That's pretty cool. That is what we're focused on. What I would say is I do think that those barriers, we still have quite a bit of room to build in-frequency with our own customers.
Thanks, guys. Thanks for hosting us. Dennis Geiger, UBS. You highlighted some compelling stats today about value scores, customer value perception scores. The love of the brand clearly came through today. Wondering if you could kind of give your latest thoughts on the brand's positioning in a difficult macro backdrop. Historically, the resiliency of sales and transactions, maybe latest thoughts on how you think about the go-forward, even in a tough backdrop where you've got a younger income cohort. Just touching on that resiliency maybe if you could. Thank you.
Yeah. I think a couple of things is one, I think we're in an incredibly unique position where we have a really, really strong foundation with our people systems and with the love for our brand. That unique position is that we have sales layers that have really worked for other folks that we are still uniquely building for ourselves. The other thing I would highlight is Josh shared our quarter to date, same shop sales number. As a reminder, we are comping over a 10 from last year and feel really good about how we're performing this quarter in what headlines might say is a more difficult environment. I do think we are incredibly uniquely positioned with the sales layers that are really large for others that we still have in front of us.
Hey, thanks. This is Greg Frank from Guggenheim. I actually had two questions. The first was, I think embedded in the build-to-suit is like a 9% implied cap rate in the difference between ground lease and build-to-suit. Is that the market for what you guys are seeing today? My second question was maybe for Tana. As you guys push into CPG, a lot of the price points for where those products are are $2, $3 per can. That's a very different price point from where a lot of the retail coffee and energy drinks are. How are you thinking about positioning the brand from a premium position versus maybe competing with some of those brands that are already in the grocery aisle? Thanks.
On your first question, two very different. I don't know our latest cap rates in terms of what market would be right now. What I would say is I think there is plenty of opportunity for us to be able to go after the build-to-suit. We do believe it, as we've seen, we see fantastic returns on our side. We see a lot of opportunity to continue building and pivoting to build-to-suit leases. I'll let you take that.
Yeah. As it relates to CPG, I think we're seeing some trends in the beverage industry that we're seeing across our retail business and then also are transpiring within the grocery store as well. There is a consumer movement towards cold. There is a movement towards flavor- forward. We think we're uniquely positioned to enter that space. We specifically will be focused on coffee as we start. We think there is just opportunity to continue, as Christine mentioned, building brand awareness to help drive and introduce people to Dutch Bros.
I would add to that. We've done a significant amount of research into the CPG business over the last year, year and a half. One of the things that's really unique about the coffee side of the business is it's really led by retail brands. That differentiation in pricing is actually already well established and is known in the market. Customers understand the differentiation between having a handcrafted beverage. They understand the customization that goes into those beverages and that service that we're providing at the retail level. Again, although we've shared it today, we have been doing a lot of work on this space to really understand because we are doing things at this point in our growth that will only enhance this brand, add to that brand value, add to the brand awareness that we have.
Oh, hi. It's Sarah. I have Mike. Sara Senatore from Bank of America. I have a question for Tana, I think. Maybe twofold. One is I think you talked about historically media dollars were non-working. I guess I wanted to understand that shift. Are you doing less frequent LTOs or how do you spend more of that on working media without needing the constant creative? When you look at when I looked at the AUVs, the Southwest, I think, is the highest AUV market. Is that sort of striking that balance between tenure and awareness versus if you look at Pacific Northwest, maybe less dense or less cannibalization? I'm just trying to understand what the curve should look like as your oldest market is the lowest volume and then your second oldest market is the highest volume.
Yeah. I'll take the media question first. I would say when I joined in 2023, we were very focused on jump-starting transaction growth, specifically improving comp performance in new markets. Our research indicated the issue was really one of top-of-mind brand awareness. Guests were just not generally familiar with Dutch, who we were, what we had to offer. We knew that advertising, we would double down and that we could drive trial and repeat, specifically to date through a paid digital program predominantly. I think as we continue to scale, we'll certainly look at our media stance, our media mix, and make sure we understand what makes the most sense for us there. I also think part of what has worked there has been around focusing on leaning into the large organic following that the brand already has.
Social media executions, brand collaborations, partnerships, field marketing, there is very much a purposeful grassroots piece to how we are building brand awareness as well. Specifically as it relates to the budget, it was honestly just looking at what we were spending and making choices around trying to move dollars into working media, really with maintaining our total budget stance, but the proportion of dollars to working, just making better choices, I think. I think we will continue to see us evaluate that and look at our media stance over time.
On your second on just the AUV variation, sorry, if you can't hear me well. The AUV variation, I mean, there's a few different impactors there. It's not just a matter of age, but if you think about our shop size in many of the older shops in particular in Oregon, just there are significantly smaller shops. We are much more densely penetrated in a lot of those Oregon markets as well, whereas in the broader Southwest, there's still plenty of room to expand and grow. I think both of those come into play when you just do a relative comparison, again, not just the age set. Still plenty of expansion opportunity across those areas.
Hi. Rahul Krotthapalli, JPMorgan. You guys have done a phenomenal job in explaining how the brand revolves around the people and culture. I'm curious about the whole adoption of the new technology, stuff which Sumi talked about in the store, labor deployment, throughput improvement initiatives. Can you detail a roadmap for this and also discuss any learnings from some of the test stores you pointed out? The follow-up is on the TAM. Can you elaborate your thoughts in the real estate strategy on how much weightage was placed on the local and regional competition growth? That would be great.
Yeah. First, on the technology, I think we've found a lot of fruit with the labor forecasting that puts us in our best position to have the right people at the right place doing the right thing. We've found broad improvement in our labor deployment as a result of that. The things that we are continuing to see on throughput, we anticipate to see the progress that we're seeing to continue going forward.
On the second part, on TAM, our TAM does contemplate and look at competition in those trade areas. As I kind of showed the new approach that we're taking, looking at the specific seed points, we're evaluating each seed based on a variety of factors: our historical data, competitive data, all sorts of variety of data sources that we put into the model to be able to evaluate what a site might be able to do. It is factoring in as recent as we can grab data to putting both competitive set as well as other pieces.
Hi. It's Crystal Schlegl with Stifel. Tana, you mentioned that the mobile order and pay orders have skewed more towards breakfast, which is great. Can you talk a little bit about the incrementality and maybe how much you're seeing from just daypart shifting versus new occasions or new?
Yeah. We know that we have opportunities with speed and convenience. Those are really the structural barriers to visitation that we're trying to tackle with the launch of mobile order. I think we're encouraged. We're seeing a steady increase in penetration over time to 10% of transactions. We don't share frequency data really beyond that, but I would say in general, we feel good about where we are at as it relates to mobile order. I think the other piece that's really important is it's very complementary to everything we're trying to do from a loyalty standpoint. We're seeing a 20% increase in registrations per shop in the last couple of months into our program. I think that would suggest that guests are seeing the clear benefit and the value that it provides, and we're solving a convenience need.
I think you guys had decomposed the mobile order and pay adoption rate from new versus existing markets. Can you kind of give us an update on that and maybe if there's been any change in the dynamic there?
Yeah. We're not sharing anything new there, but what I can share that we've shared from the past is that in our new markets, we are seeing quicker adoption of mobile order than in our legacy markets. That might be because we have so many new folks coming to us, and they haven't learned yet that we didn't have mobile order. In our existing and legacy markets, there's really an opportunity to share with customers that really might love that functionality that had not come to Dutch Bros to remind them that we have it now.
Michael Weiss for Cresco Capital. A couple of things for Josh. You gave us a forecast of comparable store sales for the quarter and the year. Could you give us what that would imply for company-owned comps, which is sort of more relevant for people's forecasts? Let me give you a second question. I'm sorry. The presumption, I think, is that you're very positive about the opportunity of food to be an increment, higher percentage of sales, which should be a driver. Given that and given the fact that online is going to be becoming a bigger percentage of sales as well, is that totally factored into your estimate of comp sales over the next five years? You would think those two would be comp sales drivers.
Yeah. To your first question, we're not providing an update on company-operated shop performance at this time. I look forward to giving you guys that data when we release our Q1 earnings. I did want to provide context of at least system, same shop sales, just given where we are in the quarter. On the second point, certainly our longer-term guidance, our revenue guidance that I provided does contemplate the continued rollout of food at some point. It does contemplate the benefits of mobile order and how that might factor into the system growth over time. As I articulated previously, certainly, again, that guidance is a longer-term view. We do believe there's opportunity here with both those platforms, which is why we're excited about them.
Sorry. One last question, Sara, from Bank of America, maybe for Jess. As you deploy some of these new systems, going from my best way to best way, does that have any impact on this culture? Because it's so special, I guess, how do you think about doing that, maintaining the culture without also systematizing things?
Thank you for the question. As we continue implementing anything and everything that impacts our people, the culture is always the highest priority as a measurement of how does it impact what's happening. We're always asking them for feedback on things that we roll out, how is it actually happening, and it influences how we shape it. At the end of the day, we always will have a value for our people and value on the customer and the service. None of the efficiency gains that we're seeing are impacting either negatively. It is about making the job easier for the Bros so they're actually appreciating.
Sorry, just one more. Andy Barish at Jefferies. On the CPG rollout, do you contemplate ready-to-drink? Will that be part of that at some point going forward. I'm not familiar with Trilliant, but does this kind of help you leverage some of the Texas roasting capacity that's come on, or are they going to handle roasting? Just kind of trying to figure out how this works within your existing supply chain.
Yeah. On the assortment question, we're not sharing kind of broad assortment just yet. We do believe that the broader coffee market, though, is ripe for innovation, ripe to have a brand with a lot of energy come in and be a part of that market. As far as roasting goes, we really are relying on our partners in Trilliant to execute on all aspects of this. Our team will work closely with them, but this is a royalty and licensing agreement that they will really be doing all of that work.
Thank you, Barbara Miller, Federated Hermes. You mentioned, Josh, a little bit about coffee inflation. Can you talk more broadly about anything you're seeing on the cost side that may be different this year and into the near future? How, if at all, you're thinking about pricing this year, particularly as you continue to go into newer markets?
Yeah. What I can share with you is what we've shared in the past. We're not providing an update on broader cost inputs. Certainly, if you're watching the coffee market, it has remained incredibly volatile, and it's still around that $4 mark, depending on the day you look at it. It's, like I said, been volatile. Certainly, we're aware of just broader macro environment and being thoughtful of even tariff considerations and just what's happening in the broader macro world. We're in a good place right now and feel confident about the spot that we're in. As we think about price, what we had shared previously was that we did take small amount of price at the beginning of this year and that our guidance contemplates taking something similar about midway through this year.
As we think about price more broadly, and we can certainly talk about just broader pricing philosophy, we do believe we have a very strong value offering there, not only the price that you're paying, but the experience that you're getting at Dutch Bros. We highlighted we score highly as it relates to value perception from our customers. We want to be very mindful and thoughtful about the amount of price that we are taking to maintain that right equation of the right balance of both price and experience.
Josh, Andrew Charles again. Just on the 1,000 more stores by 2029 and thinking about your guidance for 15% plus, or mid-teens plus unit growth, can you help us understand or think more about how much of that's going to come from franchisees versus company-owned stores?
Yeah. We haven't broken that down specifically in the longer-term guide. What I can share is if you look back at our past, our franchisees have continued to grow with us. Certainly, our pace is outpacing their growth. They've been in the 20-25-ish range, I think, in the past couple of years. We're still very supportive of growing with them. I’d expect that there's going to be some continued growth in the franchise space. We just haven't given the exact targets between the two.
Okay. Thank you. We have time for one final question, which will be coming from our online question box. Can you please speak about Dutch Bros' overarching philosophy when it comes to forming partnerships with other brands?
Yeah. I think we're looking for brands that we feel are complementary to ourselves, typically over-indexed with a Gen Z consumer base that is very focused on trend-forward types of things. I think it's really important for us to be watching how brands emerge and evolve. There is a certain point on the curve where they're maybe not broadly known, but kind of if you're an insider, you know, you know. Really those that are disrupting the spaces like that are the types of brands that we look for. Obviously, there is a merch drop component to this brand. We think about innovation as merch as a piece of our innovation program. We're going to constantly be trying to curate that for our customers.
Thank you all very much for attending our first-ever Investor Day. It has been our pleasure hosting you and sharing our strategy and vision. Buses will be departing soon to the hotel and airport, so very safe travels to you all. We will talk soon right after our Q1 earnings. Thank you very much.