BROS

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How BROS rewrote its risk factors

10-K ITEM 1A · FY2024 → FY2025

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Our financial results could be adversely affected by a shift in consumer spending away from outside-the-home beverages, decreases in general discretionary consumer spending (including due to higher gas prices, inflation or lack of consumer confidence), lack of customer acceptance of new products including new drink offerings, hot food, and consumer packaged goods (including due to price increases necessary to cover the costs of new products or higher input costs), brand perception (such as the existence or expansion of our competitors), platforms (such as features of our mobile app and changes in our loyalty rewards programs and initiatives), a reduction in individual vehicle ownership, which in turn may reduce the usefulness and convenience of our drive-thru shops, or customers reducing their demand for our current offerings as new products, including new drink offerings, hot food, and consumer packaged goods, are introduced.
We may not be successful in introducing new products or new features to our mobile app that are adopted by our customers.
Experimentation with and implementation of innovations in products and technologies, including hot food, may result in inefficiencies, such as a slowdown in our shop operations and traffic flow, disruption of workflows, technical glitches, disruption of current systems and technology, and negative customer experiences.
In addition, most of our beverages contain sugar, caffeine, dairy products, and other compounds, such as taurine and artificial coloring, the health effects of which are the subject of public and regulatory scrutiny, including the suggestion of linkages to a variety of adverse health effects, including by representatives of U.S. regulatory authorities such as the Food and Drug Administration.
Any one or more of the factors listed below or described elsewhere in this section could harm our business: • increases in real estate or labor costs in certain markets, which we have recently experienced; • changes in consumer preferences; • disruptions in our supply chain; • the impact of shortages or inflation on our cost of goods or labor, including commodity costs such as coffee, and construction supplies and labor, which we have recently seen; • changes in governmental laws and rules, including those regarding minimum wage, and approaches to taxation and tariffs; • severe weather or other natural or man-made disasters affecting a large market or several closely located markets that may temporarily but significantly affect our business in such markets, including the price or availability of goods; • labor discord or disruption, geopolitical events, social unrest, war, regional conflicts, acts of terrorism, political instability or uncertainty, acts of public violence, boycotts, hostilities and social unrest, or resurgence of or new epidemics; and • adverse outcomes of litigation.
For example, we began testing hot food offerings in a limited number of shops and implemented order ahead capabilities in over 95% of shops during 2024, and began offering consumer packaged goods in some markets during 2026.
Additionally, the success of a new initiative may negatively impact our existing lines of business, for example, the availability of consumer packaged goods could result in a reduction in traffic to our shops, and could negatively impact our overall results of operations.
Some of our competitors have substantially greater financial resources than we do, which enable them to spend significantly more on marketing, advertising, pricing and other initiatives.
Additionally, we have worked with, and plan to continue to work with, select social media influencers in promoting or marketing our products.
Such relationships between Dutch Bros and social media influencers may not be successful or appeal to our customers, and may be perceived negatively.
Recently, other brands have faced backlash for partnerships with certain social media influencers due to such influencers’ actions before or after such partnerships.
We have limited control over such influencers’ behavior in promoting or marketing our products, and no control over such influencers’ behaviors outside of any partnership to promote or market our products, and we may face negative public sentiment due to such relationships.
If our company-operated and franchised shops cannot compete successfully with other beverage and coffee shops, other specialty coffee shops, drive-thru QSRs, and the growing number of coffee delivery options in new and existing markets, we could lose customers and our revenue could decline.
As of December 31, 2025, Dutch Bros had 1,136 shops across 25 states, of which 811 were company-operated and 325 were franchised.
During the year ended December 31, 2025, we opened 141 new company-operated shops, across 19 states.
Our ability to open new shops is dependent upon a number of factors, many of which are beyond our control, including our and our franchise partners’ ability to: • identify available and suitable sites, specifically for drive-thru locations; • compete for such sites; • reach acceptable agreements regarding the lease of locations; • obtain or have available the financing required to acquire and operate a shop, including construction and opening costs, which includes access to build-to-suit leases and ground lease construction arrangements; • establish and maintain relationships with necessary third parties, including developers, landlords, and construction companies; • respond to unforeseen engineering or environmental problems with leased premises; • avoid the impact of inclement weather, natural disasters, and other calamities; • hire, train, and retain the skilled management and other employees necessary to meet staffing needs; • obtain, in a timely manner and for an acceptable cost, required licenses, permits, and regulatory approvals and respond effectively to any changes in local, state, or federal law and regulations, such as regulatory bans on new drive-thru businesses, that adversely affect our and our franchise partners’ costs or ability to open new shops; and • control construction and equipment cost increases for new shops and secure the services of qualified contractors and subcontractors in an increasingly competitive environment.
Delays in the permitting or licensure processes that may result from government shutdowns, for example, the U.S. federal government shutdown during October and November of 2025, staffing shortages, or similar actions that are out of our control, due to, among other things, loss of or uncertainty around federal funding, including the receipt of federal funding by states or state agencies where we operate, could lead to delays in building our shops and affect our shop development and expansion plans, which could harm our results of operations and financial condition.
As part of our longer-term growth strategy, we expect to continue to enter into geographic markets in which we have little or no prior operating experience.
We plan to continue to open additional company-operated shops in markets, including in markets where we have little or no operating experience.
Our ability to operate new shops profitably and increase average shop revenue and comparable shop sales will depend on many factors, some of which are beyond our control, including: • consumer awareness and understanding of the Dutch Bros brand; • general economic conditions, such as inflation, which can affect shop traffic, local labor costs, and prices we pay for the beverage and other supplies we use; • consumption patterns and beverage preferences that differ from region to region; • changes in consumer preferences and discretionary spending, which we have seen impacted recently by factors such as inflation and other macroeconomic pressures on consumers; • difficulties obtaining or maintaining adequate relationships with distributors or suppliers in new markets; • increases or continued elevation in prices for commodities, including coffee, milk, and flavored syrups, including due to announced tariffs whether or not such tariffs are ultimately enacted; • inefficiency in our labor costs as the staff gains experience; • competition, either from our competitors in the food service and restaurant industry or our own shops; • temporary and permanent site characteristics of new shops; • changes in government regulation; • our ability to hire, motivate, and retain qualified employees who share our values; • our ability to operate effectively, including timely open and meet demand due to scarcity of equipment or other materials; and • other unanticipated increases in costs, including costs of construction materials and trade labor, any of which could give rise to delays or cost overruns.
In 2024 and 2025, we shifted a majority of our total support staff to our Phoenix, Arizona headquarters.
We may, from time to time, be faced with negative publicity, including on social media, regardless of its accuracy, relating to: beverage quality; pricing; the safety, sanitation and welfare of our shops; customer complaints or litigation alleging illness or injury; health inspection scores; integrity of our or our suppliers’ or franchise partners’ food processing, employment practices, and other policies, practices, and procedures; or employee relationships and welfare; the appearance of our shops on third-party delivery platforms that may contain inaccurate menu pricing and extended delivery times; partnerships with social media influencers to promote or market our products; related parties, such as our Co-Founder, and their reputation, public perception, or actions, whether or not related to Dutch Bros; or other matters.
As of December 31, 2025, approximately 29% of our shops were operated by Dutch Bros’ franchise partners and, because of this, we depend on the financial success and cooperation of our franchise partners for our success.
Consequently, our franchise partners may not successfully operate shops in a manner consistent with our standards and requirements, such as quality, service, and cleanliness, may not hire and train qualified shop managers, broistas and other shop personnel, or may not implement marketing programs and major initiatives such as shop remodels or equipment or technology upgrades, which may require financial investment.
As of December 31, 2025, our company-operated and franchised shops in the Western United States represent approximately 65% of our total shops.
Adverse changes in demographic, unemployment, economic, regulatory, or weather conditions in the Western United States, have harmed, and may continue to harm, our business.
In addition, one of our two roasting operations is in this region and may experience closures or be subject to damage due to adverse weather conditions occurring in the Western United States.
For example, in 2022 our roasting facility in Grants Pass, OR was temporarily under a “Level 1 - Be Ready” evacuation alert due to the Rum Creek Fire.
For example, during 2025, the US announced the imposition of tariffs and other sanctions on various countries, including Canada, Mexico, and Colombia, many of which are subject to legal challenges, and it remains uncertain whether they, or similar measures, will ultimately be enacted or remain in effect.
Sales of Dutch Bros Rebel energy drinks accounted for approximately 22% of our systemwide net sales in the year ended December 31, 2025.
Failures by our co-packers or any of our other suppliers or distributors to meet our standards, provide products in a timely and efficient manner, support our current and future business needs as we scale or otherwise, or comply with applicable laws is beyond our control.
The price of coffee increased significantly during 2024 and further increased during the year ended December 31, 2025, and we expect it may remain elevated or continue increasing during 2026.
While we experienced overall declines in dairy, cocoa, and sugar costs during 2025, if such costs again increase, it could negatively impact our margins and harm our business.
In 2024 and 2025, we shifted a majority of our total support staff to our Phoenix, Arizona office.
Since September 2024, all employees who were not classified as remote are required to work in-person at either our Grants Pass or Phoenix office at least four days a week.
We and the third parties with whom we work may also experience server malfunctions, software or hardware failures, telecommunications failures, or loss of data or other information technology assets.
For example, threat actors may use an initial compromise of one part of our environment to gain access to other parts of our environment, or leverage a compromise of our networks or systems to gain access to the networks or systems of third parties with whom we work.
Security incidents and attendant material consequences may prevent or cause customers to stop using our Dutch Rewards mobile app, deter new customers from using our app, and negatively impact our ability to grow and operate our business.
In addition, we cannot be sure that our existing insurance coverage will be adequate or sufficient to protect us from or to mitigate liabilities arising out of our privacy and security practices, that such coverage will continue to be available on commercially reasonable terms at all, or that such coverage will pay future claims.
The global credit and financial markets have experienced extreme volatility and disruptions (including as a result of tariffs, recession concerns, actual or perceived changes in interest rates, and continued economic inflation), which has included severely diminished liquidity and credit availability, declines in consumer confidence, prolonged weak consumer demand, a decrease in consumer discretionary spending, slower economic growth, high inflation, uncertainty about economic stability, and swings in unemployment rates.

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Gone since FY2024

Additionally, our franchise partners’ interests may conflict or diverge with our interests in the future, which could have a negative impact on our business. • Dutch Bros OpCo may make distributions of cash to Dutch Bros Inc. in excess of the amounts used by Dutch Bros Inc. to make distributions to its stockholders and pay its expenses (including taxes and payments under the Tax Receivable Agreements).
Our financial results could be adversely affected by a shift in consumer spending away from outside-the-home beverages, decreases in general discretionary consumer spending (including due to higher gas prices, inflation or lack of consumer confidence), lack of customer acceptance of new products (including due to price increases necessary to cover the costs of new beverages or higher input costs), brand perception (such as the existence or expansion of our competitors), platforms (such as features of our mobile application and changes in our loyalty rewards programs and initiatives), a reduction in individual vehicle ownership, which in turn may reduce the usefulness and convenience of our drive-thru shops, or customers reducing their demand for our current offerings as new beverages are introduced.
We may not be successful in introducing new products or new features to our mobile application that are adopted by our customers.
Experimentation with and implementation of innovations in products and technologies may result in inefficiencies, such as a slowdown in our shop operations and traffic flow, disruption of workflows, technical glitches, disruption of current systems and technology, and negative customer experiences.
In addition, most of our beverages contain sugar, caffeine, dairy products, and other compounds, such as taurine and artificial coloring, the health effects of which are the subject of public and regulatory scrutiny, including the suggestion of linkages to a variety of adverse health effects.
Any one or more of the factors listed below or described elsewhere in this section could harm our business: • increases in real estate or labor costs in certain markets, which we have recently experienced; • changes in consumer preferences; • disruptions in our supply chain; • the impact of shortages or inflation on our cost of goods or labor, including construction supplies and labor, which we have recently seen; • changes in governmental laws and rules, including those regarding minimum wage, and approaches to taxation; • severe weather or other natural or man-made disasters affecting a large market or several closely located markets that may temporarily but significantly affect our business in such markets, including the price or availability of goods; • labor discord or disruption, geopolitical events, social unrest, war, including repercussions of the war between Russia and Ukraine or the war between Israel and Hamas and the related risk of larger regional conflicts, terrorism, political instability or uncertainty, acts of public violence, boycotts, hostilities and social unrest, or resurgence of or new epidemics; and • adverse outcomes of litigation.
For example, we began testing hot food offerings in a limited number of shops and implemented mobile order capabilities in over 95% of shops during 2024.
Additionally, some of our competitors have substantially greater financial resources than we do, which enable them to spend significantly more on marketing, advertising, pricing and other initiatives.
If our company-operated and franchised shops cannot compete successfully with other beverage and coffee shops, including Dunkin’, CosMc’s, Starbucks, other specialty coffee shops, drive-thru QSRs, and the growing number of coffee delivery options in new and existing markets, we could lose customers and our revenue could decline.
As of December 31, 2024, Dutch Bros had 982 shops across 18 states, of which 670 were company-operated and 312 were franchised.
During the year ended December 31, 2024, we opened 128 new company-operated shops, across 15 states.
Our ability to open new shops is dependent upon a number of factors, many of which are beyond our control, including our and our franchise partners’ ability to: • identify available and suitable sites, specifically for drive-thru locations; • compete for such sites; • reach acceptable agreements regarding the lease of locations; • obtain or have available the financing required to acquire and operate a shop, including construction and opening costs, which includes access to build-to-suit leases and ground lease construction arrangements; • respond to unforeseen engineering or environmental problems with leased premises; • avoid the impact of inclement weather, natural disasters, and other calamities; • hire, train, and retain the skilled management and other employees necessary to meet staffing needs; • obtain, in a timely manner and for an acceptable cost, required licenses, permits, and regulatory approvals and respond effectively to any changes in local, state, or federal law and regulations, such as regulatory bans on new drive-thru businesses, that adversely affect our and our franchise partners’ costs or ability to open new shops; and • control construction and equipment cost increases for new shops and secure the services of qualified contractors and subcontractors in an increasingly competitive environment.
Delays in the permitting or licensure processes that may result from government shutdowns, staffing shortages, or similar actions that are out of our control, due to, among other things, loss of or uncertainty around federal funding, including the receipt of federal funding by states or state agencies where we operate, could lead to delays in building our shops and affect our shop development and expansion plans, which could harm our results of operations and financial condition As part of our longer-term growth strategy, we expect to continue to enter into geographic markets in which we have little or no prior operating experience.
We plan to continue to open additional company-operated Dutch Bros shops in markets, including in markets where we have little or no operating experience.
Our ability to operate new shops profitably and increase average shop revenue and comparable shop sales will depend on many factors, some of which are beyond our control, including: • consumer awareness and understanding of the Dutch Bros brand; • general economic conditions, such as inflation, which can affect shop traffic, local labor costs, and prices we pay for the beverage and other supplies we use; • consumption patterns and beverage preferences that differ from region to region; • changes in consumer preferences and discretionary spending, which we have seen impacted recently by factors such as inflation; • difficulties obtaining or maintaining adequate relationships with distributors or suppliers in new markets; • increases or continued elevation in prices for commodities, including coffee, milk, and flavored syrups; • inefficiency in our labor costs as the staff gains experience; • competition, either from our competitors in the food service and restaurant industry or our own shops; • temporary and permanent site characteristics of new shops; • changes in government regulation; • our ability to hire, motivate, and retain qualified employees who share our values; • our ability to operate effectively, including timely open and meet demand due to scarcity of equipment or other materials; and • other unanticipated increases in costs, including costs of construction materials and trade labor, any of which could give rise to delays or cost overruns.
In 2024, we shifted approximately 40% of our total support staff to our Phoenix, Arizona office.
We may, from time to time, be faced with negative publicity, including on social media, regardless of its accuracy, relating to: beverage quality; pricing; the safety, sanitation and welfare of our shops; customer complaints or litigation alleging illness or injury; health inspection scores; integrity of our or our suppliers’ or franchise partners’ food processing, employment practices, and other policies, practices, and procedures; or employee relationships and welfare; the appearance of our shops on third-party delivery platforms that may contain inaccurate menu pricing and extended delivery times; related parties, such as our Co-Founder, and their reputation, public perception, or actions, whether or not related to Dutch Bros; or other matters.
As of December 31, 2024, approximately 32% of our shops were operated by Dutch Bros’ franchise partners and, because of this, we depend on the financial success and cooperation of our franchise partners for our success.
Consequently, our franchise partners may not successfully operate shops in a manner consistent with our standards and requirements, such as quality, service, and cleanliness, or may not hire and train qualified shop managers, broistas and other shop personnel or may not implement marketing programs and major initiatives such as shop remodels or equipment or technology upgrades, which may require financial investment.
As of December 31, 2024, our company-operated and franchised shops in the Western United States represent approximately 70% of our total shops.
Adverse changes in demographic, unemployment, economic, regulatory, or weather conditions in the Western United States, including recent significant increases in gas prices, have harmed, and may continue to harm, our business.
In addition, until our roasting facility in Texas is operating at full capacity, our roasting operations are concentrated in this region and may experience closures or be subject to damage due to adverse weather conditions occurring in the Western United States.
For example, in 2022 our roasting facility was temporarily under a “Level 1 - Be Ready” evacuation alert due to the Rum Creek Fire.
For example, in January 2025, the US President announced the imposition of tariffs and other sanctions on Canada, Mexico, and Colombia, and it remains uncertain whether they, or similar measures, will ultimately be enacted.
Sales of Dutch Bros Rebel energy drinks accounted for approximately 26% of our systemwide net sales in the year ended December 31, 2024.
Failures by our co-packers or any of our other suppliers or distributors to meet our standards, provide products in a timely and efficient manner, or comply with applicable laws is beyond our control.
The price of coffee increased significantly in 2022, has since remained elevated, and further increased significantly during the year ended December 31, 2024, and we expect will continue increasing during 2025.
If dairy costs further increase, this could harm our business.
In addition, effective September 3, 2024, all employees who were not classified as remote were required to begin working in-person at either our Grants Pass or Phoenix offices at least four days a week.
We may also experience server malfunctions, software or hardware failures, telecommunications failures, or loss of data or other information technology assets.
In addition, we cannot be sure that our existing insurance coverage will continue to be available on acceptable terms or that our insurers will not deny coverage as to all or part of any future claim or loss.
The global credit and financial markets have experienced extreme volatility and disruptions (including as a result of the COVID-19 pandemic and actual or perceived changes in interest rates, continued economic inflation, and failures of financial institutions), which has included severely diminished liquidity and credit availability, declines in consumer confidence, prolonged weak consumer demand, a decrease in consumer discretionary spending, declines in economic growth, high inflation, uncertainty about economic stability, and increases in unemployment rates.
The financial markets and the global economy may also be adversely affected by the current or anticipated impact of military conflict, including the war between Russia and Ukraine and the war between Israel and Hamas, terrorism, or other geopolitical events.
Sanctions imposed by the United States and other countries in response to such conflicts, including the war in Ukraine, may also continue to adversely impact the financial markets and the global economy, and any economic countermeasures by the affected countries or others could exacerbate market and economic instability.
If the current equity and credit markets deteriorate, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive.
Additionally, if we fail to comply with laws and regulations, publicly take controversial positions or actions or fail to deliver a consistently positive consumer experience in each of our markets, including by failing to invest in the right balance of wages and benefits to attract and retain employees that represent the brand well or foster an inclusive and diverse environment, our brand value may be diminished.
For example, the reputation of our Dutch Bros brand could be damaged by claims or perceptions about the quality or safety of our ingredients or beverages or the quality or reputation of our suppliers, distributors, or franchise partners or by claims or perceptions that we, our franchise partners, or other business partners have acted or are acting in an unethical, illegal, racially-biased, or socially irresponsible manner or are not fostering an inclusive and diverse environment, regardless of whether such claims or perceptions are substantiated.
Ongoing public and government scrutiny of environmental, social, and corporate governance (ESG) matters or our reporting of such matters could negatively impact our business.
Even with our own franchise partners, whose activities are monitored and regulated through our franchise agreements, we face risk that they may refer to or make statements about our Dutch Bros brand that do not make proper use of our trademarks or required designations, that improperly alter trademarks or branding, or that are critical of our brand or place our brand in a context that may tarnish our reputation.
In January 2024, our prior Chief Executive Officer, Joth Ricci, transitioned and Christine Barone was appointed as our Chief Executive Officer.

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Sentence-level comparison of Item 1A in the two most recent 10-Ks (FY2024 ↗, FY2025 ↗). A reworded sentence counts as one dropped and one added, so heavy edits read as low “kept”. Headings and page furniture are stripped; nothing is summarised by a model.

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