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SPEAKER_04: We opened our first day downtown Grants Pass next to the post office. And Dane was like, I don't know if I could do it, man. He's kind of hiding out in the back. What do you mean he couldn't do it? Why? He just, I think all of a sudden, it just kind of all like, oh my God, this is real. We're doing it. Yeah. And I'm like, hang on, dude. I'm going to go make you a little eight ounce mocha. And I'm going to put some tunes on. And so I put on some Led Zeppelin Going to California. And I got him a coffee. And I said, hey, man, it's on.
SPEAKER_02:
SPEAKER_01: Welcome to How I Built This, a show about innovators, entrepreneurs, idealists, and the stories behind the movements they built. I'm Guy Raz, and on the show today, how two brothers sold espresso drinks out of a pushcart in Grants Pass, Oregon, and built Dutch Bros into a billion dollar business with over 700 stores. I'm sure you found yourself in a situation like this. It's late at night, you're with a close friend, and you start talking about all the things you could do together. And you ask, what if we try that one thing and just go for it? And sometimes that conversation can power you to do great things together. Travis Borsma had that special connection with his older brother Dane. They would often talk about all sorts of crazy business ideas. But the one that really worked started out as an espresso cart in a grocery store parking lot. They called it Dutch Brothers or rather Dutch Bros. And today that former coffee cart is a billion dollar beverage business with more than 700 locations across the United States. To get there was a wild ride, often joyful, but also at times painful and even tragic. And what is now a hugely popular brand started in the small town of Grants Pass in Oregon. Travis grew up in the 70s on his family's dairy farm in Grants Pass. And he spent a lot of time with his brother Dane, even though Dane was 17 years older than Travis.
SPEAKER_04: Yeah, so you know, I mean, I remember being two, three, four years old and going on dates with Dane.
SPEAKER_01: Tagging along on his dates?
SPEAKER_04: Yeah. And he was like a second father, but he treated me like a brother. And we had such a great relationship. We were really family oriented being on a dairy farm and growing up in a small community was a really cool way of life.
SPEAKER_01: So you grew up basically working on the farm?
SPEAKER_04: Yeah, I did. You know, and man, I mean, have a motorcycle to rip around on and a dog to chase you around and herd cattle and go into the creek and fish and all sorts of stuff. And back then we had hop yards next to us. And that was an incredible playground for me.
SPEAKER_01: And hop yards like growing hops? Yeah. Which was fed to the cattle? No, fed to the beer drinkers. Okay, so I got you. So did you, I mean, that's a tough, it's a tough business, even harder arguably today because fewer people are drinking milk than ever in the United States. And so your dad, he had this dairy farm. What did that mean for money? I mean, was money tight or did you not really have a sense of that? Or was, you know, was it, he did okay with the dairy farm?
SPEAKER_04: Well, you know, I think it is a tough way of life and you learn a lot about work ethic. And, you know, we were third generation dairy farmers as far as Dan and I go. And my dad was second generation. And quite honestly, I think my dad had a desire and ended up opening an RV business in the 80s because he always wanted to do something different than the grind. All right.
SPEAKER_01: So you grew up and you go to college, eventually you wind up at Southern Oregon University. And meanwhile, Dane, who's way older than you, he's already married and raising a family. And I think both of you are pretty entrepreneurial, right? Like you would talk a lot about business ideas. Yeah.
SPEAKER_04: I would have a lot of dialogue with my brother while he was milking cows. I'd go down, hang out. We'd talk about life and we'd talk about businesses and we'd talk about possibilities. And he would cast a vision with the dairy farm that was incredible. He was like, man, if we had like purebred Holsteins and we fed them really well and we had, and we're really mindful of the quality.
SPEAKER_01: He wanted to turn it into like a high end, like organic dairy or something like that. Yeah.
SPEAKER_04: And it was organic before organic was organic. Yeah. And so we could dream about that and have some fun with it. And then we could go down different paths of like, well, maybe we should think about opening like baseball batting cages or like, you know, we would talk about business a lot. And I think one thing that's noteworthy is Dane had a Dairy Queen franchise at the age of 22. Wow. He bought a franchise? Yeah. And at that time, I think Dairy Queen, it was still in its younger years. I mean, they had, it was before the blizzard. And so he was doing well with it and having a ton of fun and making a lot of money and he ended up selling it and taking a $60,000 profit. And I think he reinvested that money in cows on the dairy farm and began to take the lead role and run the farm as my dad transitioned into the RV business.
SPEAKER_01: So there's something that happened on the farm in the early 90s. I guess it started to struggle a bit and you guys had to let go a lot of the people who worked on the farm because you couldn't afford it. But what was going on? Why did the farm run into trouble?
SPEAKER_04: Well, you know, as we had this creek running through the property, there were some environmental regulations with the DEQ and they gave us a certain timeline to become compliant with it. And if you didn't adhere to that timeline, you'd have a fine monthly that you'd have to pay. And we couldn't afford that. And we got to the place. We had very little confidence in our ability to do that. So we made the decision that we needed to sell the cows. And my dad was well off. My mom was well off, but this was Dane's way of life more so than anything else. He had three kids at the time.
SPEAKER_01: All right. It sounds like in the early 90s, this was the beginning of the end of transitioning out of the dairy business.
SPEAKER_04: Yeah. So as Dane assessed his situation, he was kind of like, wow, man, I need to go get a job and maybe I need to go to Walmart or I need to go Fred Meyer, get a job and be able to provide for the family. And I was like, hold up, dude, time out. We've talked about all these different business ideas. You and I have gambled on football games. We've taken risk. We do all this crazy stuff at the horse races. Like why don't we pursue one of the business ventures that we've talked about? And he's like, what are you thinking? And I said, yo, when I was over at Sock, I was, you know, sometimes a late night with too much beer or too many parties and need a little pick me up in the morning and a hangover recovery. I was drinking espresso and mochas and lattes. And I said, you know, I think we could maybe delve into something like an espresso business. And he goes, I don't even know what espresso is. Yeah. You know, and I said, well, dude, you got to check it out. And we kind of left the conversation. And he went to a local restaurant that night called the Bistro. Bistro was an Italian restaurant here in Grants Pass and they had espresso on the menu. So he ordered it after dinner and they brought it out in a little short Dematasi cup with a layer of crema on it. And he took a nip off and he was like, holy, this is so bitter and strong and it tastes terrible. Like nobody would buy that. And I said, okay, hold up, get in the car. I'm taking you down to this little place that I've been frequent in and I'm going to get you a vanilla latte. So we head down this little drive through here in Grants Pass, believe it or not, at that time in 1990. It was called Western Expresso with an X. Expresso. Yeah. And this little lady named Bonnie worked there and she was probably the coolest, most friendly person in Grants Pass. She was kind of oaky, barefoot, kind of a hippie lady. And I pulled up and she goes, hey, Trav, how are you? So great. And I was like, yeah, actually I need two vanilla lattes today. I got my brother, Dan, and he goes, oh, hey, Dan. And it was a single head little Electra machine. So it was organic Peruvian coffee, which was like, I didn't even know that that was, but it sounded cool. And, and so I handed over to Dane and I start to pull away and I look over and Dane had taken the lid off of the cup and he's licking the milk foam and he's like, this is unbelievable, man.
SPEAKER_02:
SPEAKER_01: So you were like roughly 21, he was about 38 around this time. And you have this idea cause you'd seen espresso carts, like you saw them in Portland, right? Yeah.
SPEAKER_04: Yeah. I remember being a kid and, and being up there in Pioneer Square and seeing this cart with these colorful bottles and steam rising up in the air. And, and I remember saying to my mom, hey, we should go over there and check the, and she'd be like, that's coffee, it'll stunt your growth. Don't worry about it. And I'm like, okay. And then being at school, you know, that's where I really started to consume coffee for the first time in my life.
SPEAKER_01: So I mean, coffee culture in America, this is still like so-called first wave, right? It's like before the sort of Starbucks kind of revolution happens. But you were starting to drink some of these drinks and you liked them and you thought, hey, why don't we do a coffee cart, like make espresso drinks from a cart. And you pitch this to your brother after you get him to try a vanilla latte. Yep. And he says what? Well, he's kind of like, well, this is really good.
SPEAKER_04: This is kind of a mind blow. He goes, what, how do we find more out about it? And I said, well, I remember up in Valley River Mall in Eugene, they used to have a cart at Nordstrom's and Nordstrom's would serve up these coffees in the mall. And I said, I don't know what they ever did with the cart, but maybe I should give them a call and see if I can chase it down. And so I ended up making a phone call and they said, oh, yeah, we still have that cart, believe it or not. It's in storage. And I asked them if they had any interest in selling it. And they said, yeah, we do. And if you want to come take a look at it, you're more than welcome. Wow. And I had friends that were going up to school in Eugene and they're in a fraternity. So it gave me a great reason to go up and party and go check this cart out. And I was excited about it. I got there and they pulled it out of storage and it was just a lap to beat to hell. And they said they wanted $5,000 for it and I wouldn't have given them $500 for it.
SPEAKER_01: OK, so you knew that you wanted to get an espresso cart. This was not going to be the one. So did you go, what did you do next?
SPEAKER_04: So I came home, told Dan, I said, look, man, that's not it. We got to figure out a new path. And he goes, you know what? One of the guys that I graduated high school with works up at Boyd's Coffee up in Portland. And his name was Larry Winkler. And Larry told Dan, he goes, we sell espresso machines. We sell carts. We've got packages. And we wholesale coffee to a number of different restaurants. And we provide coffee to different people who have push carts, believe it or not. And he goes, you know, you guys should come up, check it out. So we did. We made a trip. We decided to not just go to Boyd's, but to hit any coffee establishment that we could through the I-5 corridor all the way up to Seattle and back.
SPEAKER_01: So you would just basically, you've located different coffee roasters along the I-5 corridor, which is obviously the main sort of north-south highway that connects Canada to Mexico. And you got off the freeway and we just stop and pop in and just ask how they do it?
SPEAKER_04: Yeah. And think about this, man. We didn't have Google Maps or anything like that. We had maps. Yeah. I mean, we didn't have cell phones. We had to go to a payphone. And so there was three different places in Eugene that we went to. One was the Coffee Corner in the Fifth Street Public Market. And we had a great experience there. And so, you know, then we made the trek up to Boyd's and we sat down with Larry and he introduced us to a guy named Gary Jacobs. And Gary came over and he said, well, this is be perfect for you. And he shows us they have this fancy showroom floor and they have this little tiny cart with like an ice chest and an umbrella and a single head espresso machine.
SPEAKER_01: And I'm just curious. So Boyd's not only roasted coffee, but they also sold coffee carts? Yeah. That's just weird. That's unbelievable. That was their business? Well, they were, you know, they were selling coffee carts because there was a lot of people
SPEAKER_04: at that time doing these carts and putting them in like Fred Meyer or...
SPEAKER_01: It's a grocery store in the Pacific Northwest.
SPEAKER_04: Yeah. Or going to different fairs or different events and festivals and serving coffee. Wow. And it was in its infancy and Boyd's was ahead of the game.
SPEAKER_01: It just blows my mind that you could like go to there and like, yeah, here's model of the X500. It's the state of the art coffee cart. Or you may want to do the X750. Like it's amazing to me that there was a company that had off the shelf coffee carts that you could buy.
SPEAKER_04: Yeah. And, but that experience was a turn off for us at that stage. We felt like we were being sold, like here's your bundle and this is what you should do. And we were looking for something a little bit higher end, a little bit better equipped. And we really anticipated doing, we wanted to be able to handle volume.
SPEAKER_01: What did that mean? You needed like multiple espresso, like you need to be able to make like three espressos at the same time. I mean...
SPEAKER_04: And we knew that I knew that we needed to be able to do two at the same time rather than one because of the time that it would take. And for customers, if you had five people that came up and wanted to get a beverage a piece, then the timing would double if you only had one.
SPEAKER_01: Yeah. What was the idea? Where are we going to put the cart? Did you have like a vision like, oh, we'll just put it here and then we'll haul it on a trailer here or was it like it'll be in a permanent spot? Like what was the idea you guys had in mind?
SPEAKER_04: You know, the idea that we had in mind to begin with was let's put it at Fred Meyer. We knew that in the Portland market, there had been carts placed at Fred Meyer's and they were doing well.
SPEAKER_01: Inside the store or outside? Either one. All right. Let me ask you a dumb question because we're still a couple months before you're going to actually do this. I can make an espresso now because they're commercially available machines are affordable. I know how to do it. But in 1992, this was a different proposition. Espresso machine was like hugely expensive. Learning how to pull an espr- proper espresso. Like you didn't know how to do any of that. Was that a barrier in any way? Was like, was this going to be a problem?
SPEAKER_04: That was part of our, our thing. Like how are we going to learn how to do this? I mean, what do we, and what we knew was is that we weren't going to open unless we had it dialed. Yep. And so when we talked to these roaster wholesalers, that would be part of our questions. Like how can you help us to learn what we need to do here? And we ended up finding a place called Nice Wonger and we thought that that was the one they had a lot of Pavoni espresso machine. They had these fancy carts that were better than what Boyd sold. And we could buy a package from them for like $15,000 and we were like, all right, I think we got it. The only part about it was it felt like we were buying a new car off a lot and we didn't feel like we had somebody that could help us and teach us. And so we made the trip back down the aisle and the common bond that Dane and I had that was so cool is music. So we were rocking Beatles, Led Zeppelin, Jimmy, CCR, I mean, Cat Stevens, Chicago, the list went on and on. You were on the road to find out.
SPEAKER_01: Yeah. Cat Stevens.
SPEAKER_04: Oh man. Yeah. And I listened to that music with Dane from when I was two years old on. Great, great music.
SPEAKER_01: I mean, I'm just imagining you on the road. Well, I left my happy home to see what I could find out. And you guys are driving down the I-5.
SPEAKER_04: Right?
SPEAKER_01: Yeah. Yeah, right? Okay. I'm with you. I'm in the car with you.
SPEAKER_04: Okay. Yeah. You know, I mean, at this stage we're like, we're asking ourselves, how are we going to make this work? What do we need? How do we, you know, and while we're kind of cruising, I mean, we're high as hell on coffee. I mean, we've got more caffeine than you could ever imagine. You know, so we're on our way back down. I said, you know what, let's pop back into that Fifth Street public marketplace. In Eugene. In Eugene, yeah. That was so cool. It had the good vibes, man. Okay. Like, we didn't go see the roasting plant or talk to the guy who owns it. Let's see if we can connect with them. And so on our way down, we called, we found out where it was. It was right across the street. What was it called? It was called the Coffee Corner. Okay. Yeah. And they have all these locations and all these varietals. And from what we can see, it looks like they're like crushing it. They've got like this great energy that's real hospitable about them. But the magic for us was meeting Paul Layton, who was the owner, and he was the roaster. And when we went into the little roasting area that they had, and it was small, I want to say it was 1,500 square feet, but he had burlap sacks of green coffee everywhere throughout it. And it was like a mad scientist lab.
SPEAKER_01: And that was it the first time you saw green coffee beans? Yeah. So cool.
SPEAKER_04: Yeah. Yeah. And this guy's like, hey, come on in. Let me get you a cup. I knew you were coming. So I brewed some Kenya AA, and this is a really spicy kind of coffee that's got a nuttiness to it. And Dana and I are looking at each other like, what the hell did we just walk into here, man? Because, you know, Cat Stevens was cool. But this guy's like, he's got this big beard. He's wearing Birkenstocks. So he goes, this is the thing, man. I can help you out with everything you need. And I can teach you how to pull shots and steam milk and make a cappuccino. And this is a passion of mine. And I care deeply about the quality. I'm pursuing the perfect cup. And I'm like, what the? I didn't even know to the extent what all these varietals were. It reminded me of like wine and all the different areas where you'd grow these different. I mean, I was like, this is just a unique, wild endeavor that has more depth than I could
SPEAKER_04: have ever imagined.
SPEAKER_01: So his idea, so the idea was he would teach you how to do this, but of course, with the hope that you would buy his coffee, that was the idea. Yeah. Yeah. Does he also have things to sell you, coffee cart equipment?
SPEAKER_04: He had it all. In fact, he asked us a bunch of questions. He was like, so give me a real idea of what you want to do here. Yeah. And so Dana and I were like, well, you know, we want to do this mobile push cart and we do have a fixed location that we want to do at Fred Meyer. And he was like, okay, yeah. In order to do that, he goes, you should do like a manual pull machine because there's some art to pulling shots manually rather than like a push button. You want to be able to show people and talk to people about what you're doing and how that's important to you. And yeah.
SPEAKER_01: All right. So you, so he basically says, I've got everything you need. How much, I mean, your brother was, he was in his late thirties at that point and had already run a Dairy Queen. So he's coming to the table with some, you know, some experience and you are a young guy. So how much money did you guys have to invest? You know, a machine was going to cost money. The cart was going to cost money. What did you guys have to put into this?
SPEAKER_04: Oh man. So I had very little and Dane had, you know, Dane was frugal man. I mean, I think he had maybe $60,000, but our first car all in was 12 grand.
SPEAKER_01: All right. And you made an agreement with Paul that you would buy beans from him?
SPEAKER_04: So we, when we left from that experience with Paul, we were ecstatic. We were like, we found our guy, this is it, man. We're over the moon. And when we got back to Grants Pass, it was like within a week he was down with the equipment, the cart was being built and we set it up on a, in an old living room table and we were in our old milk house and you know, we brought our stereo in with a couch and, and he brought with him 10, 10 pound bags of coffee. And he said, you know what? I think the best thing for you guys to do is once I teach you how to pull these shots and steam milk is just have fun with it and try to come up with what you think would be best. I mean, it was back to let's, let's throw some, some music on and let's, I remember making a hazelnut latte and sipping that thing, man, and going, dude, this is unbelievable,
SPEAKER_04: man. Well, now let's try it with that mocha Java bean and let's try it with the Colombian bean and what about the blend that he had that was dark and what about the French roast stuff, man?
SPEAKER_01: That's yeah. Yeah. And between the time that you took delivery of this pushcart and the time that you actually set up and started to sell coffee, do you remember how long that took? I want to say it took us about three months before we finally were open and there's, there's
SPEAKER_04: a little story to tell there. So we kind of got to this place where we had made our simple menu, the mocha, we both knew was going to be our top seller and the thing that was most popular because there was going to be a learning curve, especially in grants pass for people that had never had an espresso coffee before, never had a latte before. So we tried all sorts of different stuff like Mrs. Richard's hot fudge to Nestle's quick to Hershey's syrup to Ghirardelli's and we were just pulling our hair out because you'd have challenges with either powdery or syrupy and settlement and it just wasn't meeting our expectation. And so Dane finally looked at me and he goes, I'm going to go down the street to Valley Rogue Dairy, who the Zottola family had been doing this for years and they had a chocolate milk that was so rich and creamy. He goes, I'm going to go pick up a couple of quarts of that and bring it back and let's steam it up and see how it holds up. And he did. And we both looked at each other and we're like, that's it, man.
SPEAKER_01: Wow. Steaming the chocolate milk and putting in a steamer. It was already blended.
SPEAKER_04: It already held true. And when we steamed, it was faster. It was, it was more consistent. It was amazing. Huh. So we got our menu dialed. We had our logo. We had our name. And your name, you came up with a name. We came up with the name Dutch Bros because we're brothers and we're Dutch.
SPEAKER_01: Dutch Bros. You're like third generation, like your great grandparents came from the old, grandparents came from the old country. Yeah. Okay. And you say Dutch Bros. You don't say Dutch brothers. I say Dutch Bros. Yeah.
SPEAKER_01: Like, um, what's that? Coffee brand. It was like an old coffee browns like Hills Brothers. Hills Brothers.
SPEAKER_04: Yeah. And everybody else went brothers and we were like, you know what? Fuck tradition. We're going bros.
SPEAKER_01: You guys are bros. Yeah. Yeah. So, all right. So when you were ready to actually put this out there and start selling coffee, where did you, where did you go? Where was it? Where'd you put it?
SPEAKER_04: So we drew up this nice proposal and had visited with the Fred Meyer store manager and we sent it in and they said, yeah, you know, we got your application and it looks great, but we haven't got to it yet and you know, hang in there and we'll get back to you. And another week passes and Dane says, you know, he says, I wonder if we shouldn't maybe look for a second location. Maybe, maybe there's a better location for us to go to. Yeah. And then all of a sudden there was like this flash and I was like, there used to be a shaved ice place right next to the post office, next to the railroad tracks, downtown Grants Pass.
SPEAKER_01: Was there foot traffic there? I mean, was there a lot of people who would pass by?
SPEAKER_04: So it's a main thoroughfare that goes to the coast. So you have a ton of cars that drive by and then you have a lot of people that park and walk over the post office to get their mail. Right. Got it. And Dane said, well, Bill Rosnick, one of my buddies is the manager for that whole shopping complex. Let me give him a call. So we showed him what we'd give to Fred Meyer and, and he looked at it and he said, I'm completely down. If you guys want to put it here, it's 150 bucks a month. There's power on this billboard sign there that you can probably use. That's what they used. And, and, uh, we got everything ready. And we said, well, we need a little storage shed to build, to put the card in, to leave it there overnight. And yeah, cause it was outdoors. You were really outdoors. Yeah. Outdoors, man. We opened our first day downtown Grants Pass next to the post office and Dane was like, I don't know if I could do it, man. He's kind of hiding out in the back. What do you mean he couldn't do it? Why? He just, I think all of a sudden it just came, it just kind of all like, Oh my God, this
SPEAKER_04: is real. We're doing it. Yeah. And I'm like, hang on, dude, I'm going to go make you a little eight ounce mocha. Yeah. And I'm going to put some tunes on. Yeah. And I put on some Led Zeppelin going to California and I got him a coffee and I said, Hey man, it's on.
SPEAKER_01: When we come back in just a moment, Travis and Dane realize that push carts can only go so far. And the real business is in drive-throughs. Stay with us. I'm Guy Raz and you're listening to How I Built This. Once a company knows what they do best, where do they go from there? Well, if you're Burrow, the furniture company known for reinventing everything you thought you knew about furniture, you go outside. Burrow's new outdoor collection just launched with a strong chip resistant galvanized steel frame and easy to clean fabric. Burrow's outdoor collection is built for everyday use and to withstand the elements. The modern sleek look and quick drying plush foam cushions bring the comfort and style of indoors outside. And it's also customizable. You can choose from 19 different configurations and purchase individual pieces or bundles to fit your seating needs. And as always, get free shipping on every order. How I Built This listeners can get 15% off their first order at Burrow.com slash built. That's Burrow, B-U-R-R-O-W dot com slash built for 15% off. Burrow dot com slash built.
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SPEAKER_01: One more thing before we get back to the show. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show. And it's totally free. Hey, welcome back to How I Built This. I'm Guy Raz. So it's 1992 and Travis and Dane are officially in business selling espresso drinks from a push cart outside a shopping center in Grants Pass, Oregon.
SPEAKER_04: And the very first day we ran into a real problem. The owner of the grocery store who was the anchor tenant in the shopping center came out and he basically said, what in the fuck are you doing in my parking lot? And Dane and I are like, we talked to Bill Ross. He goes, I don't care who you talk to. This is my parking lot. I lease this. I want you gone now.
SPEAKER_04: So one thing led to another man and I end up heading over to his office and his wife was sitting there in a desk next to him. She goes, Dave, at least be polite and hear him out. And I was like, oh, okay.
SPEAKER_04: And he had put chains up on these entrances that would come off of 6th Street to access his parking lot because he wanted to restrict people from going to the post office parking in his lot. So I said, well, I can help maybe with informing people that you'd rather not have them park here. And he said, I don't care. I want you gone. And his wife said, well, Dave, I'm going to go talk to he and his brother for a moment and I'll be back.
SPEAKER_01: Yeah. I'm just curious why he was so mad.
SPEAKER_04: Yeah. I think what the deal was is he felt like we should have asked him for permission. So his wife, she goes, look, we've been under a lot of stress, this market is brand new for us. It's our whole life. We've invested our money into it and we have people that own grocery outlet, they're like the brass and we've got an answer to them. And I said, listen, I get it and I'm sorry. And if we could be of benefit, we'd be happy to furnish you guys, your crew, everybody who works for you. We can give you free coffees. All we ask is that you give us an opportunity to stay here for the month. We paid the rent. And so the next day she came in and she said, okay, this is a deal. It's a month. And then once that month's up, you're well on your way. Said, deal, done deal, we're cool. Very first day, we did $65. It's not bad. And we were slapping high fives, man. We profited, we figured like 30 bucks. And that was more than we were doing on the dairy farm in the darkest days.
SPEAKER_01: Yeah. I mean, the beauty of that cart was, I mean, you knew there was a price you paid for it and then you could measure how quickly it would take to pay to sort of recover the cost of the cart. And then after that, everything's gravy. I mean, obviously you've got the expense of getting the coffee in, but like that was the big initial investment. Yeah.
SPEAKER_04: I mean, we had low overhead and we knew what we had to make to pay the bills. And from that point, we started earning customers one at a time and it was word of mouth and it was us promoting the product. And now customers were starting to walk by and get their mail and they're kind of looking at us like, what the hell is that?
SPEAKER_04: And so I started to just say, hey, if you're going to get your mail, I'll make you up a coffee and I'll have it ready when you come back by and you can check it out. And they'd be like, what? Oh, no, no, I'm not interested. And I'm like, no, no, it's okay. I'm just going to give it to you. And they go get their mail and they come back by and I'd hand them one and they're like, oh, wow, this is really good.
SPEAKER_01: All right. So you're out there running this coffee push cart outside this grocery store, this grocery outlet. And when your one month agreement was up, did the couple who had the store parking lot let you guys stay there?
SPEAKER_04: Yeah. So as we're cruising through two, three weeks into the gig, there's this SUV that pulls up into the parking lot of grocery outlet guys with suits, hop out of it. A couple of them light up cigarette and start strolling over to the push cart.
SPEAKER_04: And Dan and I see him come in and I'm like, I think that's the brass for grocery outlet. You know, we're kind of like on pins and needles. And so they come over and one of them orders a cappuccino, which let me know, like, you know, okay, these guys are sophisticated coffee drinkers and they look over to us and they're like, wow, this is really good. You know, nice job.
SPEAKER_04: They left a $5 tip and they were on their way over to grocery outlet then to talk to Dave and Jill. And they complimented Dave and Jill on us being there and how that made it a more welcoming environment for customers to come to grocery outlet.
SPEAKER_01: Because grocery outlet, like for people who don't know, it's like a discount grocery store. Yeah, it is.
SPEAKER_04: Yeah. And it changed the trajectory for us. So then, you know, now we're clipping along. And as long as we stayed in good graces with grocery outlet, we knew that we were there for as long as we wanted to be there. Yeah. From there, Fred Meyer calls and they say, hey, man, you're approved. And we're like, oh my God, what do we do? And then said, well, maybe we should do the second location. Maybe we should buy another car. And I said, yep, let's do it. So you guys basically took whatever cash, mostly it was his cash probably and bought
SPEAKER_01: a second cart from that same guy from Paul and Eugene. Yep. And it was exactly the same. Did that mean you have to hire somebody or did, would you man one and he manned the other?
SPEAKER_04: That's how we started is I manned one and he manned the other and we'd rotate. However, Fred Meyer wasn't doing nearly the volume of our downtown location and it never would.
SPEAKER_01: Now, I guess one of the things that your brother was into were books by Tony Robbins, the life coach. And one of the things he was into is this idea of like unlimited, limitless possibilities, right? Like thinking about what you could possibly do. And I guess the two of you, you and Dane, even in those early days would sit down and then like map out what you wanted the business to be like in a year, five years, 10 years. Tell me what you wrote down. I mean, what did you envision? Oh my gosh. The Dutch Bros being in five years at that point. This is 1993. So what did you think it was going to be in 98 and then in 2003? Well, the process was, I mean, it was really incredible.
SPEAKER_04: I mean, it was like Dane, when we sat down on the living room floor of his mobile home and did the school setting workshop in the process in itself is like, I mean, I'm writing like become a helicopter pilot, build a home on the river above Savage Rapids Dam.
SPEAKER_01: Oh, these are, these are like personal goals. These are not goals for the company. It's anything.
SPEAKER_04: It's okay. It's personal, it's professional, it's everything. It's open locations of Dutch Bros within the state of Oregon and the 11 Western United States have locations. It's have a drive through, it's build a coffee house, it's roast our own coffee. It's just anything you could ever think of.
SPEAKER_01: Yeah. And what did that do for you? I mean, lots of people write goals down, but how was that, I don't know, how was that actually useful in this case? What did it do for you?
SPEAKER_04: Well the crazy thing is, once you write all these goals down, it's almost like inventory of your dreams. And after you did that, then we exchanged them with each other and we read them out loud and we laughed because so many of them seemed so far fetched. But the amazing thing is it was like they were in our subconscious. It wasn't like we went and got tattoos of these goals, wrote them on a mirror to look at every day, but we started to drive toward them.
SPEAKER_01: So you were basically trying to manifest these things that you'd written down. And meantime, you've got these push carts and I think a good day would be what, like 200 bucks? Yeah, so I guess second year in, our downtown location is doing between $200 and $300 a
SPEAKER_04: day and Fred Meyer tips around the $800 to $100 mark every day. And we opened three more push carts and we ended up going to Walmart in Grants Pass, RCC in Grants Pass, and then Walmart in Medford. And we have employees now and trying to figure out like how do we get those other locations to perform like our downtown one. We never really could and we kind of finally landed on the ultimate success formula that we learned in this Tony Robbins book and it was know your specific outcome, take massive action toward it, ask yourself if the action's working that you're taking, and if it's not, change it until it does. And we started to look at the push cart gig and we said, you know what? I think we need to change it. I think we need to have our own environment. Bonnie who had Western Expresso had moved on and she'd given it to her kids and they kind of ran it in the ground and it was dead and gone. And we said, you know, that may be the best location for it. Let's pull these carts out of Walmart's. That environment is not for us. They wanted us to monitor people smoking. It was just a weird environment. You couldn't play music. It just wasn't us.
SPEAKER_01: You wanted your own permanent location. Yeah. And Bonnie's place was basically available. Yeah, she had a little trailer there and they had packed it up and they had vacated the
SPEAKER_04: premises and it sat there for a year. And so we ended up contacting the property owner and we decided that our customers that come downtown, a lot of moms and dads with kids and sometimes it's rainy and sometimes it's not the best weather conditions. What if we did a drive-through?
SPEAKER_01: Was it already a drive-through?
SPEAKER_04: Bonnie had had a drive-through. So Bonnie had a trailer there. Okay. When Bonnie left, she took her trailer that had the espresso machine in it with her. So it was just a pad site. Got it. So Dana and I decided to build our own custom trailer outfitted with the coffee equipment in it. Inside. A unique custom trailer, like a Wells cargo trailer and put the push cart in it. And we were able to have it all enclosed and have a drive-through where it was, you could drive through and we could serve you from a window or just an open air space. Just like any, any drive-through would serve anybody, but it was a mobile unit. Got it.
SPEAKER_01: So, but like drive-through, I don't think there were drive-through Starbucks. I mean, there were drive-through McDonald's and you get coffee there, but drive-through espresso places, it was not, it was not a thing.
SPEAKER_04: No, it wasn't a thing. And I think, you know, for us, when we figured out that that was going to be the niche for us, it was a game changer.
SPEAKER_01: How did you, once you converted this trailer into a, you know, a drive-through espresso car, how did you, was it just clear right away? It was obvious right away that that was how you were going to sell coffee in the future.
SPEAKER_04: So when we opened and we had that drive-through experience, we also had our old school walk-up experience that you could park your car, walk up, sit on a bench underneath the tent, have a cup of coffee, warm your hands by a Mr. Heater, if you want to talk with us. But the drive-through line that started form was incredible. And once we had the location open for maybe a couple months, we realized like, this is just where it's at. This is our niche. And it started to exceed volumes of three to $400 a day. All right.
SPEAKER_01: So you've got this drive-through location. And I guess there was, there was like a customer who was going to the location, a guy named Marty McKenna, who loved it and was like, hey, can I like do a version of this in Medford, which is, which is like 30 miles away. And you guys agreed to work with him. Tell me how that happened.
SPEAKER_04: Yeah. So Marty was coming in and Marty was like, man, this is so unbelievable. I would love to take this concept to Medford and do it myself. Would you guys be interested in sitting down and talking about it? And legitimately, he said, look, I'd be willing to give you $500 a month to use your name. And I'd sign a business license agreement if you want. And if you guys teach me how to make everything, I'll use all the products and buy them through you and let's take the plunge and see what pans out. And how did it do? He started rocking. Wow. He got to a point, you know, we sent our best broista with him because this is what you call baristas broista. Yeah. And the volume started to really build.
SPEAKER_01: So the, the idea of kind of what was sort of a version of franchising really began with this guy just saying, Hey, can I open the location? Like you guys, this was not something you were looking to do, but it, because he, he sort of approached you about it. It's sort of, I guess, triggered some thoughts about, well, maybe we can open more locations beyond grants pass. Correct. And did he become a partner in a sense?
SPEAKER_04: Yeah, I think, uh, you know, it wasn't too long into the gig. Maybe it was six months to a year into the gig. We all sat down and talked about this idea of partnering up and growing both Medford and grants pass. And we were all in like a third, a third, a third.
SPEAKER_01: Yeah. Now this seems kind of crazy to do like, like this guy, Marty, who I'm sure is a great guy, but like you barely knew him and you know, it's his location. Then he becomes a partner, a third partner owner. Did that turn out to be a mistake or did that work out?
SPEAKER_04: Well, you know, when you have partners, there's always compromises. Yeah.
SPEAKER_01: Cause it was you and your brother and your family. And so, you know, that's different.
SPEAKER_04: Yeah, it really was. Yeah. You know, we cared so deeply about the product and how we did it. And so Marty was kind of in a different place. I mean, he didn't have the commitment, the, the way of living real frugal. Um, you know, he wanted to take more money and we wanted to roll the money back into the organization. So there was some challenges in those years and we got to a place where like, okay, we've, we've got to grow here. We want to invest. We want to go buy a coffee roaster. And we talked to Marty and you know, he didn't have the money to continue with expansion, let alone grow and invest into a roasting operation. So we decided, well, you know, if we just do the roaster on our own, we can sell coffee to the business that the three of us are partnered in still. And then that created a little bit of a rub.
SPEAKER_01: Hmm.
SPEAKER_01: I mean, in a nutshell, you and Dane were disagreeing with Marty about some, some pretty fundamental things. I mean, clearly you guys wanted to, to use your revenue to grow the business and he didn't. And I guess all of that, all that got so challenging that you started talking about ending, ending the partnership, right? Yeah.
SPEAKER_04: You know, Dane and I looked at each other and we said, you know what? This is a long play and we're going to grow and I think we can do it better if Marty wasn't here and maybe we should be buying Marty out. So finally we just said, you know what? Let's talk about that real number of what it would take. And he finally threw out, I'd do it for 1.2 and had we had a financial advisor at that time, they would have said, no way, don't do it. It's I mean, how many years is that going to take to get your money back? And, but we took the plunge and we give him, he carried the paper 1.2 million at 7%. So you, you bought him out for 1.2 million, obviously you could not pay that off right
SPEAKER_01: away. So you did 7% interest. And that was, I mean, this is 1999. I think at that point you had 10 total locations. Yeah. And eight of them that you guys owned and then two that were licensed. So you were a small business. I mean, I mean, your revenue, I can't imagine what your revenue might've been. Maybe 5 million at most a year, 10, maybe 10 million. I don't know. Oh man. I mean, it wasn't even that, but a million dollars, a big amount of money. And well, let's put it this way.
SPEAKER_04: It was, we wrote him a $12,000 check every month. Wow. And Dan and I were taken home just to live on. I think it was like three grand. Wow. But you know, we had kind of formed a belief, like if you're not growing, you're dying.
SPEAKER_01: So he's out of the picture in 99 and what I'm trying to figure out is, so now it's back to you and your brother and you've got these 10 locations total. And now you know, you want to expand, but over the next four years, you would open 40 more locations, drive-through locations. So help me understand how you did that. Did you guys finance all of these? Was it franchisees? Was it, it was the same model, a trailer converted into a coffee place? So we had these really cool buildings that Dane designed.
SPEAKER_04: And as we continue to grow, the demand for wanting to franchise the business was there with friends and family, customers that they wanted their own location.
SPEAKER_04: They were like, man, how can I, can we get in? Can we take this over to Roseburg? Can we take it to Klamath Falls? And so Dane wrote the first franchise agreement and I wrote the operations manual. Wow. And franchise owners would take all of their own money invested into a fully equipped mobile unit and that didn't require any capital from us. And we would get a franchise fee of say like 30 grand and then we'd get royalties and they'd buy the beans from us that had a profit margin built into them. Because you were roasting your own beans. We were roasting our own beans. And so that really became a cash cow for us and it became the lifeblood of the company for our own growth, our own investments and paying Marty off.
SPEAKER_03: All right.
SPEAKER_01: 2004, you've got a lot of growth ahead of you and it's a good place to be. You're 34ish, Dane's a little over 50. And this is going to prove to be a really challenging time, actually. It's challenging as an understatement. This is going to be a rough few years ahead, which you did not yet know. But I guess around that time, you started to notice that your brother was slurring a speech. What do you remember?
SPEAKER_04: Well, I remember the first time that it was brought to our attention.
SPEAKER_04: We're in this local Mexican restaurant that we love called Taqueria in Grants Pass and we were just having lunch and Dane's wife Sandy came in and we were talking and she goes, how much have you had to drink? And he goes, nothing. And she goes, well, why are you slurring your speech? And I was like, well, that's weird. He is kind of slurring a speech. That was the beginning of something that we had no idea of what to imagine.
SPEAKER_01: But meantime, that same year, there was a fire at your warehouse. And I think it destroyed everything inside, like your inventory. Like, what happened? Well, it was August 8th.
SPEAKER_04: It was 108 degrees out that day. And I'm over at my sister's house, Carly's house, with her husband Brian, who works with us at the stage and we're swimming in their pool and we're literally, you know, maybe a half a mile away from where our headquarters is located. And my mom comes driving up the driveway at a pace that looked dangerous and she slams the brakes on and jumps out. She's like, there's a fire. We need to go.
SPEAKER_04: And we literally jumped out of the pool and board shorts and headed down to the warehouse. And when we got there, what I saw was this giant trash dumpster that we had that's made out of plastic melted against the wall on fire. All of a sudden, here came the fire department pulling in and the one chief came over to me and he was like, hey, listen, you know, we're going to do the best we can. Is there anything that we need to know? And I said, well, the number one thing is to save the coffee roaster out of there. If that's the only thing that made it out, that that'd be the thing that's really important for us. And I said, I'd like to go in and get that. And he goes, you cannot go in here. You're not allowed. If you do, your insurance could be voided. Trust me, do not even, I know it's tempting. Sit here, let us do our job. And I said, okay. And so I ultimately still had confidence that they're just going to put the fire out and everything would be cool. And the smoke was so dense and so much in there, they couldn't get a hold on it. And they, it just got away from them. And we literally lost everything, including the roasters. All of it.
SPEAKER_01: When we come back in just a moment, Travis and Dane get through the fire and then face an even bigger blow. Stay with us. I'm Travis Iraz and you're listening to How I Built This. Football season is back and Whole Foods Market has everything you need to host a successful watch party or tailgate on game day. In the meat department, there's animal welfare certified marinated chicken wings, organic chicken sausages, hot dogs and more. And you can grab football ready sides in a flash, everything from mac and cheese and potato salad to sushi. I love picking up Whole Foods guacamole, which if you haven't eaten it, you are about to get your mind blown because it's actually amazing. By the way, catering from Whole Foods makes tailgates a breeze. Explore the menu at shop.wfm.com. Save 20% from September 20th through October 17th with promo code fall catering, all one word. If you sleep on the build your own taco bar, it's always a winner. Terms apply. Elevate game day at Whole Foods Market. This episode is brought to you by State Farm. If you're a small business owner, it isn't just your business, it's your life. Whatever your business might be, you want someone who understands. And that's where State Farm's small business insurance comes in. State Farm agents are small business owners too and know what it takes to help you personalize your policies for your small business needs. Like a good neighbor? State Farm is there. Talk to your local agent today. Hey, welcome back to How I Built This. So it's 2004 and the beginning of what Travis calls the dark years for Dutch Bros. For starters, something is up with his brother Dane. He's not doing well and he's slurring his speech. And around the same time, a fire at the warehouse destroys everything, including the coffee roasters.
SPEAKER_04: I'm just sitting there and I'm like, once I realized that it was gone gone, I called Paul. Paul had been our green bean boker and buyer. I said, hey man, I don't know what to do here. And so he called me back and he said, I talked to David Boyd up at Boyd's and they're willing to roast coffee and keep your guys' product going. So I said, that's amazing. Thank you. And literally the next morning I was like, we got to figure out what we're going to do. And people were coming up that were community members and saying, you may want to consider antidepressants at some point because this is going to be a long road. And these were people that had actually had fires themselves. And I'm like, listen, man, all I want to do is get it behind me and make sure that our stores are not impacted. Well, so that's going on.
SPEAKER_01: And eventually your brother Dane gets a diagnosis.
SPEAKER_04: Well, the diagnosis didn't come so easy and with ALS or Lou Gehrig's, it doesn't.
SPEAKER_01: And that's of course what he was diagnosed with, ALS. Yeah.
SPEAKER_04: And you can't diagnose it until you're well into it. What happens is you go through a process to rule out, you know, a tumor, cancer, Parkinson's
SPEAKER_01: or something else. Yeah.
SPEAKER_04: Parkinson's. You rule out all these things through testing and time. You know, when this fire happened, I was so concerned about him. I thought, oh my gosh, he's so stressed out. I kept thinking maybe he's just overwhelmed and we're growing at a rate that's maybe excessive.
SPEAKER_04: And so I just, I mean, my heart hurt for him because I knew something was wrong. I just didn't know to what extent. And it took us a good year and a half to figure out that he could have ALS. And that was brutal news to even entertain because we knew it was a death sentence.
SPEAKER_01: Wow. And I think normally when people are diagnosed with ALS, they live usually for another three, maybe up to five years, depending on the symptoms.
SPEAKER_04: Yeah. And the hard part is you think, how do we beat it? What can we do? Yeah. You know, maybe there's a way, maybe we're the miracle. And then you're thinking, well, maybe it's something else still. And so, you know, we thought maybe it's Lyme's disease. And he was getting treated and flying to Colorado Springs, had a poor insert in his heart for Lyme's disease. And you're like, well, you know, it could be that. And maybe this'll, you know, and he didn't really want to do that, but he asked me and goes, hey man, what do you think? And I said, I go, damn man, I think you should turn over every rock, man.
SPEAKER_01: Tell me how you coped with, I mean, you were, you know, now you had to run this thing and he had to focus on his health, on getting better or at the very least surviving. Tell me about your just like mental, emotional state, you know, trying to be the leader and a boss and this happening.
SPEAKER_04: You know, not only was Dane my business partner, he was my brother. He was my best friend. And what I now know is he was my mentor. And for him to be going through this thing, it was horrific. And I was like loaded all on my back.
SPEAKER_04: I'll do everything that I possibly can to make sure that the business stays afloat and that it's working and that we go through this, these storms. And literally, I was killing pain with booze and dope and it was tough, you know, and, and I was not healthy. The business was doing okay, but I wasn't handling it well and it took its toll. It really truly did.
SPEAKER_04: And I think that there was a pivotal moment in time and it's when, when he finally, this is the deal with ALS, you either get it limb onset or it starts with your speech and it goes to swallowing and then it goes to your breathing diaphragm. So it had gotten to the place where his breathing diaphragm, he was really having a hard time breathing and he was on oxygen, which is the worst thing you could do because he wasn't having a hard time getting oxygen in. He was having a hard time getting the carbons out. So at some point he couldn't do it anymore. He had to go to the hospital and at that stage he had the choice to be put on a ventilator and the family chose to go down that path. And from there, he's probably one of the few people that was able to still walk with a ventilator, but it doesn't adapt to your heart rate, man. I mean it's air in, air out, air in, air out. And so you can maybe take a few steps and pause and his quality of life for the next two years, seeing grandkids born and those kinds of things and going over to visit with them and watch music videos and football games and that kind of stuff was still there, but it was brutal.
SPEAKER_02:
SPEAKER_01: I want to get a sense of your internal world because obviously what he was going through is just unimaginable. Yeah. How did you, you said you were self-medicating, right? Alcohol, smoking pot, or whatever you were using to dull your pain. How did you manage the business while you were also suffering? How did you do that?
SPEAKER_04: You know, the business was a huge priority. I felt compelled for Dane and his family to continue to perform well and make sure that we continue to grow and scale and that if we were going to go down this road and Dane wasn't going to be here, I was going to make sure that I was able to provide for them.
SPEAKER_02: Yeah.
SPEAKER_04: So that was also driving you. Yeah, it sure was. You know, and so I had the wherewithal and I had the leverage to perform to the best of my ability and I had to ratchet it up. There came a time in 2008 where we had grown into some markets, the brand wasn't well known, it needed to be pioneered in those markets and we had franchise owners that were willing and able, but it was a challenge. We were growing with people that maybe had business experience, but they didn't necessarily grow up in the company and they maybe didn't have the principles or values all the way that we did. And you know, the real estate bubble was about ready to burst if it had no ready.
SPEAKER_01: Because this is 2008 now. Yeah.
SPEAKER_04: 2008 was probably the time where we made the heaviest, I made the heaviest decisions that I ever made in my life with the company. And we decided to draw a line in the sand and stop our growth with franchising and evaluate how we best should grow. And that's like stopping a train because you've got a year and a half of locations to go still open that you're committed to with franchise owners that are growing.
SPEAKER_01: But I'm not, I'm just, I'm confused. If you mean 2008, you're growing, their franchise is growing. Yes. When people said, hey, Travis, I want to open a location. You said, no, we're freezing it right now. And they said, well, why, why are you freezing? You're doing so great. What was your answer?
SPEAKER_04: I think when, when we got to 2008 and we were struggling in these new markets with Boise, with Fresno, with Tempe, Arizona, there was, the stores were not performing to the level where they were profitable. When you buy a franchise, I think there's an expectation that you're going to get a brand name with a system to execute by and it's going to profit. Yeah. Yeah. Right. And you don't profit. People start to come up with creative ideas that they think are going to help them to get the result. And so our team was trying to teach culture to people at business acumen. And we knew that we really didn't want to sell franchises anymore to people who just had business acumen. We had people that wanted to open 30 locations in a state and give us millions of dollars. And we're like, nah, that's really not what we want to do.
SPEAKER_01: So what did you guys do? Like how did you start to change things?
SPEAKER_04: So I remember going in and talking to Dane and I was like, man, I don't know. And at this stage, Dane couldn't ride anymore. He had lost his mobility. He was bedridden. And our communication was him smiling or his eyes. Wow. And I said to him, I said, Hey man. I'm burning the candle at both ends here. I don't know if I should sell the company or if I need to go work on me or what I should do. And maybe I should go to one of those Tony Robbins seminars. And he smiled. And his smile and his eyes said a thousand words to me.
SPEAKER_04: And I went to Tony's life mastery, his wealth mastery, the date with destiny, the UPD, all of it.
SPEAKER_04: And the thing that happened that was really unbelievable is he had developed this thing and it was a test and it was called business mastery. And we went to the first one and it was like 75 people. And I brought our team and I think I was only supposed to bring two of us. And it was ideas around like, where are you at in the life cycle that you're in of the company and where is the industry and its life cycle and what business are you really in? And I'm thinking to myself, we're in the coffee business. It's pretty self-explanatory. I mean, we're, we're selling beverages. And one of my team members that is like a brother to me, Dave looked at me and goes, you know what, man, maybe, maybe we're in the relationship business. We see customers that come in day in, day out. We have franchise owners who are running these businesses. We're trying to make sure everybody's beaten to the drum the same way. We're kind of rolling with an iron fist right now, but he goes, and maybe the product is love.
SPEAKER_04: And I was kind of like, maybe, but what the hell are you saying? And the five of us sat down and reflected heavily and kind of got to this place of like, you know what? That's exactly what it is and who we are. And we got to grow from within and from within only with the people who understand the culture that have the fire in their belly. And it was game changer.
SPEAKER_01: So you made a decision that year that you would only sell franchises to people from the system. And you were the one who essentially, the prerequisite to start a franchise was you had to have worked as a barista or a manager at a Dutch Brothers location.
SPEAKER_04: Yeah. And then they didn't have the money. Yeah.
SPEAKER_01: So you had to finance that.
SPEAKER_04: Well, no, we didn't have to finance them. We didn't. A lot of people would magically, I mean, when you have that burning desire, you find a way to get the money. And a lot of them had a mom or a dad or an uncle or an aunt or a customer for that matter that were willing to take the risk and put the money up. And then we kind of got to the place later where we looked at it differently. We said, you know what? We got to bring the barrier to entry down. And we've got to really, I mean, we'd never closed a store because it didn't perform. But I'll tell you, it was a whole new approach. And all of a sudden, we started building momentum and those markets started flourishing. And it wasn't shortly thereafter. In 2009, I lost Dane.
SPEAKER_01: 2009, your brother passed away from ALS. He was 55 years old. And you now, I mean, you'd already pretty much been running the business by yourself, but you didn't have him as your guide and mentor anymore. It was like, it was all you now.
SPEAKER_04: Yeah. But Dane's wisdom and Dane's guidance and the values and the principles and the culture, those were things that were established throughout our partnership and the time that we had together. And man, had I not had him there. He was the catalyst as a leader. And he led by example. He was the most selfless, tolerant man that I've ever known.
SPEAKER_01: All right, so now at this point, you're trying to go forward, running this company without Dane and you have this new approach on franchising. So what did you do in terms of growth? Did you also have a different view of what that was going to be? I mean, that year, I think that the year he passed away, you had something like 135 stores in seven states. Did you still feel like, let's slow this down, let's not go so fast?
SPEAKER_04: No, I think when we stopped the train, if you will, it didn't take effect until 2010. We only opened two locations in 2010 as a result of hitting the brakes in 2008.
SPEAKER_04: In 2009, we turned growth back on, but it was with our own people only. And so we opened, I want to say 20 locations in 2011.
SPEAKER_01: Tell me about the people who are coming into the stores. I mean, did you notice, like, because it's not a bar, there's no alcohol, it's a safer place to hang out, especially for younger people. Did you just notice certain groups of people hanging out at the stores? Yeah, I think that high school and college students predominantly, part of that was the
SPEAKER_04: service and part of that was the music and part of that was Rebel.
SPEAKER_01: Rebel, which is this energy drink that you basically, you guys just created because, you know, what started out as a coffee, hot coffee beverage place really morphed into a cold beverage place. And one of those things was the Rebel energy drink, which, let's talk about that for a moment because that really began earlier, right? You guys were serving Red Bull over ice. Yeah. And that was a popular option for some people. Yeah, it's hard to believe how the market in the industry has changed over the course
SPEAKER_04: of time, but we ended up doing a product that was a frozen beverage, like a granita, but better. We called it Brain Freeze in the early days and this was kind of the segue to colder beverages, blended beverages, and really something that played a critical role in our growth. And as we grew into Northern California, our franchisee down there, Chris Reznor, we were offering Red Bull and he started taking Red Bull and putting different flavors from Torani syrups in the Red Bull and pour them over ice. And that was absolutely a game changer for our organization. And in back in the time that we were serving Red Bull, they were adamant about their can. They wanted their product in their can to be served. And you know, at bars, if you were to go get a vodka Red Bull, bars would make you the drink and then they'd hand you the can with it to chase it. Of Red Bull.
SPEAKER_01: And that was like a requirement from Red Bull?
SPEAKER_04: Yeah. I mean, they were so, I mean, they were like, we don't like the idea that you're just serving it in a cup. And you know, we're almost hesitant to continue to go forward with you guys, but you're doing so much volume and we're really interested in the volume that you're doing. So we went round and round and we were like, well, if we can't come to a better agreement to where you guys give us a better price point, we do promos together, we figure out ways
SPEAKER_04: to work together here, then we're going to probably need to do our own. And so we did, and we were nervous about it and we didn't want it to be the same as Red Bull. We wanted to have its own identity. And then when we implemented it, it was Dutch Bros Blue Rebel. And I mean, we just started to explode.
SPEAKER_01: Did that become your biggest seller or one of your biggest sellers? It's one of our biggest sellers, yes. Yeah. If you go to the menu today, right, it's definitely different from where it began on that card. I mean, it's like the drinks are very colorful. There's some coffee drinks, but there's mainly non-coffee drinks, sodas, lemonades, smoothies, energy drinks, mango nada, really your business is like sweet cold drinks.
SPEAKER_04: Well, we have a nice blend. And so coffee is still the backbone of our business. I think our number one drink as far as hot beverages goes like a golden eagle. Is that a latte? It's like a vanilla caramel mocha. Oh, okay. I got you right. And I mean, we serve a lot of iced, blended, frozen concoctions with coffee.
SPEAKER_01: Yeah. You made a second sort of transition or pivot around franchising, I think around 2015 or 2016. By that time, you had about 265 locations. You were in seven states, still mainly on the West Coast. I mean, I think your revenue is about $280 million by 2015, but you decided to stop franchising actually at that point. That the existing franchisees would be grandfathered in, they would still run their businesses, but that from that point forward, all new locations would be corporate owned. Right?
SPEAKER_04: Well, Dan and I from the early stages always wrestled with, is it better to franchise? Is it better to be company owned? But eventually it just made better sense to morph into company owned stores and provide these regional operator opportunities to the farm league or the bench that we have that's developed. There's over 220 qualified operators that aren't in those capacities yet that have more than four and a half years of experience today. Yeah.
SPEAKER_01: I mean, it's amazing because you started the business in, what, 1990? 92, yeah. 92. And it was only in 2018 when you brought in an outside investor, TSG, which is a huge, they've got steaks and big food brands, and they bought a minority steak in Dutch Bros in 2018. Correct. So they, once you bring out an outside investor, obviously there's an end game, right? And it's either you sell it or you go public. And in your case, I mean, you eventually stepped down as a CEO in 2021 and the company went public later that year and you raised $500 million in that IPO. I mean, it was a hugely successful IPO. That also turned you into a very, very rich person. I mean, probably far beyond what you wrote down in a Tony Robbins, imagining your limitless future when you were 25 or whatever with your brother. I mean, it is kind of crazy, right? I mean, that you, what started out as a coffee cart turned into a billion dollar business.
SPEAKER_04: And I still feel like we're small. Yeah.
SPEAKER_04: And for me, well, yes, there's this wealth and there's all this money and all that stuff. You know, I'm just a regular dude, man. And I believe that you never arrive until you depart.
SPEAKER_01: But the ambition from what I understand is to grow to more than 4,000 stores. That's like Starbucks level.
SPEAKER_04: Yeah. And it comes back to providing opportunities for the people. I mean, you can earn six digits on just one store when you get to a given community, drive your stake in the ground. And you know, so I love that we can have those opportunities for people to climb into those seats and we have an infrastructure to support them with. It's really us doing the best we can with what we have, where we are with everybody.
SPEAKER_01: Travis, when you think about this journey and where you got to, I mean, it's the biggest IPO in the history of any Oregon company, which includes Nike, which is the biggest apparel brand in the world. Like you guys did pretty well. How much of where you are now do you attribute to the grind, to the work, to your skill? And how much do you think has to do with getting lucky?
SPEAKER_04: Let's put it this way. The struggle is real for all of us, no matter where you are and what you do. And so the grind is part of it. But when opportunity and being prepared meet, that's where luck lives. And you know, this life isn't fair. And you know, the loss of my brother, I probably learned the greatest lesson out of and realizing that I don't get to control everything. I use this idea of like, life has a destination. The river has a destination. It's the ocean. And if you look at it, you can get a kayak and a helmet and an oar and navigate your way. Or you could be a log and let it take you where I may. Or you can fight it and swim upstream and exhaust yourself. And if you're able to use the resources that you've been given and you can step outside, walk downstream, see what lies ahead and try to plan for the best of your ability. That's how I like to look at this life that we get to live and how I'm the luckiest guy to ever live I feel like.
SPEAKER_01: That's Travis Borsma, co-founder, along with his late brother Dane, of Dutch Bros. This is like a thought experiment. And I know there are going to be people who might hunt me down for this. But could you make the argument that America is now a better espresso country, like better at espresso drinks than Italy?
SPEAKER_01: Ooh. I know. I know. I'm going to get... I know.
SPEAKER_04: I'm just going to say no to that. And you know what? I'm going to go ahead and sit on the Italy side of it. Yeah, fair enough. It's a very safe, very safe and diplomatic answer.
SPEAKER_01: Hey, thanks so much for listening to the show this week. Please make sure to click the follow button on your podcast app so you never miss a new episode of the show, and it's totally free. This episode was produced by Alex Chung with music composed by Ramtin Arab-Lui. It was edited by Neva Grant with research help from Katherine Seifer and technical assistance from Gilly Moon. Our production staff also includes J.C. Howard, Casey Herman, Sam Paulson, Liz Metzger, Kerry Thompson, Elaine Coates, John Isabella, Chris Masini, and Carla Estevez. I'm Guy Raz, and you've been listening to How I Built This. Hey, Prime members. You can listen to How I Built This early and ad-free on Amazon Music. Download the Amazon Music app today, or you can listen early and ad-free with Wondery Plus in Apple Podcasts. If you want to show your support for our show, be sure to get your How I Built This merch and gear at WonderyShop.com. Before you go, tell us about yourself by completing a short survey at Wondery.com slash survey. Hey, it's Guy here. And while we're on a little break, I want to tell you about a recent episode of How I Built This Lab that we released. It's about the company TerraCycle and how they're working to make recycling and waste reduction more accessible. The founder, Tom Zaki, originally launched TerraCycle as a worm poop fertilizer company. He did this from his college dorm room. Basically, the worms would eat trash and then they would turn it into plant fertilizer. Now, his company has since pivoted from that and they recycle everything from shampoo bottles and makeup containers to snack wrappers and even cigarette butts. In the episode, you'll hear Tom talk about his new initiative to develop packaging that is actually reusable in hopes of phasing out single-use products entirely and making recycling and TerraCycle obsolete. You can hear this episode by following How I Built This and scrolling back a little bit to the episode, Making Garbage Useful with Tom Zaki of TerraCycle or by searching TerraCycle, that's T-E-R-R-A-C-Y-C-L-E, wherever you listen to podcasts.
