Dutch Bros. Coffee: Travis Boersma

28:46And so Dane finally looked at me and he goes, I'm going to go down the street to Valley Road Dairy, who the Zotola 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. Wow. Steaming the chocolate milk and putting in a steamer. Yeah. It was already blended. It already held true. And when we steamed, it was faster. It was more consistent. It was amazing.

29:21Huh. So we got our menu dialed. We had our logo. We had our name. And your name, you came up with a name. I came up with the name Dutch Bros because we're brothers and we're Dutch. Dutch Bros. You're like third generation. Like your great-grandparents came from the old country. Yeah. Okay. And you say Dutch bros. You don't say Dutch brothers. I say Dutch bros, yeah. Like, what's that coffee brand? It was like an old coffee brand. Hills Brothers. Hills Brothers, yeah. Yeah, I think everybody else went brothers, and we were like, you know what? Fuck tradition. We're going bros. You guys are bros.

29:56Yeah. Yeah. So, all right. Right. So when you were ready to actually put this out there and start selling coffee, where did you go? Where was it? Where did you put it? 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 said, you know, he says, I wonder if we should maybe look for a second location. Maybe there's a better location for us to go to. 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.

30:45Was there foot traffic there? I mean, was there a lot of people who would pass by? 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 because it was outdoors outdoors yeah outdoors man and we opened And 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.

31:51He's kind of hiding out in the back. What do you mean he couldn't do it? Why? 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. Yeah. And I'm going to put some tunes on. Yeah. 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. When we come back in just a moment, Travis and Dane realize that push carts can only go so far, and the real business isn't drive-thrus. Stay with us. I'm Guy Raz, and you're listening to How I Built This.

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37:02Hey, 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. 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 Dana 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 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 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.

38:16So 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. Yeah. I'm just curious why he was so mad. 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.

38:58And I said, listen, I get it. And I'm sorry. and if we could be a 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 we paid the rent right 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. I mean, we profited, we figured like 30 bucks. Yeah. And that was more than we were doing on the dairy farm in the darkest days.

39:41Yeah. 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. 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?

40:21And 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, 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. 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 a couple who had the store parking lot let you guys stay there?

40:57Yeah. 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 a cigarette and start strolling over to the push cart. and dan and i see him coming 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 they're like wow this is really good you know nice job they left a five dollar tip and And they were on their way over to Grocery Outlet then to talk to Dave and Jill.

41:47And 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. Because Grocery Outlet, for people who don't know, it's like a discount grocery store. Yeah, it is. And it changed the trajectory for us. Nice. You know, now we are 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. Huh. And we're like, oh, my God, what do we do? And Dan said, well, maybe we should do the second location.

42:31Maybe 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 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 would you man one and he man the other? That's how we started is I man one and he man the other and we'd rotate. However, Fred Meyer wasn't doing nearly the volume of our downtown location and it never would. 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?

43:16Like 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. Dutch Bros being in five years at that point. This is 1993. So what did you think it was going to be 98 and then in 2003? Well, the process was – I mean, it was really incredible. I mean, it was like, Dane, when we sat down on the living room floor of his mobile home and did this goal setting workshop, and 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.

44:07Oh, these are like personal goals. These are not goals for the company. It's anything. 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 coffeehouse. It's roast our own coffee. It's just anything you could ever think of. 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? Well, the crazy thing is once you write all these goals down, it's almost like inventory of your dreams.

44:52And 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 seem so far-fetched. But the amazing thing is it was like they're in our subconscious. It wasn't like we went and got tattoos of these goals or wrote them on a mirror to look at every day. But we started to drive toward them. So you are basically trying to manifest these things that you've written down. And meantime, you've got these push carts. And I think a good day would be, what, like$200? Yeah. So I guess second year in, our downtown location is doing between$200 and$300 a day.

45:32And Fred Meyer tips around the$80 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.

46:10And 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 Espresso, had moved on and she had given it to her kids and they kind of ran it into 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 Walmarts. That environment is not for us. They wanted us to monitor people smoking, And it was just a weird environment. You couldn't play music. It just wasn't us. You wanted your own permanent location. Yeah. And Bonnie's place was, it was basically available.

46:50Yeah, she had a little trailer there and they had packed it up and they had vacated the 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-thru? Was it already a drive-thru? Bonnie had had a drive-thru. 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.

47:38Inside. 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 you could drive through and we could serve you from a window or just an open air space, just like any drive-through would serve anybody. But it was a mobile unit. Got it. So, but like drive-thru, I don't think there were drive-thru Starbucks. I mean, there were drive-thru McDonald's and you get coffee there, but drive-thru espresso places, it was not a thing. 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.

48:22How did you, once you converted this trailer into a, you know, a drive-through espresso bar, 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? 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 to 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.

49:06This is our niche. And it started to exceed volumes of three to four hundred dollars a day. All right. So you've got this this drive to location. And I guess there was there was like a customer who who was going to the location, a guy named Marty McKenna. Yeah. Who 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. 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 talking about it?

49:46And 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. So the idea of what was sort of a version of franchising really began with this guy just saying, hey, can I open the location?

50:28Like you guys, this was not something you were looking to do. But because he sort of approached you about it, it sort of, I guess, triggered some thoughts about, well, maybe we can open more locations beyond Grands Pass. Correct. And did he become a partner in a sense? Yeah, I think, 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. Yeah. Now, this seems kind of crazy to do. Like this guy, Marty, who I'm sure is a great guy, but like you barely knew him and he opens his location.

51:11and then he becomes a partner, a third partner owner. Did that turn out to be a mistake or did that work out well? You know, when you have partners, there's always compromises. Yeah, because it was you and your brother and your family. And so, you know, that's different. 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 way of living real frugal. 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 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.

52:14And then that created a little bit of a rub. I mean, in a nutshell, you and Dane were disagreeing with Marty about some pretty fundamental things. I mean, clearly you guys wanted to use your revenue to grow the business, and he didn't. And I guess all of that got so challenging that you started talking about ending the partnership, right? Yeah. you know dame and i looked at each other and we said you know what this is a long play and and we're gonna grow and i think we can do it better if marty wasn't here and maybe we should be buying marty out and 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.

53:04I mean, how many years is that going to take to get your money back? But we took the plunge and we gave him, he carried the paper, 1.2 million at 7%. So you bought him out for 1.2 million. Obviously, you could not pay that off right away. So you did 7 % interest. And that was, I mean, this is 1999. I think at that point, you had 10 total locations. And eight of them that you guys owned and then two that were licensed. So you were a small business. I mean, I can't imagine what your revenue might have been, maybe$5 million at most a year, maybe$10 million? I don't know. Oh, man, yeah, it wasn't even that.

53:45But a million dollars, a big amount of money. Well, let's put it this way. 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$3 ,000. Wow. But, you know, we had kind of formed a belief like if you're not growing, you're dying. 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-thru locations. So help me understand how you did that.

54:29Did you guys finance all these? Was it franchisees? Was it the same model, a trailer converted into a coffee place? Well, so we had these really cool buildings that Dane designed. and as we continue to grow, the demand for wanting to franchise the business was there with friends and family and customers. They wanted their own location. They were like, man, can we get in? Can we take this over to Roseburg? Can we take it to Clima 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.

55:17And 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. All right, 2004, you've got a lot of growth ahead of you, and it's a good place to be. You're 34-ish, Dane's a little over 50. And this is going to prove to be a really challenging time, actually.

56:04It's challenging as an understatement. And 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? Well, I remember the first time that it was brought to our attention. We were 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.

56:48He is kind of slurring his speech. That was the beginning of something that we had no idea of what to imagine.

56:57meantime that same year there was a fire at your warehouse yeah and i think it destroyed everything inside like your inventory like what what happened well it was august 8th 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 like that looked dangerous. And she slams the brakes on and jumps out. She's like, there's a fire. We need to go. And we literally jumped out of the pool in board shorts and headed down to the warehouse.

57:52And 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 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 her job.

58:41And 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, 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, and we literally lost everything, including the roasters. Wow. All of it. 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 Guy Raz, and you're listening to How I Built This.

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1:01:42Hey, 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. 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 poker 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.

1:02:27Oh, wow. So, you know, 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 know, you may want to consider antidepressives 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. Wow. So that's going on. and eventually your brother Dane gets a diagnosis. Well, the diagnosis didn't come so easy, and with ALS or Lou Gehrig's, it doesn't.

1:03:20And that's, of course, what he was diagnosed with, ALS. Yeah, 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. or Parkinson's or something else. Yeah. 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, you know, we're growing at a rate that's, you know, maybe excessive. And, and so I just, I mean, my heart hurt for him because I knew something was wrong.

1:04:01I 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. 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. Yeah. Yeah, and the hard part is you think, how do we beat it? What can we do? Maybe there's a way. Maybe we're the miracle. And then you're thinking, well, maybe it's something else still. Yeah. And so 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.

1:04:55And you're like, well, it could be that. And maybe this will. You know, and he didn't really want to do that, but he asked me, he goes, hey, man, what do you think? And I said, I go, Dan, man, I think you should turn over every rock, man.

1:05:10Tell 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 you know not only was day in my business partner he was my my brother he was my best friend yeah and what i now know is he was my mentor and uh for him to be going through this thing. It was horrific. And, uh, I was like loaded all on my back. 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, and literally, um, 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 uh handling it well and it took its toll it really truly did 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 we had to go to the hospital and and at that stage he had the choice to be put on a ventilator and the family chose to go down that path.

1:07:09And 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 know, you can maybe take a few steps and pause and his quality of life for the next two years, seeing grandkids born and those kind 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. I want to get a sense of your internal world because obviously what he was going through is just unimaginable. How did you, you said you were self-medicating, right?

1:07:56Alcohol, 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? You know, the business was a huge priority. I felt compelled for Dane and his family to continue to perform well. Right. 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. Yeah. So that was also driving you. Yeah, it sure was. 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.

1:08:48And 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. And 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 the real estate bubble was about ready to burst if it hadn't already. Because this is 2008 now. Yeah. Yeah. 2008 was probably the time where I made the heaviest decisions that I ever made in my life with the company.

1:09:30And 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. But I'm not, I'm just, I'm confused. If, I 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? I think when we got to 2008 and we were struggling in these new markets with Boise, with Fresno, with Tempe, Arizona, the stores were not performing to the level where they were profitable.

1:10:22When 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 so when you don't profit, people start to come up with creative ideas that they think are going to help them to get the result. Right. 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, no, that's really not what we want to do.

1:11:06So what did you guys do? Like, how did you start to change things? 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 he had lost his mobility he was bedridden and our communication was him smiling yeah or his eyes wow and uh i said to him i said hey man i i'm burning the candle at both ends here. I don't know if I should sell the company or if I need to like go work on me or, you know, 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.

1:11:56And I went to Tony's life mastery, his wealth mastery, the date with destiny, the UPW, all of it. 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 you're 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.

1:12:34It's pretty self-explanatory. I mean, we're selling beverages. Yeah. And one of my team members that is like a brother to me, Dave looked at me and goes, you know what, man? 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 beating to the drum the same way. We're kind of ruling with an iron fist right now. But he goes, and maybe the product is love. 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?

1:13:22That'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. So you made a decision that year that you would only sell franchises to people from the system. So people 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. Yeah. And then they didn't have the money. Yeah. So you had to finance that. Well, no, we didn't have to finance them. And 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.

1:14:06And 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 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. 2009, your brother passed away from ALS. He was 55 years old.

1:14:48And 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. 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, you know, he was the catalyst as a leader. And he led by example. He was the most selfless, tolerant man that I've ever known. All right. So now at this point, you're trying to go forward, you know, running this company without Dane.

1:15:42And you have this new approach on franchising. So what did you do in terms of like growth? Did you also have a different view of what that was going to be? I mean, that year, I think the year he passed away, you had something like 135 stores in seven states. Did you still feel like, you know, let's slow this down, let's not go so fast? 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. 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.

1:16:33Tell 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 service and part of that was the music and part of that was Rebel. Red Bull, 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.

1:17:17And 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 and the industry has changed over the course 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.

1:18:08And he started taking Red Bull and putting different flavors from Tarani syrups in the Red Bull and pouring them over ice. And that was absolutely a game changer for our organization. And 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. Yeah. And that was like a requirement from Red Bull? Yeah, I mean, they were like, we don't like the idea that you're just serving it in a cup.

1:18:54Yeah. And 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 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 it to have its own identity. And then when we implemented it, it was Dutch Bros Blue Rebel.

1:19:34And, I mean, we just started to explode. 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, mangonata. Really, your business is like sweet, cold drinks. Well, we have a nice blend. And so, you know, coffee is still the backbone of our business. I think our number one drink as far as hot beverages go is like a golden eagle.

1:20:17Is 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. 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?

1:21:07Well, 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. We've got 320 qualified operators that aren't in those capacities yet that have more than four and a half years of experience today. Yeah. I mean, it's amazing because you started the business in, you know, 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.

1:22:00and they bought a minority stake in Dutch Bros in 2018. Correct. So they, you know, 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 know, 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, you know, imagining your limitless future when you were 25 or whatever with your brother.

1:22:51I mean, it is kind of crazy, right? I mean, that you, what started out as a coffee cart, turned into a billion dollar business. And I still feel like we're small. Yeah. 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. Yeah, but the ambition, from what I understand, is to grow to more than 4 ,000 stores. That's like Starbucks level. 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.

1:23:40And, 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. Travis, when you think about this journey and where you got to, I mean, this is 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, you know, 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?

1:24:20Let'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, you know, I don't get to control everything. You know, 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 know, you can get a kayak and a helmet and an oar and navigate your way, or you can be a log and let it take you where I may, or you can fight it and swim upstream and exhaust yourself.

1:25:06And 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 it to 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. 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?

1:25:46Ooh. I know. I know. I'm going to get, I know. 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. Very safe. Very safe and diplomatic answer. 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 Arablui. It was edited by Neva Grant with research help from Catherine Seifer and technical assistance from Gilly Moon. Our production staff also includes J.C.

1:26:30Howard, Casey Herman, Sam Paulson, Liz Metzger, Carrie Thompson, Elaine Coates, John Isabella, Chris Messini, and Carla Estevez. I'm Guy Raz, and you've been listening to How I Built This.

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