Dutch Bros (BROS) risk factors, FY2024 10-K

Risks Related to Our Business

1. 01Evolving consumer preferences and tastes or changes in consumer spending may adversely affect our business
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3. 03Our financial condition and results of operations are subject to, and may be adversely affected by, a number of factors, many of which are also largely outside our control
4. 04Our marketing programs may not be successful, and our new menu items, advertising campaigns, and other initiatives may not generate increased revenues or profits
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6. 06Our strategic initiatives and growth strategy may be unsuccessful which could adversely affect our business and financial results
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8. 08New shops, once opened, may not be profitable or may close, and the increases in average per shop revenue and comparable sales that we have experienced in the past may not be indicative of future results
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10. 10If our new shops do not perform as planned or close, our business and future prospects could be harmed. In addition, an inability to achieve our expected average shop revenue could harm our business
11. 11Our failure to manage our growth effectively could harm our business and operating results
12. 12Damage to our brand or reputation or negative publicity could negatively impact our business
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14. 14Our inability to identify, recruit, and retain qualified individuals for our shops could slow our growth and adversely impact our ability to operate
15. 15We are subject to the risks associated with leasing space subject to long-term non-cancelable leases and, with respect to the real property that we own, owning real estate
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17. 17Our shops are geographically concentrated in the Western United States, and we could be negatively affected by conditions specific to that region
18. 18Interruption of our supply chain of coffee, flavored syrups or other ingredients, coffee machines, and other restaurant equipment or packaging could affect our ability to produce or deliver our products and could negatively impact our business and profitability
19. 19Increases or sustained inflation in the cost of high-quality arabica coffee beans, dairy, or other commodities or decreases in the availability of high-quality arabica coffee beans, dairy, or other commodities could have an adverse impact on our business and financial results
20. 20If we fail to offer high-quality customer experience, our business and reputation will suffer
21. 21If we fail to maintain adequate operational and financial resources, particularly if we continue to grow rapidly, we may be unable to execute our business plan or maintain high levels of service and customer satisfaction
22. 22We have a limited history of operating with a dispersed workforce and the long-term impact on our financial results and business operations are uncertain
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26. 26Pandemics or disease outbreaks have had, and may continue to have, an effect on our business and results of operations
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28. 28Unstable market and economic conditions may have serious adverse consequences on our business and financial condition

Risks Related to Our Brand

1. 29Our success depends substantially on the value of our brand and failure to preserve its value could have a negative impact on our financial results
2. 30Ongoing public and government scrutiny of environmental, social, and corporate governance (ESG) matters or our reporting of such matters could negatively impact our business
3. 31We may not be able to adequately protect our intellectual property, including trademarks, trade names, and service marks, which, in turn, could harm the value of our brand and adversely affect our business
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5. 33If we, our franchise partners, or our vendors are unable to protect our customers’ credit and debit card data or confidential information in connection with processing the same or confidential employee information, we could be exposed to data loss, litigation, liability, and reputational damage
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7. 35We are subject to payment-related fraud and an increase in or failure to deal effectively with fraud, fraudulent activities, fictitious transactions, or illegal transactions would materially and adversely affect our business, results of operations, and financial condition

Risks Related to People and Culture

1. 36Changes in the availability of and the cost of labor could harm our business
2. 37We depend on our executive officers and other key employees, and the loss of one or more of these employees or an inability to attract and retain other highly skilled employees could harm our business
3. 38Our culture has contributed to our success, and if we cannot maintain this culture as we grow, we could lose the high employee engagement fostered by our culture, which could harm our business
4. 39Unionization activities may disrupt our operations and affect our profitability

Risks Related to Regulation and Litigation

1. 40Changes in statutory, regulatory, accounting, and other legal requirements, including changes in accounting principles generally accepted in the United States, could potentially impact our operating and financial results
2. 41Fluctuations in our tax obligations and effective tax rate and realization of our deferred tax assets may result in volatility of our operating results and adversely affect our financial condition
3. 42We are subject to many federal, state, and local laws with which compliance is both costly and complex
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7. 46We and our franchise partners are subject to extensive government regulations that could result in claims leading to increased costs and restrict our ability to operate franchises
8. 47Beverage and restaurant companies have been the target of class action lawsuits and other proceedings that are costly, divert management attention and, if successful, could result in our payment of substantial damages or settlement costs
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Risks Related to Our Organizational Structure

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4. 52In certain cases, payments under the Tax Receivable Agreements may be accelerated and/or significantly exceed the actual benefits Dutch Bros Inc. realizes in respect of the tax attributes subject to the Tax Receivable Agreements
5. 53The acceleration of payments under the Tax Receivable Agreements in the case of certain changes of control may impair our ability to consummate change of control transactions or negatively impact the value received by owners of our Class A common stock
6. 54If we were deemed to be an investment company under the Investment Company Act of 1940, as amended (the 1940 Act), as a result of our ownership of Dutch Bros OpCo, applicable restrictions could make it impractical for us to continue our business as contemplated and could have a material adverse effect on our business

Risks Related to Ownership of Our Class A Common Stock

1. 55Additional stock issuances (including pursuant to the redemption or exchange of Dutch Bros OpCo Class A common units from our Continuing Members) could result in significant dilution to our stockholders and cause the trading price of our Class A common stock to decline
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3. 57The trading price of our Class A common stock may be volatile, and you could lose all or part of your investment
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5. 59The multi-class structure of our common stock has the effect of concentrating voting control with our Co-Founder, limiting your ability to influence corporate matters
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7. 61Our Co-Founder continues to have significant influence over us, which could limit your ability to influence the outcome of matters submitted to stockholders for a vote
8. 62We are a “controlled company” within the meaning of the New York Stock Exchange rules and, as a result, qualify for, and may rely on, exemptions and relief from certain corporate governance requirements. You do not have the same protections afforded to stockholders of companies that are subject to such requirements
9. 63Certain of our directors have in the past and may in the future have relationships with our Sponsor, which may cause conflicts of interest with respect to our business
10. 64Future sales of shares of our Class A common stock could cause the market price of our Class A common stock to decline
11. 65Our trading price and trading volume could decline if securities or industry analysts do not publish research about our business, or if they publish unfavorable research

General Risks

1. 66Our results may fluctuate significantly and may not meet our expectations or those of investors or securities analysts
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3. 68As of December 31, 2024, we had $234.7 million outstanding under our term loan facility. In addition, subject to certain restrictions under the 2022 Credit Facility, we may incur additional debt
4. 69Restrictions imposed by our outstanding indebtedness and any future indebtedness may limit our ability to operate our business, execute our growth strategy, and finance our future operations or capital needs or engage in other business activities
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6. 71These restrictions may affect our ability to grow in accordance with our strategy
7. 72We are vulnerable to interest rate risk with respect to our debt, and swap agreements entered into to manage such risk may not effectively limit our exposure
8. 73If we fail to maintain effective internal controls, we may be unable to produce timely and accurate financial statements, and we may conclude that our internal control over financial reporting is not effective, which could adversely impact our investors’ confidence and our Class A common stock price
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10. 75A failure to establish and maintain an effective system of disclosure controls and internal control over financial reporting, could adversely affect our ability to produce timely and accurate financial statements or comply with applicable regulations
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12. 77We may engage in merger and acquisition activities or strategic partnerships, which could require significant management attention, disrupt our business, dilute stockholder value, and adversely affect our business, results of operations, and financial condition
13. 78We may need additional capital, and we cannot be sure that additional financing will be available
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15. 80There are provisions in our amended and restated certificate of incorporation and amended and restated bylaws that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change in control was considered favorable by our stockholders
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17. 82Catastrophic events may disrupt our business
18. 83Economic and business factors that are largely beyond our control may adversely affect consumer behavior and the results of our operations