✉️ This story was featured in this week’s Coffee News Club.
👋 Get the newsletter in your inbox every Monday—sign up.
As drive-thru coffee chains expand across the country, Dutch Bros and 7 Brew have spotted an opportunity for some quick growth: acquiring stores from bankrupt drive-thru brands.
On Aug. 4, the drive-thru restaurant chain Salad and Go filed for bankruptcy. The next day, Dutch Bros Coffee announced it had agreed to acquire up to 65 Salad and Go locations for more than $100 million. A week later, 7 Brew threw its hat into the ring, saying it could pay more.
Salad and Go has more than 70 locations across the American Southwest and announced it would close all its stores the day after declaring bankruptcy. Some workers, who found out the news from customers, used up remaining supplies by making food for homeless people.
But all those shuttered drive-thrus won’t stand empty for long. “These sites would expand our leadership position across Arizona, Nevada, Oklahoma, and Texas, where we’ve built strong brand awareness and see a significant opportunity to continue densifying our footprint,” Dutch Bros’ CEO Christine Barone said in a press release about the deal.
In an analysis of the deal for Restaurant Business, Jonathan Maze noted that the price Dutch Bros paid was high, which highlights “the insatiable need for real estate in the fast-growing, drive-thru-beverage business.”
That explains why, just a few days later, rival coffee drive-thru start-up 7 Brew threw its hat in the ring for the closed stores. 7 Brew argued in a court hearing that Salad and Go should run an auction for the locations, saying that it could offer a better deal. 7 Brew’s offer “provided more dollar value and provided certainty of closing greater than that which was provided by the Dutch,” attorney Ross Fiedler said at the hearing.
Maze wrote that the battle for the Salad and Go locations points to an “arms’ race” between the two fast-growing coffee chains. The potential bidding war shows that they are willing to “devote tens of millions of dollars to secure new sites and keep them out of the other’s hands,” he wrote.
Drive-thru coffee chains have been growing at top speed in recent years. Dutch Bros has more than 1,200 stores and aims to have 2,029 locations by 2029. Meanwhile, 7 Brew has been the fastest-growing restaurant chain in the U.S. over the past three years, and is already the country’s fourth-largest coffee chain—right behind Dutch Bros.
Read more on the coffee drive-thru wars here.
Photo by Ruben Valenzuela on Unsplash
