Party in the Parking Lot: Aaron Harris, Senior VP of Development at Dutch Bros Coffee

Guest: Aaron Harris, Senior VP of Development, Dutch Bros Coffee

Host: Chris Hatch

Listen on Spotify

Summary

In the inaugural episode of the Dirt Dog Pod, Chris Hatch sits down with Aaron Harris, who leads development at Dutch Bros Coffee. Aaron spent 245 nights on the road last year, and he explains why site selection has to happen in the field: walking into nearby restaurants, talking to managers and barbers, and following up with the people you meet. He walks through Dutch Bros' growth from about 250 shops in 2017 to 962 today, including going from one store to 205 in Texas since 2021, and the Compelling Future program that turns employees into operating partners. He also covers why Dutch Bros does as much business after noon as before, the 12-year chase for a top site in Oceanside, California, the Burger King conversion he and Chris put together near Hill Air Force Base, his years as a pro wrestler with WCW and WWE, the mistakes that taught him the most, and his go-to drink order.

Key Takeaways

• Site selection happens on the road. Local knowledge of streets, neighborhoods and where people spend money can't be replaced by heat maps or data that's 18 months old.

• Walk into the nearest QSRs and check their condition, then talk to managers, hotel staff and even barbers about the neighborhood.

• Follow up with everyone you meet. A quick thank-you text turns a local contact into a set of eyes on your job site.

• Dutch Bros grew from about 250 shops in 2017 to 962, and from 1 to 205 stores in Texas since January 2021, with 1,000 expected in early 2025.

• The Compelling Future program creates operating partners from within, and the people are the brand's secret sauce.

• Dutch Bros does as much business after 12 p.m. as before. About 70% of drinks are iced, and energy drinks pull in a younger afternoon and evening crowd.

• The ideal Dutch Bros site sits near a mix of retail, work and home, where people spend their time.

• Move fast when the opportunity is there. The Hill AFB Burger King conversion took minutes to agree and about four and a half months to open.

• Don't chase store counts. Expansion needs an operational plan, field support and back-office infrastructure behind it.

Transcript

[01:17] Chris Hatch: Here we go, the inaugural Dirt Dog Pod. We have our guest of honor, Aaron Harris. Welcome to the pod.

[01:37] Aaron Harris: Chris, thanks for having me. I'm happy to be here on the inaugural Dirt Dog with you, and happy to spend a little bit of time talking about what we do at Dutch Bros. And I've got a lot of questions for you too.

[01:52] Chris Hatch: I like that. You know, it's funny, we've kind of zeroed in on this nickname, the Dirt Dogs, and what's fascinating about that is I don't think there's a bigger Dirt Dog in the world than you. You are the most fitting guest to have on as the very first. And a great example of that, first question: how many hotel nights did you have last year, in calendar year 2023?

[02:17] Aaron Harris: 234 nights in Hilton hotels, and probably nine in non-Hilton-branded properties of some kind. I know I was at a convention at one of the Gaylord properties. And then, long, complicated story, but I ended up in a Motel 6 in Scottsdale for two nights. Not bad, I might add.

[02:37] Chris Hatch: So of the 234 nights in a Hilton product, which is your favorite Hilton hotel?

[02:42] Aaron Harris: My go-to at this point, just for luxury, would be the Conrad, and I don't stay in the Conrads very often. I might spend some points. They have their Curio Collection, and the Curio Collection is all these unique hotels that they've branded differently. A lot of them are older and smaller hotels, but they're operated or managed under the Hilton nameplate. Right here in Salt Lake City, there's the Peery.

[03:10] Chris Hatch: You know that hotel's haunted, right?

[03:11] Aaron Harris: Yeah. That hotel is haunted.

[03:15] Chris Hatch: If you guys don't know, Google "haunted Salt Lake" and that's the first thing that pops up. Is there one room in that hotel that's more haunted than the others?

[03:23] Aaron Harris: I don't know that, but I guess the area was old lavender fields. And when you're walking through the hallway... I don't know if they play into the myth and pipe in some lavender smell, but it's a very cool thing. I really like that hotel. There are a couple of hotels that Hilton has, like in downtown Salt Lake or downtown Kansas City, that have speakeasies built right in, so I like to have a little bit of fun with that. Then when I'm just out in the suburbs, I've become a guy who's gotten really accustomed to the Home2 Suites. I'm trying to be a little bit healthier these days, not eating out every day. So if I stop at a grocery store and stay at the Home2, I can cook for myself. Well, okay, microwave for myself. Being honest with you here.

[04:23] Chris Hatch: Love that. 234 nights, plus nine, plus two. So that puts you at 245 nights of 365 days last year. Is that math right?

[04:31] Aaron Harris: Yeah, it was something like that.

[04:33] Chris Hatch: Wow. When I think Dirt Dog, I think driving behind the windshield, looking at sites, and that is your life, right? For the listeners thinking about two-thirds of somebody's year spent in a hotel room: is that what it takes when you're expanding a brand like Dutch and you're trying to get as many stores open? You've got to be on the road and see these things?

[05:08] Aaron Harris: I'm a big believer that this job, a development job, especially in an expanding chain, happens on the road. The job does not happen in an office. It happens out in the field. There's no substitute for knowledge of local neighborhoods, local streets, local businesses, what's going on, where people are spending their money, where they're doing their wares. I can pull some stuff up on Google Earth, I can look at every heat map in the world, and AI can tell me, this is where everybody is. But when you're there on a Friday afternoon and you see where people are going when they get off work, where people are shopping, where people are spending their money... you need to experience and be a part of those communities.

So yeah, I do think it's something that needs to happen. We've been interviewing for a couple of positions I've posted lately, site selection managers. And one of the people I interviewed the other day asked me, "What do I need to know from you? What do I have to do to be successful at this job?" And I said, "You've got to be present in your markets." I don't need these guys to be order takers. And as the boss, I have to lead by example, so I need to be out there. Sometimes people joke that I remember every site I see, and that's a blessing and a curse at times. But as we go down the road and look at sites, you get to know neighborhoods, you get to know when things are changing. Are we on the upswing or are we on the downswing?

[06:38] Chris Hatch: How do you assess it? So, okay, I've presented you a site, and let's just take Kansas City, and maybe it's a part of Kansas City that you're not as familiar with. You go there, you look at the site. What are your first two or three or four steps to assess the site?

[06:53] Aaron Harris: I honestly walk into the closest QSRs and start to assess the condition.

[06:59] Chris Hatch: Is there a QSR specifically? Like, if there's a McDonald's, is that what you go into first, or is there a flag you typically like?

[07:07] Aaron Harris: Obviously if there's a Chick-fil-A, I like to see how the Chick-fil-A is running. They're always great. But you mentioned Kansas City. I'm going to look at, is McDonald's here, and are they doing a good job? Frankly, is my competition, Starbucks, here, and are they doing a good job? And then I'm going to look at their building. Are they being maintained? Not brand new, I get that, but are they being maintained? Is the local franchisee, the local operator, making some money? Are they reinvesting in this community? Then I walk around the parking lot. Is it clean? Does the landscape look good? Do people take pride in the neighborhood here? And we ask ourselves, is this a place where we can fit?

And then I start to look at second-generation space. What I mean by that is, are there new things coming in and making it better? Or am I seeing that a lot of brands have come and left, and now you've got some not-so-reputable businesses coming in to backfill? You want to get an idea of what that trend looks like. I can pull crime data, I can pull economic data, but best case scenario, that stuff's 18 months old. It's just never what we need. It's really about getting a feel.

So when I'm in a hotel 240 nights a year, I'm talking to the gals working at the front desk: "Hey, what do you think of this?" And they're like, "Oh yeah, my neighborhood sucks. Are you crazy?" You get a lot of those comments, and they mean a lot. And then you start to dig into why, and you've got to make sure you know how to ask those leading questions. Or you run into an old building where the franchisee is not making any money, and they're keeping it open, keeping jobs and paying some taxes in the community, but you look around and you're like, "Man, they need to replace the windows, they've got to replace some doors. This thing needs some TLC." Is that because the community is dying? That's what you have to figure out.

[09:10] Chris Hatch: So you're there with the shift manager or manager for that store location and you're asking them questions. Do you identify yourself? "Hi, I'm Aaron, I work with Dutch Bros"?

[09:19] Aaron Harris: I will, unless I'm walking into a Starbucks.

[09:22] Chris Hatch: Okay.

[09:26] Aaron Harris: Absolutely. One of the things that gets you a lot of information is handing out a Dutch Bros gift card in a market where we already are. You walk in, you hand out five, ten dollars' worth of Dutch Bros drinks, and you can pretty much get the launch codes, if you know what I mean. A lot of the time I do that. Sometimes I just mention, "Hey, I'm a real estate investor. Can you tell me about this?"

[09:45] Chris Hatch: And then you say, "I'm looking at X building."

[09:47] Aaron Harris: Absolutely. "What do you think of that property? What do you think of the neighborhood? How long have you been a part of this neighborhood?" And I've been known to pop into barbershops and ask them the same type of question. You'd be amazed what you can find out in a barbershop.

[10:01] Chris Hatch: A barbershop. I've never done that. Haven't thought of that.

[10:04] Aaron Harris: Everybody likes to talk in barbershops.

[10:06] Chris Hatch: That's a good point. So many people that follow me and follow you on Twitter and LinkedIn are young real estate professionals. They're trying to get their foothold in the business. And I think this concept we're talking about is such a basic concept, but it's something that really doesn't get taught very frequently. You can't beat going in and talking to the business owners and the people running those businesses.

[10:30] Aaron Harris: You can't beat going in and talking to the business owners. You have to network and you have to follow up. And easier said than done: the larger you make your network, the more people you have to follow up with, and the harder it is to return those phone calls. My poor admin can't believe the number of emails I get in a day and the things we have to respond to. I've got young folks on my team, and I mentioned being present earlier, but also being a person of your word, following up and making deals, and getting to a quick no, or telling somebody why something will not work.

Now, I'm responsible not only for the real estate side of this, but also for the construction side and the facilities side. I get vendors that call me on an hourly basis, because we're one of the fastest growing companies in the nation. I probably hear from 200 sign vendors a week.

[11:29] Chris Hatch: That are pitching you for new business?

[11:32] Aaron Harris: Absolutely. Pitching me for new business. Hey guys, I have three. I'm good. Make sure that's out there. But I appreciate it; they're out there hustling. I can't respond to every single one of those. But if I meet you at a trade show and I talk to you and you give me your card and I act like I have some interest, I owe it to you to follow up. I don't need to ghost you.

[11:54] You talk about the young people in this world: get out there in the neighborhood and follow up with folks. Send them an email: "Hey, thank you for your time." That guy at the barbershop, if he's got an email or a card, send him an email. A text message is just as good these days. "Thank you for your time. Thank you for talking to me about the neighborhood." And then if you open, or you start to get under construction, you've got a friend. John at the barbershop: "Hey, do me a favor. Keep an eye on the site for me. Drop by. Shoot me a text if you see something going on."

[12:26] Chris Hatch: Well, he's not just John at the barbershop. He's John at the barbershop who probably talks to 200 people a week.

[12:30] Aaron Harris: And not only is he talking to 200 people, he's a set of eyes and ears. We all know the security problems you have on job sites. That's a set of eyes and ears walking by, keeping an eye on it for you. And you know what that costs me? Gift cards. And then I have a friends and family event. By the way, we have one here today in Utah, in Riverton. Come on, get a free drink. Take care of us.

[12:57] Chris Hatch: That's great. Let's talk about the growth for a minute, because you were just talking about growth. When did you start with Dutch?

[13:04] Aaron Harris: I joined Dutch as a consultant in late summer of 2017.

[13:07] Chris Hatch: And how many stores did they have at that time?

[13:09] Aaron Harris: Roughly 250.

[13:10] Chris Hatch: And how many stores do you have today?

[13:12] Aaron Harris: 962.

[13:13] Chris Hatch: Wonderful. So that is some serious growth. And it took a minute to get the train rolling, right? When did you start hitting the heavy growth? Was it 2020, 2021?

[13:23] Aaron Harris: It was actually late 2018 and early 2019 that we really committed to being a brand that wanted to grow. We brought on some private equity investment, and we spent the better part of a year figuring out what our growth plan was going to be as a company. The goal was to be at 800 stores by the end of 2023. That was the goal we had established for ourselves, and TSG was our private equity partner at the time. This was under previous leadership. This was before a supply chain crisis, before a global pandemic, and before we took the company public. Oh, and interest rates had also spiked and construction costs had gone up.

[14:04] Chris Hatch: I was going to say, let's go back to that. When you first got hired, did Trav hire you himself?

[14:12] Aaron Harris: Trav and, at the time, our chief operating officer, Brian Maxwell.

[14:16] Chris Hatch: So 200 stores, they're getting bigger, but it's still kind of just a bunch of guys and gals hanging out in Grants Pass running this company.

[14:27] Aaron Harris: Yeah, it's small. It's funny, I've known Dutch Bros for a long time. Most people know I spent a decade running development for Popeyes before I joined Dutch. I always knew the brand and had a few experiences. Nothing bad, but I just thought, these are these crazy hippies out of Oregon. That's really the way I thought. I'd always heard they only hired from within, they only grew from within, and a lot of that held true for the longest time. And whenever I was approached about the opportunity to do something with Dutch, I'm like, "What? Those crazy Oregon hippies who only hire from within? I don't know that I'm interested."

And then I met with Brian. Brian Maxwell is a great man. I met with Brian and Trav and got to know them and their vision. Trav had built this great brand through franchising, and then created some operating partner opportunities for his group. One of the things he wanted to do was continue that program, called Compelling Future. So creating those operating partners across the nation to be able to run our stores was big. And I'm like, "Wow, I spent a lot of time working as a consultant back in the day. I actually get to help 30 or 40 kids, and they're all kids at this point, become operating partners and work for us every year."

[15:51] Chris Hatch: It more or less functions like their own store, right? Because of the way the incentive structure works for them.

[15:57] Aaron Harris: Very similar. Everybody's probably familiar with some version of how Chick-fil-A runs with an operating partner. We pay them a solid base salary. They are employees; they get a 401(k) and all the great benefits that come with being an employee, and we do take very good care of them. There's a small bonus plan on top of that, and then they're paid based on the performance of their stores. So they have an opportunity to do really well. And the program is called Compelling Future for a reason. Trav explained it to me: he wanted to make it difficult, like law school, but he didn't want to make it impossible, like the NBA. That's always stuck with me. I've seen some of our folks come up from juniors, what we call "mobsters," who help us open stores, on their first trip out to a new opening in Tucson, Arizona, and now I'm seeing them working for us as operating partners in Apalachicola, Florida. It's just amazing to watch that growth.

[17:03] Chris Hatch: Wild. In the 10 years you were at Popeyes, how many stores do you think were opened that you were responsible for?

[17:10] Aaron Harris: It's funny. I've crossed that number; I've done more at Dutch now than I did at Popeyes.

[17:17] Chris Hatch: And in a shorter timeframe.

[17:18] Aaron Harris: In a shorter timeframe, but we were a much more established brand back there at Popeyes. We didn't have as much wide open space to be able to go. I mean, obviously I did here in the West, in Utah and Arizona and whatnot, but I opened about 640 Popeyes. And I still get phone calls every week. People still sometimes think I'm the Popeyes guy. I want them to think of me as the Dutch Bros Coffee guy.

[17:47] Chris Hatch: There you go. Okay, so you're sitting there getting onboarded into the system. I've known you for a long time, and let me tell you, if you don't know Aaron, you'd better just buckle up. You're going to be on a rocket ship ride every day of your relationship with him. He's very entertaining, but you're going to move quickly. So how do you look at a company that's got 200 stores, and they're telling you, "We want to get to 800 by X date," and get a confidence level that that's going to happen? Because it's not just real estate. The real estate job is hard and the construction job is hard, no doubt, but the operational job is equally as painful, right? How do we keep the same culture when we get to that many stores? How do we get the same team of mobsters that are going to get us open and get us running?

[18:44] Aaron Harris: One of the beautiful things we had going here, which I figured out really quick, is we had enough people. We had the people who could protect the core of the brand, who wanted to be our operating partners. This is what they wanted to do. We just didn't have the opportunities for them. So we had some leaders who were willing to develop those folks, to create the positions and train people and scale them. And I was willing to go out and find the actual physical opportunities, and not only work on the prototype building, but find the real estate and scale.

I figured out within about 10 minutes of getting to Dutch Bros that I knew the secret other folks didn't. People loved our brand. Our customers loved it. People loved where they went to work. People loved where they went to get a drink. And we were different from others. As much as I love some of the burger guys or some of the chicken guys, it's a fast food job. It's not the most glamorous thing in the world. I've worked fast food my whole life and I love it, but I know that's not for everybody. And the secret sauce for us is our people.

So I start to think about, what is the cool job to have when you're a kid? When I was a kid, and I'm going to date myself now, it was Blockbuster Video.

[20:09] Chris Hatch: Oh, yeah.

[20:11] Aaron Harris: Blockbuster Video was the cool thing. You're working at Blockbuster...

[20:14] Chris Hatch: That was the weekend hangout.

[20:15] Aaron Harris: Exactly. You're working at Blockbuster on a Friday night, your friends come up, you're good. Now, listen, I was always the guy working in a burger joint who was getting off work and running by Blockbuster. I wasn't working at the Blockbuster. But I look at it this way: we're that diner in Footloose, right? Where everybody shows up and you're playing music, that party in the parking lot. We're that Blockbuster Video. And that's a secret that nobody else gets, and so we resonate very well. I knew that. And we were creating these opportunities, and we had so many people who wanted these opportunities. I wasn't worried about the initial scale.

I know you do a lot of work with In-N-Out, or you're trying to do a lot more work with In-N-Out.

[20:58] Chris Hatch: That's right. Great company.

[20:59] Aaron Harris: Great company. But one of the things I learned about In-N-Out is they had so many people on their bench that they were losing people. One of their executives explained to me years ago that they had to start expanding, and that's why they went to Texas. If they weren't creating opportunities for their folks, they were going to start losing good employees. I knew that we had the opportunity to keep that from happening at Dutch. We had a lot of great people, and we could go create a lot of great opportunities.

When I joined, we had one store in Las Vegas, Nevada, over on Tropicana. Since then, we're at 29 stores in Las Vegas, with four currently in the works, so I'm pretty proud of those numbers. We had not opened in Tucson, Arizona, as of yet. We now have 21 stores in the Tucson DMA. So we've been able to create those opportunities.

And I think one of the more impressive things, beyond the people and the opportunities: we're drive-thru only, and we resonate with customers in a big way. You might not be able to afford... well, I don't know, you're a developer, you can afford anything.

[22:26] Chris Hatch: I just have these tenants that keep cramming rents down. But let's leave that out.

[22:31] Aaron Harris: Cybertruck, man. Cybertruck. So you may not be able to afford to take your family to Ruth's Chris every day or every week, but most people have enough coins in their ashtray to afford a five- or six-dollar drink of some kind and hit the Dutch Bros drive-thru. And we're that little 10-minute escape, the party in the parking lot. And we do a great job there.

[22:54] Chris Hatch: I think that's one of the most amazing things to me. It doesn't really seem to matter where I'm at; at Dutch Bros, it's the same type of employee that's there. They're full of life, they're happy to see you and they're thrilled to be at their job. I just have yet to be disappointed with it as a customer experience.

[23:11] Aaron Harris: We do a really good job of weeding that out and self-policing. I've had all kinds of corporate jobs, and I've been the black-and-white guy. I've been a real a**hole at times: "You've got to do your job. This is what we do and you've got to follow this." And I think Dutch Bros makes you a better person. There's a devil on this shoulder saying, "What's the best thing for the business and the bottom line?" And there's an angel on this shoulder saying, "What's the best thing for the people involved in the business?" And those two are constantly fighting. And I can tell you, at Dutch Bros, the angels always win.

And people get to know us and they get to know our brand. As we grew in Northern California, Oregon, Washington, and then Las Vegas and Arizona, anybody who travels out West starts to know who Dutch Bros is. And we said, "Okay, where do we want to build stores, and where do we want to go in contiguous markets?" Obviously, Chris, you and I have worked together here with some chicken stuff in Utah. I always thought Utah would be a great market for us, and it has been. I believe we're at about 20 stores in the state of Utah right now. The first one we did in Utah was in St. George.

[24:27] Chris Hatch: As close to Vegas as you could get.

[24:29] Aaron Harris: That's right. Our second one was at Jordan Landing, right here in Salt Lake. And I shared with you, we opened a Popeyes there at Jordan Landing 12, 13 years ago. Very high volume, record opening days, and the franchisee, a guy named Amin Danani, was very engaged in what we did. Amin is a guy I have a ton of respect for, and he's a very competitive guy. And I've got to tell you, I pulled our sales from whatever it was, eight years earlier, where I had the hourly sales from the Popeyes. And at the end of the day, we did more sales at Dutch Bros on opening day. By the way, the Dutch Bros is across the street from the Popeyes. And of course, he got a text message at midnight that night, because: competitive me, competitive him. Surprise.

I'm really proud of what we've been able to do here in Utah, and the way we've been able to grow, and not only in this market. Then we went into New Mexico, and we've done really well in New Mexico. Arizona for the longest time was our strongest market, so New Mexico just seemed like a natural fit. And then the number of stores we've opened in Las Vegas. But if you flash back just a little under four years, we opened our first store in the state of Texas on January 8th, 2021, in College Station. We currently have 205 stores in the state of Texas.

[26:12] Chris Hatch: From 1 to 205, from 2021 to now?

[26:14] Aaron Harris: That is correct.

[26:15] Chris Hatch: Wow. Big growth. So you're in the DFW area. Had you done Popeyes work there before?

[26:21] Aaron Harris: I had, and I had spent some time in Dallas before. I knew the market okay.

[26:28] Chris Hatch: Okay, so you didn't know the market well enough, and that was what drove you to go stay there, more or less?

[26:35] Aaron Harris: What drove me to it was, in February 2020, as we were talking about continued expansion, we had actually spent some time touring parts of Texas with some of our executives. This was before the pandemic, before we knew the world was going to lock everybody down. And we said, "Great, we're ready to start kicking some tires and doing some things in Texas." We talked about what our commitments were as a brand. A few of us loaded up a couple of Suburbans and drove around Houston, Waco, Austin, all those fun places where we wanted to be. So we knew that's a place we wanted to be.

I knew there were two things that could happen. I could move into a hotel room and lean into growth and continue trying to make deals in Texas, or we were going to shut down. I was under the impression I might have to lay off some of my team. That's the world we were in. I thought we might slow down on openings back then. And I started highlighting a couple of the projects we do on LinkedIn. I do a little Saturday night update, and it got a little bit of buzz.

[27:51] Chris Hatch: So that's when you started?

[27:52] Aaron Harris: That's exactly when I started. I had done the occasional post before then, but this is when I really started to get programmatic and routine with it.

[28:00] Chris Hatch: And for anybody listening who hasn't followed you on LinkedIn, Aaron is one of the most entertaining follows, because every Saturday, like clockwork, you get "Here is the opening." You get a little bit of a snippet about what happened with the deal, and it tags everybody involved.

[28:12] Aaron Harris: I want to tag as many people involved as possible.

[28:15] Chris Hatch: Oh, and a drink recommendation.

[28:16] Aaron Harris: And the drink recommendations.

[28:18] Chris Hatch: The drink recommendations are solid.

[28:20] Aaron Harris: They are. Especially when some of the kids tell you about the things on the secret menu. And Dutch Bros does have a secret menu. Find me and I'll text it to you. It's insane. But I started highlighting a couple of our employees. I was thinking, "Listen, if I have to lay them off, or if someone wants to steal them from me, let's let them go get stolen." I was really afraid that was going to happen. It became pretty clear to me within about four or five weeks that we were not going to slow down. Growth was not going to be a problem for us. Customers may have been locked down, but they somehow were leaving their houses and going to Dutch Bros. So business continued to be good. But all of a sudden I was getting 10,000 views every time I posted something, and then I'm getting 100,000 views. So how can I stop doing that?

So on Saturday nights, I like to put out a blurry photo of whatever store. These aren't professional photos; these are whatever my construction guys send me. And I want to be very clear, this isn't something prescheduled that my marketing department does. I don't do it at the exact same time every week. I call it the Saturday Night Update. Sometimes it's Saturday morning, occasionally it's Sunday morning. Most of the time, I'm watching the UFC fights on a Saturday night and having a cocktail while I type it up and put it out there.

[29:36] Chris Hatch: I love it. Okay, so you've trapped lightning in a bottle from a real estate development perspective. You've been on this ride, which is massively entertaining. Your goal was 800 stores by 2023, and you've gone beyond that goal. You're going to hit 1,000.

[29:55] Aaron Harris: We should hit 1,000 sometime during the first quarter of this year.

[29:59] Chris Hatch: Perfect. And where is the brand headed from here?

[30:03] Aaron Harris: We have four open and operating shops in Kentucky right now, and we're working in Cincinnati, Louisville and Indianapolis. I don't think any of that's a secret. I have two stores under construction in the St. Louis market as we speak. If you were to look along Interstate 64 or Interstate 70 and go right across the nation, those are the places I'm really looking at. I'm not looking much further north than that.

[30:32] Chris Hatch: Why is that?

[30:36] Aaron Harris: I've got to plant a few tent poles out there and get a little bit of traction before I go too far north of where I am. We have the tent pole that I've done in Texas. I've also planted a flag now in Florida; we've opened in the Orlando market. We have five stores open in the state of Florida right now, and we expect to have 15 by this time next year, maybe more. I don't have a crystal ball in front of me, and today might be earnings day, so I don't want to say anything incorrect there. But we're absolutely focused there. We also have deals signed in other parts of the Southeast: Atlanta, Georgia, and Augusta, South Carolina. So we're excited about what we're working on.

[31:28] Chris Hatch: I find a lot of the professionals in our world speak about Dutch like a coffee store. They're constantly thinking about an ideal site for you being on the AM, drive-to-work side of the road. And my experience with Dutch is that the customer pattern's a little bit different. Tell us, when is the peak time of day for a Dutch?

[31:51] Aaron Harris: Obviously, like anybody else, we do sell coffee. Dutch Bros Coffee, and energy drinks, and morning times are busy for us. But we do as much business after 12 o'clock as we do before 12 o'clock. Most of your coffee guys aren't going to be able to say that. They hit their business bright and early, and then they're not busy late in the afternoon.

[32:12] Chris Hatch: Why is that? What do you think is different about Dutch?

[32:15] Aaron Harris: They've trained a customer around hot drinks. They've trained a customer around the morning routine: getting your cup of coffee, going to work. And that's great, and we've done the same thing and capitalized on that. But in a lot of cases, 70% of what we sell is some sort of iced beverage. And we also sell a ton of our energy drinks. Those energy drinks attract the younger crowd, and the younger crowd comes in after school. They come in early evenings, they come in late night. So between the energy drinks and the blended or iced drinks that we sell, that's got a bigger impact.

So how does that tie back to real estate? We're talking about who our customer is. We skew quite a bit younger. But more important than that, we're a part of all activity. People say, "Well, where do you really want to be?" I want to be near a mix of retail, work and home. Just one of those things isn't great for me. For some brands it could be great. McDonald's near retail is great, or near work is great. I need all three of those. And sometimes people say, "Well, you skew young. You want to be near the high schools." Listen, high schools are awesome, but sometimes they're built a few miles out of town. What I really want is to be where people are spending their time. Are people spending their time shopping? Do I have a pad in front of a mall? I think you showed me the Florence Mall in Florence, Kentucky. You have a pad in front of the mall, there's a movie theater, and at 8 o'clock at night, is there a ton of activity going on? That's where I want to be.

[33:59] Chris Hatch: So you've done 700 stores at Dutch, and you've done 600 stores at Popeyes, so 1,300 stores.

[34:05] Aaron Harris: Sure, and there's a few hundred from somebody else in there somewhere.

[34:08] Chris Hatch: So what's the wildest thing that's ever happened to you in a deal?

[34:12] Aaron Harris: We have a store in Oceanside, California, just on the corner of Oceanside Boulevard and Interstate 5. And the store rips. It is doing very well for us. And that piece of real estate is one I worked on for a dozen years, across three different brands, trying to put a deal together there. We had a very difficult landlord. We had a very difficult city when it came to not only entitlements, but some things having to do with utility infrastructure and getting everybody out of the way. I tried to build a Popeyes deal there for a number of years. If you're standing in my parking lot right now, you'll look across the street and see a Popeyes. That was after we'd given up, after a few years of trying to make this site happen, and we ended up moving across the street. Then I was doing some consulting work helping the folks at Arby's for a while, and we tried to put one in there too, and it just wasn't going to work. And I never gave up on this site. And a little bit of validation: it's one of the top five stores in my company.

[35:28] Chris Hatch: Which is tremendous. And think about the effort that went into that over a dozen years. Just wild.

[35:33] Aaron Harris: One of the things we've learned over the years is you've got to strike while the iron's hot and you've got to move quick. You and I had a Burger King opportunity that we converted here, outside Hill Air Force Base.

[35:55] Chris Hatch: Hill Air Force Base. Clearfield, Utah.

[35:57] Aaron Harris: And I think some of the folks on our respective teams weren't in as much of a hurry to get that done, for whatever reason. And when you and I finally got together, it took us about seven minutes to put the deal together. And I'm not even exaggerating.

[36:11] Chris Hatch: I actually think you're rounding up. I think it was six.

[36:14] Aaron Harris: And I get really excited every time I drive by that, because I saw a building there, and listen, the Burger King guys take care of their stuff and they did a real good job, but time had passed them by and they needed to do something else. We took that building, and with my team, we were able to get it up and running and operating inside of about four and a half months from the time we signed the deal with you to the time we actually opened the doors.

[36:42] Chris Hatch: That's incredible.

[36:42] Aaron Harris: And that was a plus-one for me on whatever quarter that was, something we weren't counting on. I love deals like that. There's not a guy out there who does what I do who doesn't drive by every drive-thru, and you're just as bad at this. You never saw a drive-thru I didn't like: how can I convert that and make that work for us? So I love taking these second- and third-generation spaces and doing something very cool with them. We've converted Wendy's, we've converted Baskin, we've converted Sonics. I think those are the ones that get me the most excited. I get really excited when we're chasing things, whether it's chasing an end-of-the-year deadline or an end-of-the-quarter deadline. Sometimes people say, "Why are you pushing so hard to get this deal done?" Because I can. Because we can do it. Why would you not be in a hurry to get something open and start changing the world? That's what we do.

[37:55] Chris Hatch: All of this is your real estate career. Before your real estate career, you had a different career. How long did you spend in the ring?

[38:08] Aaron Harris: Okay, let me be very clear here: I've never left the ring. All that to say, I wrestled in high school and college as an amateur wrestler.

[38:23] Chris Hatch: Greco-Roman?

[38:23] Aaron Harris: Freestyle. Those Greco guys are tough. But I did all of that for the longest time, and then I did some Golden Gloves boxing and whatnot. And then I used to fight in Toughman contests. Remember those old four-round Toughman boxing contests?

[38:40] Chris Hatch: This is all pre-UFC.

[38:43] Aaron Harris: All pre-UFC, exactly. And then I was going to grad school at Duke, and I met a couple of wrestlers at the gym, and they said, "Hey, if you can make it through our tryout camp, we'll train you to be a pro wrestler." I was in the best shape of my life. Don't challenge me. So that would have been about 1994. I made it through their tryout camp, got signed, and wrestled with a company called WCW, World Championship Wrestling, for a number of years, and eventually they got acquired by WWE. I was under contract with both organizations at one point or another. Never a top guy, never a guy you saw on TV very often. I think the term they use these days is "enhancement talent." Call it a jobber. But some folks play soccer in the evening or they're in a men's softball league. I always had a day job, was going to school, owned some restaurants, and then I wrestled.

The cool thing about it is I got to travel all over the world and do some really great things in the wrestling business. I made a little bit of money, not a lot of money, but I got experience in things like television production: pointing at microphones like right now, how to talk into a microphone, what stage left and stage right are, what a hard cam is. Not only do you learn about the production side, you learn about the way you market things. We call it putting butts in the seats. How do you get people in the doors and talk them into the arena? "Live from the arena in Atlanta, Georgia!"

[40:34] Chris Hatch: So in that world, obviously, persona is everything. You're selling a persona, and it's always a tough-guy persona. Were there any wrestlers that stood out to you, where when you got to know them, you were like, "You're literally one of the nicest people I've ever met"?

[40:53] Aaron Harris: I think everybody would blow you away with how nice they were, because it's all a game. What I will tell you is the people who were not successful long term are the people who believed the gimmick they were putting out there. Here's a little peek under the curtain: wrestling's fake.

[41:18] Chris Hatch: You heard it here first.

[41:20] Aaron Harris: When you go in there, someone's going to win and someone's going to lose. When you start to take that personally... when you're in there to lose, you're not in there to lose. You're in there to put on a show and entertain the crowd, and sometimes advance the storyline, depending on where you are. If you start to take those losses personally or you start to believe your gimmick a little too much, that's a problem.

I can tell you, from firsthand experience, folks like Harley Race... you may not be old enough to know who Harley Race was, but he was a real tough old guy, and he was the nicest man in the world. And then you watch Ric Flair. Everybody knows who Ric Flair is to this day. He's still out there styling and profiling and wheeling and dealing. What you see on TV is what you get in real life.

[42:12] Chris Hatch: Oh, really?

[42:13] Aaron Harris: What you see on TV is what you get in real life. And there are a lot of wrestlers who've passed over the years. Eddie Guerrero was a friend of mine. Unfortunately, he passed back in 2005, and he was one of the nicest, most sincere guys I've ever met. Same with John Cena, who obviously is still alive and out there doing it. I'm in awe. I knew a lot of them when they were really young, and they've done some very good things for themselves.

It's definitely a game of personality. I'm a big personality, and I like to talk and have some fun with this, but I never had the addiction to the spotlight. It's never something I craved every single day. Most people say, "I don't believe that about you," but trust me. Even guys like you and me, Chris, we're out there, we're public guys, we're trying to get this done. But where we are, and where those next-level professional wrestlers are, it's night and day when it comes to living the gimmick.

[43:25] Chris Hatch: Wild. In all those deals that you've put together, in a long, wonderful career in commercial real estate, and in the drive-thru space more specifically, what's the biggest mistake you've ever made professionally?

[43:45] Aaron Harris: There's a long pause there, because the list is so big. I think over the years, not so much at Dutch, but with some other brands, we've chased numbers just to chase numbers at times. "Hey, there's an opportunity to do 10 stores, let's just go do it," without thinking about a real long-term approach to the market plan: where the market's going to be five years from now, 10 years from now, and do we really need to have 15 chicken joints in this town? I think that's probably a fair one.

Early in my career, I'd say not being fully transparent with some franchisees was probably a big mistake. I never lied, but I never went out of my way to let them know what the company might have been up to. As I've gotten older, I just don't have time for drama.

And then, and this was not at Dutch, this was another brand, we opened some stores in Idaho and allowed a franchisee to expand. They were California-based franchisees who'd run out of places to grow. They were doing really well, and they were looking for places to go, and I'm like, "Hey, man, we need to be in Boise." They had a lot of money and they acted like they knew what they were doing, and we probably didn't vet them well enough. We allowed them to go into a couple of markets in Idaho where we had no existing stores, and I think we damaged the brand for a number of years by having done that. This was 15 years ago, and do I regret that? Yeah. I sometimes drive by those stores like, "Yeah, we got that one wrong."

[45:56] Chris Hatch: What would you do differently?

[45:59] Aaron Harris: I would be very focused on the operational plan to support those stores. Not, "Hey, great, we get to do a store and we get that store count, we get that revenue." It's, "Where are we at with people? Who's going to run the stores? Who's running your current organization, and do they have the ability to scale up and grow?" If you have somebody who's been running three stores, but they don't want to travel from California to Idaho, how are we going to scale? How are we going to support that?

[46:29] Chris Hatch: It's a great point. You think about what you do, or what I do for a living: we go find that new site, we determine that it's an acceptable site, we go through the normal protocol of getting a building built and getting it open, and then we leave and go to the next thing. But the operator stays there.

[46:49] Aaron Harris: Yeah. And even above the store level, you've got a district manager or regional manager, whatever you want to call it depending on the brand. Who's there to support that? And what does the back office infrastructure look like? Do you have an IT person, so when the computers don't work, who do they call? When there's a facilities problem, who do they call? We built a great structure here at Dutch Bros, and we've got someone you can call 24/7. When I allowed some franchisees to scale in the past, maybe it wasn't as well supported as it should have been. So that would probably be a regret.

And the other thing, as you get older, is making sure you learn from the mistakes. They're going to happen. During the pandemic, I opened a couple of stores in some neighborhoods that were pretty good. Since the pandemic ended, the neighborhoods have gotten really bad. I regret that, but I've learned from that.

[47:50] Chris Hatch: It seems fitting, since I asked you the question, to share one of the giant mistakes I made, in how we originally met. We bought a property in Orem, Utah, that had a Taco Bell on it and a Burger King. Taco Bell figured out that they could move to a pad in front of Target. That franchisee liked to own their own real estate, so they bought the pad and built a Taco Bell there. That left me with a dark restaurant. Really cheap rent, though, so I was going up no matter what. That was the good thing. And I actually had Zaxby's bidding against Popeyes. That was the first time we met, if you remember.

[48:27] Aaron Harris: I do.

[48:28] Chris Hatch: And I did not pick your brand. And I seem to think the conversation was, "We feel that Zaxby's and their franchisee with no stores is a better fit for our property than your billionaire franchisee with a nationwide brand." I'll tell you, it has required way more time and attention from us than a normal net lease transaction should. Had we just chosen Popeyes, it would be business as normal and we wouldn't be talking about it.

[48:59] Aaron Harris: Zaxby's does a good job. Popeyes does a good job. And it actually was a learning lesson for me: why are they pushing so hard to get Zaxby's going here? It was some supply chain things; they needed to have a number of stores. But I think in the end, we saw what Popeyes was able to do in this market. I wouldn't kick myself over that one too much, because we've done a lot of Dutch Bros deals together.

[49:27] Chris Hatch: That's right.

[49:27] Aaron Harris: And by the way, we're going to do a lot more.

[49:30] Chris Hatch: I look forward to it. And it's funny, back to learning from your mistakes: when I ran into you at the ICSC New York City event in 2019, I just ate crow. I walked up and said, "You remember me? I chose Zaxby's, not you." And you obviously remembered who I was. It was a good opportunity for me to eat some crow and say, "Hey, look, let's figure out how we can do something together." And you were totally willing. So it was great.

[50:03] Aaron Harris: You've heard me talk about it. We were talking about Rocky movies earlier: it was redemption, right? If we can get a deal done, that's great. You win, I win, my brand wins, my employees win, my customers win. That's all that matters. We can go out here and punch each other because we're mad, but so what? It's all a long-term game, and there are going to be some wins and some losses. We've talked about the 750 stores or whatever it is I've built here at Dutch. I'd love to tell you that every single one of them is Oceanside, California. They're not. But I definitely like our track record here. And more importantly, we get better.

We're trying to go nationwide, a little bit on the south side of the nation. Nothing in the Northeast, nothing north of Virginia just yet. But we want to continue growing in Florida.

[51:05] Chris Hatch: Is Florida part of that growth pattern you mentioned, the south side of the US, because 65% of your drinks are frozen or iced?

[51:17] Aaron Harris: Probably more at times. But it's also about making sure people start to recognize us. I'm a drive-thru coffee company, and this may sound crazy, but I need to go where people drive. People don't drive in Manhattan. Am I going to work on those eventually? Am I going to open stores in subways, on corner lots in Manhattan? Heck yeah, I am. Not yet. That's not what I'm worried about just yet. Right now, I'm focused on where people are driving, where the young families are and where things are growing.

One of the things I like to do, and I take my team out and we do this sometimes: the first time we go into a market, we drive the subdivisions, and I start looking at basketball goals in the driveways. That tells me they've got young kids. And sometimes you'll see one that's old and rusted and falling apart. That means those families have moved on. So what's happening in this neighborhood? You get to spend some time there.

And there's just been so much growth in the Midwest and the Southeast. You look at Kansas City, one of the fastest growing markets in the US. You look at Huntsville, Alabama, the fastest growing city in the Southeast. That's been incredible for us. And I think the growth in Florida speaks for itself. Everybody knows what's been happening in Florida: not only population growth, but economic growth.

[52:58] Chris Hatch: To me, it seems like Florida and Dutch is a great combination.

[53:07] Aaron Harris: We're very happy with our early returns in the stores we've opened so far. And we haven't even hit the heart of Orlando or Tampa yet. We're in a couple of stores on the outskirts, just the way the timing worked. We've had some fun regulatory challenges trying to get our first couple of stores open in Orlando, but they're coming.

[53:32] Chris Hatch: Can't wait. As we wrap: in the odd event that there's somebody listening who hasn't been to a Dutch Bros, what drink are you telling them to go get today? By the way, I just get the Nitro Cold Brew. Black Nitro Cold Brew.

[53:49] Aaron Harris: I like to change it up constantly, but my go-to is our Rebel energy drink, because, you know, I'm not bouncing off the walls enough. I like to get our orange and vanilla flavor in a blended Rebel energy drink, and then you put a Soft Top on it, which is a layer of sweet cream across the top. That is my go-to drink. I tell everybody to have that. I like to have one about 3 o'clock most afternoons, and it's incredible.

Now, if you're more of a coffee person, our version of what some people might know as a caramel macchiato, we call a Caramelizer. That's half-and-half, coffee and milk, steamed and hot, and it's delicious. So I would say either a Caramelizer or the Rebel energy drink. We also sell iced tea, and we sell what we call a Dutch Soda, our version of an Italian soda. You can get something we call Ocean Water that's pretty tasty. But I'm a much bigger fan of the Rebel energy drinks.

[55:03] Chris Hatch: I love it.

[55:04] Aaron Harris: That's the problem with being in the office. I can drink them unlimited. The days I'm in the office, the poor team has to deal with me hyped up.

[55:13] Chris Hatch: So when you call me and you're at like 3,000 words per minute, that's what's going on. You've just had two or three Rebels and you're ready to roll.

[55:20] Aaron Harris: Either that or I was just listening to Iron Maiden. One or the other. I'm just a little pumped up.

[55:28] Chris Hatch: I love it. Aaron Harris, thanks for joining us today on the Dirt Dog Pod.

[55:33] Aaron Harris: Chris, thank you for having me. Joining you on the inaugural one, that's it. And I want to say, what you guys are doing and the noise you're out there making, it's a good kind of noise. And I'm just proud that you picked us to partner with and work with. So thanks.