The Word Cult Is in Culture: Daniel Batty, Chief Development Officer at Swig

Guest: Daniel Batty, Chief Development Officer, Swig

Host: Chris Hatch

Listen on Spotify

Summary

Chris Hatch talks with Daniel Batty, chief development officer at Swig, about a development career that runs through McDonald's, Carl's Jr., Dunkin' and Dutch Bros, where he led design and construction as the brand scaled from about 18 openings a year to roughly 160. Dan gives a candid look at why modular buildings haven't worked for high-volume drink concepts, what Swig looks for in a site (end caps with a drive-through, carve-outs and third-acre pads), and how rising costs are making deals harder to pencil. He also talks about Swig's "dirty soda" origins in St. George, its Save the Cups giving program, and why he left Dutch Bros to build again.

Key Takeaways

• Small-format drink buildings are a game of steps: fitting a full operating kitchen and walk-in into about 1,000 square feet means designing around every reach, stoop and turn.

• Modular construction saved about $100,000 and 21 days per store at first, but crawl spaces, moisture, sinking pylons and two sets of architects and approvals turned it into a maintenance nightmare. Dan's view: there's something there, but it's not dialed in yet.

• Swig's ideal site is an end cap with a drive-through or a carve-out pad of about a third of an acre. It's 100% drive-through, with sales peaking between noon and 5 PM.

• Tucking a small building into the corner of a big-box parking lot (like an H-E-B) without blocking the anchor's visibility is becoming one of Swig's strongest site types.

• Landlords and brokers are seeking Swig out because it brings a new type of customer to a center that's already crowded with coffee concepts.

• High costs for goods, labor and construction make a three-year payback hard to hit, which is pushing Swig toward developer-built end caps over ground-ups.

• On mistakes: drill more soil borings while the rig is on site, keep a sense of humor, and lean on mentors. Competitors share "trade experiences," if not trade secrets.

Transcript

[01:45] Chris Hatch: Good to be back here at the Dirt Dog Pod studio. And today we have Dan Batty, chief development officer with Swig, joining us.

[01:52] Daniel Batty: Yes, sir. Good to be here. Thank you so much.

[01:55] Chris Hatch: Thanks for joining us. Dan, we met a couple of years ago when you were at Dutch Bros.

[02:01] Daniel Batty: I did, yeah. I had a pretty good career there for about five, six years, and I thought I would try to do a repeat here at Swig. So we'll see how it goes.

[02:12] Chris Hatch: I was going to say, in five or six years at Dutch Bros, during the time that you were there, do you know how many stores were opened, approximately?

[02:18] Daniel Batty: Yeah, so when I started, we had 273 shops. We were opening about 18 a year, and when I left four months ago, we were on track to open about 160 this year, and we'll be well over 1,000.

[02:29] Chris Hatch: And what was your role at Dutch Bros?

[02:32] Daniel Batty: I was vice president of design and construction.

[02:35] Chris Hatch: So what is it like taking a concept that... you said 18 stores a year?

[02:40] Daniel Batty: Yeah.

[02:40] Chris Hatch: So you went from growing 18 stores a year to ten times that growth, 180 stores a year. What's it like to do that?

[02:47] Daniel Batty: It's a headache. No, it's actually pretty exciting. If you have the right team with you, it's amazing what you can accomplish. We were very fortunate. When I started with the brand, we had five people on our team, and we just kept adding bodies as it was required. And we were very purposeful in what we were doing. We actually increased the size of the building from, I think it was about 650 square feet to about 990, to squeeze all the new equipment in there over that time. We would review the plans every six months or so. I worked really closely with the real estate team, which is Aaron Harris, who you and I know very, very well. We just built out an incredible team. When I finally left, I had 22 people reporting to me.

[03:32] Chris Hatch: Nice. So you went from five people up to 22.

[03:36] Daniel Batty: To 22, yeah. And again, just top-notch people. I think what helped us deliver is it wasn't about the individual, truly. It was truly about the team and the brand, and we worked so cohesively together and helped each other out. There is no way that you can grow like that with dissent happening. It doesn't mean that there weren't challenges, but at the same time, everybody seriously just worked so well and so closely together, we were just able to crush it.

[04:08] Chris Hatch: Yeah. You build the structure, right? You build the stick frame of the building, you put everything together, you make it all pretty inside, and then you put a membrane roof over the top. And those membrane roofs, as we all know, are gold.

[04:20] Daniel Batty: Oh, yeah.

[04:21] Chris Hatch: They block all the moisture out. And then you get up on top of a Dutch Bros roof and there's like 37 penetrations in a 990-square-foot area. And it kind of gives you a sense of anxiety as the owner of the building. I'm sure you probably...

[04:32] Daniel Batty: Oh, yeah, without a doubt.

[04:35] Chris Hatch: Just one of the wild components, I guess, to think about when you're building with such a small footprint.

[04:40] Daniel Batty: No, it's definitely a challenge. But it's also like an ice skating rink up there at the right temperature. So it's a lot of fun.

[04:47] Chris Hatch: Are there other challenges like that you run into when you're designing a building that small?

[04:53] Daniel Batty: Listen, you're trying to put a full operating kitchen inside of 1,000 square feet. That is just honestly the hardest piece of the puzzle. And a good portion of that is your walk-in cooler. So it's trying to maneuver. And listen, in this business, I worked for McDonald's, I worked for Carl's Jr., Dunkin' Brands. It's all about the number of steps you take on the operational side. So trying to marry the operational efficiencies with the build is actually extremely hard. It's about where you're reaching. Are you stooping, are you reaching higher, are you moving left or right? Trying to find that balance is honestly the hardest piece of the puzzle. But I think they did a pretty good job at Dutch Bros, and we're tweaking that right now at Swig.

You know what's really funny? Aaron Harris and I worked really closely together on that in the beginning, and we would call each other at two in the morning. And you know Aaron, he loves late-night conversations.

[05:50] Chris Hatch: Oh, yeah.

[05:51] Daniel Batty: My phone would ring and I'd pick it up and he goes, "Hey, I was thinking about this." And we would talk about the ins and outs of all the advantages or disadvantages of modular. We settled on using a firm out of Florida who was the largest Rally's/Checkers modular manufacturer in the country. The idea behind modular is fantastic, I think.

[06:15] Chris Hatch: I was going to say, for my social media stuff, I don't think there's a single subject that people like to talk about more than modular. And every brand's tried it, and every brand has walked away.

[06:29] Daniel Batty: I think there's definitely something there. I just don't think it's been perfected enough. For us at Dutch Bros, the biggest component was having the crawl space underneath it, not having it sit on a slab, which I think is probably the way that modular needs to be done going forward. But having these big stem walls, there's a lot of moisture down below. There's all these problems, especially if you're in a situation like Texas, where we were kind of in a floodplain and all the water just emptied underneath our building. We had to pump it out. Our pump crashed, so the water just sat down there, stagnant. They couldn't figure out why the floor was lifting on the inside. You have water coming up from down below.

If you're in a Dutch Bros or you're in a Swig, there's water all over. There's ice being slung all over the place. And so it just destroyed the modular buildings. They were a maintenance nightmare. So from that perspective, for the type of fast casual restaurant that we're in, I think it's a really bad idea. But I still think there's something there. I'd be willing to revisit it in the next three, four years, but I'm not truly convinced it's the right way to go.

[07:42] Chris Hatch: And why do you build modular with a stem wall and a crawl space?

[07:46] Daniel Batty: Honestly, that is a question that I struggled with, with the manufacturers. We would go round and round about that conversation. There is a company in Las Vegas, Xtreme Cubes, and they're actually doing that now. They're actually putting it on a slab.

[07:59] Chris Hatch: So a little more coordination there, right?

[08:01] Daniel Batty: A little more, definitely.

[08:03] Chris Hatch: Because you still need a local general contractor that's going to come out and do all of your site work. He's going to pour that slab, do any of the under-slab plumbing, et cetera, right? So you've got to coordinate that a little tighter, I guess.

[08:18] Daniel Batty: You do. And honestly, general contractors aren't benefiting from it, because somebody else is building the building. That's where they make their profit. And they've got to be buttoned down. They're basically coming in saying, "Hey, we're just doing site work, putting in stem walls, some pylons." And if those things are off, they're going to pay the price, right? We've had bubbles, we've had pops in the floor, or we've had to jack up both sides of the building, things of that nature. We actually had a pylon in Texas, when I was leaving, that was sinking. The whole modular building comes in three pieces, so the whole building was like a V. Great if there's a fourth-grader in the middle, but...

[09:01] Chris Hatch: Just because of a bad slab.

[09:03] Daniel Batty: Well, a bad pylon in the middle. So, like I said, there's something there, but I don't think it's quite dialed in yet.

[09:11] Chris Hatch: I don't think I understood, when we did our first couple of modulars that, of course, you insisted that we do...

[09:17] Daniel Batty: Exactly, yeah. It is my fault.

[09:20] Chris Hatch: I don't think I quite understood going into it. You guys were pretty gung-ho on them and we said, great, sounds good. I don't think I understood that we would have basically a second set of architects and engineers attached to it, because you have the architects and engineers with the modular group and then you have the site side. And I also definitely did not understand that we had an entirely different approval process at the state level, right? Is that true with most states?

[09:45] Daniel Batty: Most states.

[09:45] Chris Hatch: The one we did was in Idaho, Idaho Falls. And there, the State of Idaho's housing department actually stamps your plans on your prefab.

[09:54] Daniel Batty: Yeah, that's pretty standard. It's really interesting. They say there's modular-friendly states and then there's other states that obviously don't want modular there. But some of the modular-friendly states are the ones where you have to go through the state housing department. And the issue is the cities or jurisdictions don't like that oversight, because basically the state is overriding the jurisdiction of the city. So the city a lot of times will tack on, "Hey, we want some exterior finishes on there," that are maybe a little over the top, just to make their point perfectly clear. But listen, it's just part of the game.

I will say this. It's really funny when you're talking about the coordination between the manufacturer's architect and our architects. My dream was just to have a developer come in and do everything, because the level of coordination that's required is very time-consuming. There was a cost savings when we first started doing it. There was about a $100,000 cost savings and about a 21-day savings on the build time. And in the fast casual business, obviously, if you're open 21 days sooner, that's generating X number of dollars in sales. So it was actually benefiting us a lot more than just the normal build time. We were pulling all those components together to say, "Hey, look, this is a lot better deal. We're going to actually generate about $150,000 or $200,000 in savings, depending on where it's at." And that worked for probably the first five out of 28. And then it all just went sideways.

But at that point, you're so far down the pipe. To go back and pull all those modulars and say, "We're not going to build modular"... we already had signed agreements to manufacture the modulars. We already had the sites laid out, and everything was in plan review. So we just kind of rolled with it. But when those 28 were done, we were pretty much toast.

[12:03] Chris Hatch: Interesting. Such a fun buzzword, such a fun phrase to use at cocktail parties. And then you go to implement it in your life. Okay, so five years at Dutch.

[12:15] Daniel Batty: Yes.

[12:15] Chris Hatch: And where were you before then?

[12:17] Daniel Batty: Before then I was at Dunkin' Brands. I was part of the team that was rolling out the West Coast. They had been in the West many years earlier and they didn't do that well, so they kind of came back, and they were doing okay. And then I left. The timing was good for me to leave at that moment. But they actually have several strong franchisees for Dunkin' out in the West now. They were still trying to figure it out.

[12:45] Chris Hatch: That brand's going through a real resurgence right now. I think you see a lot of power plays on the franchise side.

[12:50] Daniel Batty: Oh, yeah. It's pretty interesting. If you were to compare Starbucks to Dunkin' Brands, Dunkin' is on every corner, down every street on the East Coast. It's pretty amazing. If you've been out there, I've been driving down literally a country road in the middle of nowhere outside Boston, and there's a Dunkin' Donuts. It's a great brand. Like I said, it wasn't translating well on the West Coast. At the time I was working there, I was trying to get them to change their color scheme and do some different things. I just don't think it was translating out here. But again, they've come back, they're having a big resurgence right now, and they're doing pretty well.

I think coffee is one of the things that drives a lot of sales. You look at the success of Dutch Bros. Starbucks is struggling a little bit right now. I think it's a cultural piece, quite honestly. But they'll get their footing again and probably come back pretty strong. I think they just need to find their way.

[13:48] Chris Hatch: You can't count any chain with over 40,000 stores out by any means.

[13:52] Daniel Batty: No way.

[13:54] Chris Hatch: Plus, it blows my mind. Everywhere you go, they serve Starbucks coffee. Convention halls, hotels, literally everywhere, right? And how long were you at Dunkin'?

[14:05] Daniel Batty: Just a little over two years.

[14:07] Chris Hatch: Okay. And before then?

[14:09] Daniel Batty: I was with Carl's Jr. for about 12 years. That was a great ride. It's actually a funny story. I actually started with McDonald's. So let me digress. I'll go really far back.

[14:19] Chris Hatch: Sure.

[14:20] Daniel Batty: My father was a contractor. I told my father, "I will never work in construction, and I will never be as fat as you are." I'm twice as fat as my dad and I've worked in construction my whole life.

[14:32] Chris Hatch: Amazing.

[14:32] Daniel Batty: So don't disrespect your parents. No, my dad's an amazing man and ran an incredible business. My brother ended up taking it over. I went to work for a civil engineering firm out of college and worked there for several years. An opportunity came up at a waste hauling company, of all places. I went to work at a waste hauling company and was there about six years, and a friend of mine reached out who was at McDonald's. He said, "Hey, you've got to come over here and check this out." So I went to McDonald's and started my career.

[15:04] Chris Hatch: So you went from the waste hauling company straight to McDonald's?

[15:07] Daniel Batty: Yes.

[15:07] Chris Hatch: And what were you doing at McDonald's?

[15:09] Daniel Batty: Construction manager.

[15:10] Chris Hatch: I mean, literally the gold standard in the entire drive-through food industry.

[15:13] Daniel Batty: Yeah, it was amazing. Fortunately I had enough of the civil engineering background. I think that was appealing to them.

[15:19] Chris Hatch: What a great job, right?

[15:21] Daniel Batty: Yeah. And it's really interesting. When I went to work with a civil engineering firm, I started out running blueprints. That was in the old days when they used ammonia, so I'm probably a little bit whacked out because of that. But no, it was a great job. I went from doing that to learning design work, and was running projects, was doing government relations for the firm. I did that for a few years, and I don't know how I ended up at the waste hauling company, but it was a great gig for the time being.

[15:54] Chris Hatch: So you went to McDonald's, and then did you follow your boss from McDonald's over to Carl's?

[15:58] Daniel Batty: I did. Yeah. And had a little bit longer run there.

[16:02] Chris Hatch: Do you know Don Ikeler?

[16:04] Daniel Batty: Yes. So Don Ikeler is about 10 years younger than I am, and I tell everybody he's one of my mentors. He's actually a pretty incredible human being, just on a personal and professional level. He did amazing things at McDonald's, amazing things at Carl's Jr., and now he's been at Chick-fil-A for many years. Really, really good human being. He gets upset when I say that about him. But he's a good man. He actually paved the way for me to get to where I am today, quite honestly. And he and I still talk about every six weeks or so. Usually if I run into a problem, he's one of the first people I call, because he's pretty much seen and done it.

[16:43] Chris Hatch: So in that time period, the early to mid-2000s that you were at Carl's, you and Don were kind of reformatting the brand. The layout changed and the prototype changed, right?

[16:52] Daniel Batty: Yes. There were a lot of changes there. It was a pretty amazing time to be at the brand. We had our big resurgence. Some pretty interesting commercials at the time.

[17:04] Chris Hatch: Yeah.

[17:04] Daniel Batty: Which just kind of drove the brand. I can tell you some funny stories about being yelled at on planes. I'd say, "Look, I just work in construction and development. I don't touch the media."

[17:19] Chris Hatch: Just those big drippy sandwiches.

[17:21] Daniel Batty: Those ones, I touch. That's right. But it was a great time for the brand, and the franchise model was just kicking into high speed there.

There's a story I always tell, because to me it kind of encompasses how you can take a poor-performing store and turn it into something different. I was talking with a franchisee who had just bought... I'm sure I can talk about this, it's been many years. He'd just bought a market for a dollar because all the stores were doing terrible. And he said they were losing about $800,000 a year. And he goes, "I went out and toured the sites, and I realized that every one of the shops needed to be cleaned. They all needed to be refreshed."

[18:06] Chris Hatch: How many stores?

[18:08] Daniel Batty: I think it was eight or 10 stores. And he goes, "You know what? I looked at the employees. I hung out at each shop for a couple of weeks, and I started eliminating the toxic employees. And I went out and I bought all new uniforms and all new shoes for all the employees." And I thought that was the most interesting component of the puzzle. He said, "I made them feel proud of where they worked, proud of how they looked." And he said that translated into larger sales. He goes, "Within six months, I was $800,000 positive."

So you just realize it's the small wins like that, especially in our business. It's the small wins that propel a brand, or propel the ability to continue forward and thrive in the construction or development industry. It's a really tough business, and you and I can attest to that. But there are so many great things at the end of the day, and you're truly transforming lives. I think developers get a bad name. People go, "Oh, you're tearing up raw resources," or whatever the argument is. We truly change lives in this business. I think we truly allow people to thrive and be employed, and we change the landscape of the areas that we live in. It's truly one of the most rewarding businesses I've ever been attached to in my life. So I thoroughly enjoy it.

[19:39] Chris Hatch: Wow.

[19:39] Daniel Batty: Well, he said he realized... he goes, "I walked in and I was just watching people walk around, and they had Crocs on, they had all these different types of shoes. And mostly I was thinking they're probably going to slip." But he said, honestly, the thing is they probably wore shoes that were handed down or whatever. And he goes, "I wanted to make sure that everybody felt a sense of pride."

[20:03] Chris Hatch: Let's pivot for a minute to what you're doing currently, right? So you've stepped into another drink brand.

[20:11] Daniel Batty: Yes.

[20:12] Chris Hatch: Slightly different. Tell us, what is the mission of Swig? How would you describe Swig?

[20:20] Daniel Batty: Quite honestly, we are on the cutting edge of a completely new market for drinks. We're kind of leading the market in understanding the amazing things you can do with soda. There's an old Laverne & Shirley episode, if you're familiar with it, where she would pour milk into her soda, and everybody would go, "Milk in your soda?" I'd seen that probably... I'll be dating myself, but probably 20 years ago. And it's really interesting, because what we're doing with the soda brand as a whole is game changing. It's kind of a new component for beverages. Listen, Sonic has done a great job at it for years.

And that's kind of how the whole business started with Nicole Tanner. She would love to go to Sonic, but the lines were always too long, and she worked on a farm. She was like, "Look, I had to get my drink and I wanted to get back to work." And later in life, she and her husband said, "Hey, why don't we start our own concept," called Swig. It was in St. George, Utah. It was one shop, and it just started slowly growing and growing in popularity. And as a result, we're at 82 locations today. We're literally creating a brand new market for drinks in the fast casual space. And the runway's big. We run a lot of data and analysis on it, and the great thing is we're starting to gain a lot of traction. I had 12 people reach out last week for deals across the country.

[22:11] Chris Hatch: Franchisees?

[22:12] Daniel Batty: No, brokers.

[22:14] Chris Hatch: Brokers.

[22:14] Daniel Batty: Yeah, brokers. Right now I think we have about 30 franchisees, and we're in about 14 states.

[22:25] Chris Hatch: You're in 14 now?

[22:27] Daniel Batty: Well, we're developing 14 right now. Our corporate model is Utah, Arizona, Oklahoma, Texas, and then we have Indiana, Tennessee, parts of Florida, Ohio, things of that nature. So you're going to start seeing more and more of these come online. We'll probably finish out the year with about 81 shops on the corporate side and probably about 25 on the franchise side. And we see those numbers growing exponentially over the years to come.

[23:01] Chris Hatch: You're breaking 100 this year. What do you think you'll open next year?

[23:05] Daniel Batty: Corporately, listen, we're slow walking a little bit. We are a new brand in a lot of ways. It's a startup. So we're kind of going back and reevaluating what our processes are, how we're going to grow the brand, who our target audience is. We have a pretty good idea, but we don't have it completely dialed in. We're almost there. We're just on the cusp. And then we're probably going to hit it a little harder in 2026. But we're happy with about 30 corporate builds next year.

[23:36] Chris Hatch: That's respectable.

[23:38] Daniel Batty: It's a little over 30%, about 40% of our... my math's terrible. Help me out here.

[23:44] Chris Hatch: I think it's like 40... like 41, 42%. It's one every other week.

[23:48] Daniel Batty: Yeah, exactly. One every other week.

[23:50] Chris Hatch: Those are good numbers.

[23:51] Daniel Batty: I know. Those are great numbers.

[23:52] Chris Hatch: Tell us what a perfect site for Swig is right now. What would be the hard corner of paradise and desire?

[23:59] Daniel Batty: Always "Main and Main," right? We all want to be on Main and Main. But listen, we build a lot of end caps, and we've been pretty successful with that. The square footage of our building is usually about 970 square feet, but it's hard to find an end cap that's 970 square feet. So we end up getting larger end caps, up to 8,000 square feet. But we're also looking into doing some more ground-ups. They've done ground-ups in the past, but they were modular, and we're now starting to have those same maintenance issues on the modular buildings that we had at Dutch Bros. So it's a little humorous to me, and also frustrating. But we're looking at about a third of an acre. Carve-outs are great. We've done quite a few carve-outs in the Texas market right now.

[24:45] Chris Hatch: Drive-through required?

[24:46] Daniel Batty: Drive-through required, yeah. We're 100% drive-through. We do have some dining areas, but they're very small, maybe 10 people. That's just not our business. Very similar to Dutch Bros.

[24:59] Chris Hatch: Is there anything unique? Water requirements, sewer requirements, et cetera? Do the buildings run on gas, electric?

[25:05] Daniel Batty: Right now it's gas and electric. We're probably going to go all electric, like the rest of the country is probably going in that direction. Fortunately, the equipment piece is a lot different than it was at Dutch Bros. It's probably about a third of the cost. And it's a little easier to manage on the water side. We just use filter systems. We had an RO system, a reverse osmosis system, at Dutch Bros, which was interesting. But we're able to manage the Coke products and things like that using just the normal filters that they use in stores all across the country: Burger Kings, Carl's, McDonald's, things like that.

Our average volume is a little over a million right now. So we're doing great. The margins are good. But we want to up those, obviously, quite a bit, because we're looking at the next event, which is probably a few years down the line. So we're talking about that as a brand, and where we want to go.

Listen, part of the reason we have a lot of brokers reaching out to our brand right now is we are different. We are creating a new space. When they're building out shopping centers and things of that nature, they're looking around going, "Hey, who could we have in here that's unique, that's going to draw a different type of customer, a new customer?" And we're at the top of the list. There are so many coffee concepts out there: Dutch Bros, Starbucks, 7 Brew, Dunkin' Brands. Not that those are tired brands by any means, but they're brands that everybody's seeing day in and day out. People are looking for something different, and I think Swig is meeting that need. So it's really exciting to be a part of it. I've been here four months, and I'm working long hours, but it's been an education for me, and I'm working with a lot of great people. So it's a lot of fun.

[27:00] Chris Hatch: At Swig, does it matter if you're on the AM or PM side?

[27:03] Daniel Batty: I don't think it matters. Listen, we do the majority of our sales between about 12 and 5. And a lot of times it's after school. Moms are coming through with their kids. "Hey, what do you like?" "We like Swig." If you're there in the afternoons, it's a mom with a car full of kids coming through and getting drinks for their kids. My good buddy, he's 72 years old, he says, "I drink six sodas a day, and I'm at Swig for three of those sodas." So everybody's got their vice, right?

[27:33] Chris Hatch: He's really maxing that.

[27:34] Daniel Batty: He's maxing it out. But you know what? He's in amazing shape. So I don't know if it's just good genetics or what, but I might go on the all-soda diet here pretty quick.

We have some amazingly loyal customers. And listen, the one thing about Dutch Bros, when I was there, is they were able to capture the culture of the brand, right? And of the business, and their care for people and their care for their community. Swig has that nailed down. Nicole Tanner is a breast cancer survivor, and we actually have a program called Save the Cups. When she was struggling through her battle with breast cancer, somebody came and paid all her bills. They said, "Look, you worry about getting better, don't worry about the bills." And they wrote a check to cover all her medical expenses. And so we actually... I get chills... we actually do that for people every year, and that's growing.

What I thoroughly enjoy about the brand is that it's very much aligned with, and similar to, what Dutch Bros is doing with ALS and Drink One for Dane. They raise quite a bit of money; I think it's over $5 million for ALS research. We're not quite that high, but we've written some pretty big checks and changed a lot of people's lives. And it's great to be a part of a company that does that. I think it's bigger than business sometimes. We're all human beings. We're all on this planet trying to do the best we can. We all like to make money, and I'd be lying if I said differently, but at the end of the day, I think it's what you do and how you do it that makes a difference.

[29:24] Chris Hatch: How frequently do you see Nicole in the office?

[29:27] Daniel Batty: Honestly, at a minimum every other week. She is very involved in the business. She's still a minority shareholder, but her influence is felt all throughout the business. It's interesting. She'll be driving down the street and see a long line at a shop, and she'll pull her car into the center and go help serve drinks. That's just who she is. She can't get away from it. She loves the business.

[29:51] Chris Hatch: That's the best part about every founder, right? It's that passion, it's that drive.

[29:55] Daniel Batty: And one thing I was going to add: Larry H. Miller has been an amazing partner, extremely supportive of the brand. Their influence in the Utah area, with their philanthropy and things of that nature... they are such an amazing organization to align with just for that reason alone. They get it at a little higher level than just the business perspective.

[30:18] Chris Hatch: Well, I think that goes back to Save the Cups, right? So 12 to 5 is the peak time. Is there a go-to drink, more than others?

[30:28] Daniel Batty: You know what? It changes, because obviously we're testing drinks all the time. But it's really interesting: the founder's drink, Nicole's drink, is a Dr Pepper... Nicole, if you're watching this and I get this wrong, please forgive me... a Dr Pepper with vanilla cream and...

[30:45] Chris Hatch: That's what I have right now.

[30:46] Daniel Batty: Is that what you have right now? Are you checking me?

[30:50] Chris Hatch: I sub Coke Zero.

[30:52] Daniel Batty: I think it is cream, right? Cream and lime.

[30:55] Chris Hatch: Yeah, there you go. It's delicious.

[30:57] Daniel Batty: So the drinks are amazing. Who would have thought? And we don't have just soda drinks. We have what we call refreshers and things of that nature. We also have an energy drink. What they're trying to do with drinks in general is cutting edge.

[31:17] Chris Hatch: Not that you need to give away any trade secrets, but since we're here on the Dirt Dog Pod, I've got to at least ask. Are there any new products, any new product lines coming down the pipe?

[31:27] Daniel Batty: Yeah, you know what? We actually just launched... and I apologize, I should have had this all written down... we just launched some new drinks for the holidays. And they have some incredible things, like Almond Roca, that are added on them. They'd probably blow your mind. They're plenty of drinks. But we're constantly... that's something that's high on the chart. Every Wednesday we try new cookies in our office. It's horrible, but I enjoy being there on Wednesdays. And we're constantly trying new drinks.

[31:59] Chris Hatch: So at the corporate office, you guys are trying out different cookies.

[32:02] Daniel Batty: We're trying the product. That's right. You've got to do that. So it's a good time.

[32:07] Chris Hatch: And in all the states where you're open and operating, are all of the baked goods coming from one commissary?

[32:15] Daniel Batty: They're not at this time, but they will be shortly.

[32:19] Chris Hatch: What are you seeing as the biggest challenges right now? The economic stress, cap rate stress, right?

[32:23] Daniel Batty: Yeah, it's definitely... listen, it's trying to explain to my CFO why we're not going to have a payback in three years, right? That's what we're shooting for as a brand. Listen, the market is tough out there. I've been in this business for 25 years. The cost of goods is so high. The cost of labor is so high. It's just hard to make deals pencil, and I know you're experiencing that yourself. One of the ways we're countering that is we're trying to get with developers that are building out centers that will have an end cap with a drive-through. That's the least financial cost that we can manage for our brand. As for the ground-ups, we have 12 ground-ups this next year. The metrics are tough. They're going to be tight. So again, we're trying to figure out what is going to work for our brand as we move forward.

And as we appeal to more and more people, we're not sure if we're going to continue franchising. We have great franchise partners now. We just don't know where that's going to go in the future. It could be something we do more of or less of. We're just kind of making that determination right now.

[33:42] Chris Hatch: No doubt.

[33:43] Daniel Batty: One of the things, too, and I think we talked a little bit about it: we're doing the carve-outs in front of a lot of these brands like H-E-B and things of that nature. They have these huge parking lots, and ours is such a small building. We're okay being kind of tucked off into a corner so we're not blocking the visibility to the H-E-B. Those seem to be some of the sites that are gaining more traction.

[34:04] Chris Hatch: Well, a third of an acre is small, too. Your impact is low, right?

[34:08] Daniel Batty: Yeah. And that's a blessing and a curse. It's hard to find a third of an acre to build on. Or developers don't want to give up a third of an acre for you to build on, because if you ever leave, what are they going to do with it? That's their concern. But it also provides unique opportunities to be in some areas that are on a great thoroughfare, where all they have is a third of an acre because it's butted right up against other properties on both sides, and a family owns that third of an acre. So it's a long, narrow piece of property that we can make work.

[34:48] Chris Hatch: And you went from McDonald's to Carl's Jr. to Dunkin', all of which are really great brands, all household names. What's it like going from that to Dutch, and now Swig, where you've gone from the stable environment of knowing what to expect, knowing what your schedule looks like and what you need to get done, to, I guess, just everything, right?

[35:12] Daniel Batty: No, it's a great question. McDonald's is it, right? They have everything nailed down to such a deep level. It was the best place to start, because I still carry a lot of what I learned from McDonald's with me to this day. Taking that and moving into Carl's Jr. in its heyday, when we were building like crazy, a lot of that was able to translate. They were public at the time that I went to work for them. They went private and sold like three times during my tenure there. It really was a little bit of a mess in some regards, but it helped me learn a lot about the business side of what I was doing, not just the development side. From there I went to Dunkin' Brands, and again, they were just reaching out to the West Coast, trying to start that flame again.

But going to Dutch Bros, quite honestly... I said Aaron's name earlier. I'd had a relationship with Aaron. One of the pieces I didn't tell you is I left Carl's Jr. and sold signs for a year. I hated it so much that I went back to Carl's. I made a lot of money, but that is one of the hardest jobs and one of the worst experiences of my life.

[36:41] Chris Hatch: You were selling monument signs, pylon signs?

[36:43] Daniel Batty: Yeah, everything. Building signs, everything. I worked for a great gentleman, and he convinced me it was the best decision of my life. It was the worst decision of my life, but I don't blame him. I blame myself. But it helped me again. It's all those pieces of the puzzle that you learn along the way, so it's actually benefited me throughout my career.

During that tenure selling signs, I actually met Aaron. So he and I just kept a relationship going, and he would always say, "Hey, we're going to work together. We're going to work together." He went to work for Dutch Bros as a consultant and called me and said, "Hey, you need to check this company out." So I flew up and interviewed with the founder, Travis Boersma, and his brother-in-law, Brian Maxwell. Two amazing people. Travis has such a passion for what he's doing. I'm like, this is how a business needs to be run. We just walked through business as a whole. There was discussion around development and real estate, but it was really his passion for the business and what he was trying to accomplish. He lost his brother to ALS, Lou Gehrig's disease, and the business was a testament to his brother's vision. And that just struck me. I have a close relationship with my brothers, and I wanted to be in a family-owned and operated business. I thrive in that environment.

So that journey was incredible. And having the opportunity to stand alongside him as the company went public, things of that nature, benefited me to a level I can't even tell you and could never have imagined. But you realize that money's a great thing and it's not a driver, right? The driver is what you're doing every day.

When I left Dutch Bros to come to Swig, I kind of hit a point where I was doing the same thing over and over and over again. I could have stayed there the next 10, 15 years, had a hugely successful career, grown with the business. I loved working there. They enjoyed having me there. When I left, it was really hard. It was like leaving family. And it was difficult to explain to everybody, because I had said I was there for the long haul. It was just a moment in time, and I said, "Hey, you know what? I want to try something different. I'm a builder. This is an opportunity for me to build again."

If you know anything about our CEO, Alex Dunn, he was one of the founders of Vivint here in Utah. He built a $10 billion company, built another $5 billion company. The man is a savant. He just understands business and people and markets to a degree that I can only hope of achieving at some point. We sit in meetings and he challenges me to such a deep level, one I don't think I was getting challenged to at Dutch Bros, and I'm able to look at things a little bit differently and execute at a little higher level. I was able to execute at a great level at Dutch Bros, but once you're public, they try to build the risk out of the business. They're pretty risk averse, because they don't want to disrupt the opportunity for profitability and things of that nature. Here we have a little more flexibility. We can try new things. I'm actually really excited about some things we have baked to try in the next couple of years.

I always say that the word "cult" is in "culture." We're going to build another cult here at Swig that will increase the culture and help us move forward. So, yeah, it's exciting.

[40:25] Chris Hatch: And not that we need an airing of grievances, Festivus-style, right? But tell us about something you did wrong, and then how you learned from it.

[40:33] Daniel Batty: I do things wrong every single day. I learn every single day. I never stop learning. Listen, probably the biggest mistake I made was when I was at McDonald's. There were actually two incidents at McDonald's. You go out and you do borings on your job site...

[40:53] Chris Hatch: Soil borings.

[40:53] Daniel Batty: Soil borings, thank you. And the first one, we punched all over the site and probably didn't punch enough holes. And just for people listening: if the equipment's already out there, it's cheap to punch more holes. So it's better to punch more holes than fewer.

[41:09] Chris Hatch: It is like Swiss cheese to some degree, right? Because you're just trying to guess at where there might be a problem.

[41:15] Daniel Batty: Where there might be an issue. Yeah. And literally, on the first site, the first scoop, they grabbed a car out of the ground. It was an old dump site. And the funny thing is, they had wire coiled up and thrown in the ground. They had to clamp it off before they cut the pieces, because if they just cut it, it would unravel and kill somebody, right? So they had to actually clamp it all off and cut pieces off.

And it was another McDonald's job where the groundwater table was a little higher in one area, and where were we going to put the building?

[42:00] Chris Hatch: Small problem. Naturally.

[42:01] Daniel Batty: Everywhere else it was fine, but it just happened to be in that corner. But listen, those are things that just happen in this business. I tell everyone, please have a good sense of humor, because this business will eat your life, and you've got to be able to pivot quickly and make some fast decisions. One of those, I don't recall which one, and this was back in the '80s, was probably a quarter-million-dollar mistake, which was a lot of money back then.

[42:27] Chris Hatch: Still a lot of money today.

[42:29] Daniel Batty: Fortunately, there were enough people in the business who had been doing it a long time and had my back. But it's just one of those things that happens in the course of real estate. I always say what makes me an expert is mistakes. I've made more mistakes than I care to count. It's if you keep repeating them, that's foolish, right? So you've got to learn from your mistakes and make a mental note of, "Hey, I've got to go that extra mile." Listen, some of the developments that were done here at Swig were not up to par with what I would do, and we're paying the price for those right now. Again, it's just part of the process. There is experience that comes with this job.

Lean into people. Have strong mentors, have a great network, like you do. Listen, I still talk to Aaron Harris. He's a good friend. If I have a question on a deal or something that's not sitting right, I'll pick up the phone and call him. If I have something on the construction side, I reach out to Don Ikeler. I have people in this business that I've worked with for years that I still talk to to this day. And the funny thing is, competitors or not, they're more than happy to help you. Nobody wants to see other people fail, for the most part. We're not sharing trade secrets, but we are sharing trade experiences. And I think there's a lot of advantage to that.

[43:56] Chris Hatch: A great message. I appreciate your time today, Dan. Good to hear your story.