1. As a group (within the workshop) do the following:
2. 1)Consolidate your individual swot into one 'masterpiece' on the answer sheet provided
3. 2)List the range of 'needs, wants and demands' that coffee buyers have. (Textbook 7E pages 5-6)
4. 3)DescribeDutch Bros current 'market offering.' (HINT:Write out on your answer sheet what a
5. market offering is, as per the textbook first). Textbook 7E pages 6-7)
6. 4)How does Dutch Bros create value for its customers and capture value from them in return?
7. (Textbook 7E pages 4-5, 18-19)

The Coffee Cult: How Dutch Bros. Is Turning Its 'Bro-istas' Into Wealthy Franchisees

This story appears in the June 29, 2016 issue of Forbes.

https://www.forbes.com/sites/susanadams/2016/06/15/the-coffee-cult-how-dutch-bros-is-turning-its-bro-istas-into-wealthy-franchisees/#26b9859a3694

Watch this video first:https://www.forbes.com/video/5426708496001/or in your Stream folder as a mp4 file.

Kristen Von Tersch, a 28-year-old college dropout with a pierced

nose, owns five Dutch Bros. drive-through coffee franchises in the sleepy southern Oregon, USA town of Klamath Falls. A year ago she was making $35,000 as a

regional manager. Now her stores are on track to gross nearly $4 million, leaving her $230,000 in profit. But she says she doesn't care about the money. "I would work for Trav for free," she says of Travis Boersma, 45, Dutch Bros.' CEO and co-founder.

The franchisees at Dutch Bros. (pronounced "brose"), a 24-year-old chain with 264 drive-throughs in seven western states of the USA, say they care most about being part of what they call the "Dutch Mafia." "It's just a magic place to work," Von Tersch says. On a sunny spring morning she dashes across a parking lot and throws her arms around Larry, one of her regulars, whose wife is struggling with breast cancer. "Our customers love on us as much as we love on them," she says.

Dutch Bros., based in Grants Pass, Ore. USA, hires and promotes only outgoing optimists committed to customer service. No bad tempers allowed. "It's our Dutch Bros. way of life," Von Tersch says, "practicing love and humility."

Sound like a cult? " 'Cult' is just 'culture' minus three letters," says Josh Kimzey, 33, who's worked for Dutch Bros. since 1999.

Cult or culture, it is working for the franchisor, which logged $283 million in system-wide sales last year. According to FRANdata, the consultancy in Arlington, Va. that puts together FORBES' annual list of best and worst franchises, Dutch Bros. has one of the strongest track records among the 3,375 firms evaluated. In the two previous rankings, Dutch Bros. was rated among the top ten companies that require franchisees to invest between $150,000 and $500,000. This year it just missed making the cut. The company scores high for franchisees' return on investment and store profitability. It also scored a high 97% five-year continuity rate, meaning only 3% of units closed between 2010 and 2015.

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115.116 Workshop 1-Week 4Internal Students-Group Tasks and Case

"Other coffee establishments are all about the coffee or about the ambience of sitting in the shop," says Joshua Margolis, a professor of organizational behavior at Harvard Business School. "Dutch Bros.' culture revolves around the connections they make with their people."Travis Boersma, the founder and CEO of Dutch Bros Coffee sums up2:

"Coffee is what do, but it not who we are.

Here, at Dutch Bros we live by three main core values. One cannot be sacrificed for another. All must work together in order to provide the best experience possible.

We may be a coffee company, but we are in the relationship business.

SPEED

We get it, time travel isn't real...yet. So we move quickly, pour fast and serve with a sense of urgency to ensure that our customer's time is spent living life beyond our window.

QUALITY

We know our products and have mastered our craft. Perfecting each customer's drink, by hand,is the name of the game. We know the magic is in the details and strive to give our customers a remarkable product, each and every time they visit any of our stands.

SERVICE

We are committed to providing the best experience and enjoy positively interacting with everyone we meet. We genuinely care about every customer we see and do our best to findsolutions to any problem that might come our way."

Baristas, known as "bro-istas," memorize patron preferences, ask after spouses and kids, and dole out free drinks to customers who are going through rough times. Kevin Murphy, 29, a franchisee in Portland, gave flowers and a month's worth of free iced coffees to a regular who had confided in him after her abusive husband hanged himself. "We were her safe place," he says.

Since 2008, Dutch Bros. has stuck to a policy that, according to long-time franchise consultant Ed Teixeira, author of The Franchise Buyer's Manual, is unheard of among major American franchisors. It sells franchises only to people who have worked for the company and sucked up the culture for a minimum of three years, buying out the few franchisees who fail to live up to its standards. "We simply don't tolerate toxic or cancerous behaviour to the culture," says Boersma.

2https://www.dutchbros.com/our-story

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Franchisee Kristen Von Tersch (Credit: Parker Fitzgerald).

Last year, aiming to speed expansion, Dutch Bros. started offering extraordinarily generous terms to loyal employees like Von Tersch, who started as a minimum-wage bro-ista when she was 19. To buy her five franchises, she had to put up only $5,000. By contrast, Dunkin' Donuts requires franchisees to have liquid assets of at least $250,000 and a net worth of $500,000 per store. To cover the rest of her investment, including the $30,000-per-store franchise fees plus depreciated equipment costs, Dutch Bros. loaned her $250,000 at 12% interest, amortized over ten years. She pays rent on the real estate and a royalty of 7% of her gross.

The company also took over site development for new franchisees, scoping locations, buying or leasing property, and paying for remodelling or construction of the can't-miss gray-and-blue Dutch Bros. stands, with their peaked roofs, bas-relief windmills and tulips painted around the base of the exterior. Franchisees get a plug-and-play operation, paying rent to headquarters, which handles payroll and accounting. New equipment, which includes $10,000 La Marzocco espresso machines, can total $150,000, and franchisees must pay $30,000 to $60,000 for opening-day expenses. That includes a celebration with wind socks, giant inflated coffee cups, free drinks to all comers, and a team of up to eight trainers, called Dutch Mobsters, who stay on-site for at least four weeks.

Kyle Garrett, 25, who started at Dutch Bros. while he was still in high school, opened a 24-hour store last year in Elk Grove, Calif., on the Highway 99 on-ramp leading to Sacramento. In its first ten months the high-volume location earned $570,000 on sales of $3.1 million, a profit margin of more than 18%. Garrett already has plans for a second location. By contrast, Boersma pays himself $350,000. He says the last time he took a profit disbursement was more than two years ago. He rejects the notion that he is offering franchisees terms that are too generous. "We're only here for so long," he says, "and I'm not going to take any of this with me when I'm dead." He says he's rejected numerous buyout offers and plans to grow only where he knows the brand will succeed.

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115.116 Workshop 1-Week 4Internal Students-Group Tasks and Case

A fan of self-help books and Tony Robbins motivational seminars who peppers his speech with words like dude and rad, Boersma blends in with his twenty- and thirty-something franchisees. Like him, many are college dropouts or didn't study past high school. He swaggers through headquarters wearing flipflops, baggy striped shorts that resemble bathing trunks, a well-worn orange Dutch Bros. T-shirt and a backward polyester trucker's cap with a Dutch logo. He has no office, preferring the hangar-like common area where tattooed and pierced employees and visiting franchisees shoot baskets, play PingPong, lounge on leather couches, perfect their videogame skills or order drinks from the full- service espresso bar. Removing his sunglasses, he makes his own black Americano. "Offices are like traps," he says. "I'd rather connect with our leaders."

Dutch Bros. started in 1992 as a pushcart in downtown Grants Pass, next to the post office and close to the Rogue River, which cuts through the town of 35,000. Before leaving Southern Oregon State College after his sophomore year, Boersma developed a taste for the mochas from the school's espresso cart. He and his older brother Dane, then 38, had been casting about for a livelihood beyond their family's failing third-generation dairy farm. A Folger's drinker, Dane, who lived with his wife and three kids in a trailer on the farm, was skeptical about espresso after sampling a bitter cup in a local Italian restaurant. When he tried a vanilla latte, though, he was hooked.

The brothers spent $12,000 on a cart and an espresso machine, naming the business Dutch Bros., for their immigrant grandparents. Within six months the cart was grossing $200 a day and the brothers were having a blast, listening to music and schmoozing with customers. After years of milking cows at 2 a.m., says Travis, "this didn't feel like work."

In the early 1990s cappuccino and sugary coffee drinks were surging, and the brothers decided to add a drive-through. Eventually they started roasting their own coffee, sourcing beans from El Salvador, Colombia and Brazil. In 1994 they made a deal with Marty McKenna, a customer from Medford, 30 miles away, to open a Dutch Bros. there, later bringing him on as a partner. But the Boersmas clashed with McKenna. "They trusted the employees," McKenna says. "I wanted a more formal point-of-sale system like cash registers instead of a cash drawer." The brothers bought out McKenna for $1 million in 1999.

Still, the Medford store showed them that a franchise model could work, if they found the right people. Dane had been a Dairy Queen franchisee in his early 20s, and with the help of a franchise law book he drafted the first formal Dutch Bros. franchise agreement. Meanwhile Dutch Bros.' menu had grown beyond mochas and lattes to include drinks like the Annihilator, made from chocolate and macadamia nut syrups, half-and-half, two espresso shots and ice, and smoothies that relied on sugared fruit concentrate topped with whipped cream.

By 2004 the brothers had franchised more than 50 drive-throughs, when they were blindsided on two fronts. A fire destroyed $2 million in coffee and equipment at their office and roasting plant. Far worse, Dane started slurring his speech, a symptom of amyotrophic lateral sclerosis (ALS), which would take his life five years later. "It was just devastating," says Travis. Each spring Dutch Bros. celebrates a day called "Drink One for Dane," when stores donate proceeds to the Muscular Dystrophy Association.

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115.116 Workshop 1-Week 4Internal Students-Group Tasks and Case

This March a customer posted a picture on Facebook of three bro-istas reaching through the window of a Vancouver drive-through to touch and pray with a tearful woman. Her husband had died the night before. The local Fox station picked up the story, and its video report got more than 60 million Facebook views. For Dutch Bros. employees it was just business as usual. "If you contribute positive energy and positivity," said bro-ista Pierce Dunn, "that's all you'll get in return."