2 Restaurant Stocks That Could Make You a Millionaire

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When it comes to investing in restaurant stocks, investors are always on the lookout for the next Chipotle Mexican Grill (NYSE: CMG) or Starbucks (NASDAQ: SBUX), two of the biggest winners in the space over the past 15 to 30 years. These two stocks would have created a lot of millionaires out of investors who bought them in their early days as public companies and held on to the stocks.

Let’s look at two stocks that could follow these two iconic restaurants and be the next millionaire-making restaurant stocks.

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Like Starbucks, Dutch Bros (NYSE: BROS) traces its roots to the Pacific Northwest, only instead of coming from Seattle, the company started in Oregon. But Dutch Bros is not trying to emulate Starbucks and its upscale coffeehouse style.

Instead, the company tends to have small locations that rely primarily on drive-thru traffic. Older legacy stores are only about 500 square feet, while newer stores are between 800 square feet and 1,000 square feet, and have multiple drive-thru lanes served by one window, plus a walk-up window. It also has a few end-cap locations that have a lobby but no seating.

Approximately half its sales come from coffee-based drinks, while a quarter come from its Blue Rebel energy drinks and the rest from other types of drinks such a smoothies and lemonade. The company is just starting to test more food options. Food is only about 2% of sales currently, so this is a big opportunity.

The company has been putting up solid results, with same-store sales rising 2.7%, and 4% for company-operated stores, last quarter, despite Dutch Bros looking to redirect some traffic from existing stores to new stores. It is looking for 4.25% same-store sales growth for the year. Dutch Bros has also just introduced mobile ordering, which should be a nice same-store-sales driver.

The big opportunity for Dutch Bros, though, is store expansion, which is what ultimately could turn the stock into a millionaire maker. The company ended last quarter with 950 stores, of which 645 were company owned, and it sees the potential to grow to more than 4,000 locations over the next 10 to 15 years. However, that’s still much less than the nearly 17,000 Starbucks stores in the U.S. alone.

Importantly, Dutch Bros’ small-footprint stores are not expensive to build and the company is currently generating free cash flow, which lets it follow its expansion plan without having to take on debt. And while its stores are small, with average unit volumes (AUVs) of $2 million, its stores currently generate more revenue per store than the approximately $1.5 million in AUV Starbucks gets from its U.S. locations. AUV measures the average sales each restaurant generates.

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