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With 831 locations, mainly in the western and southern parts of the U.S., Dutch Bros (NYSE: BROS) is a chain of coffee shops that most people might not have heard of.

This retail coffee concept emphasizes a fun atmosphere for its employees and customers, accessibility and convenience with its drive-thrus, and an extensive menu of customizable beverages.

Shares of Dutch Bros haven't done too hot for investors. They are currently 60% below their all-time high, but that doesn't mean the most bullish shareholders don't have high hopes for the business.

Can this under-the-radar coffeehouse chain one day become the next Starbucks (NASDAQ: SBUX)? Here's what investors should know.

Dutch Bros has potential

The market appreciates a good story, and Dutch Bros' management has told one. It has stated that it intends to build the chain to 4,000 locations one day. Should this become a reality, it would be a monster 380% expansion from the current footprint.

At that scale, Dutch Bros would likely be generating significantly higher revenue than the $966 million it reported in 2023. Add the increase in sales from more stores to same-store sales growth, and the recipe for impressive gains in its share price is there.

You would expect a company that is fully focused on growth initiatives to be unprofitable. But to its credit, Dutch Bros posted positive operating income of $46 million last year. This encouraging situation hopefully keeps trending in the right direction for the sake of prospective investors, because the company should have no issue paying interest on its debt.

Starbucks dominates the industry

The fact that Dutch Bros is a coffee retailer naturally draws comparisons to Starbucks, the Seattle-based company that has long dominated this restaurant sector. It currently has 38,587 stores worldwide, of which 16,466 are in the U.S. That easily makes it one of the biggest restaurant chains in the country and across the globe.

Starbucks is ubiquitous but still has sizable growth prospects. By the end of this decade, the leadership team wants to have 55,000 locations open. Even in the U.S., the objective is to get to 20,000 stores eventually.

Dutch Bros will have its work cut out for it going up against a scaled operator with a proven and extremely lucrative business model. Starbucks is one of the world's strongest brands, it has marketing prowess, and consumers have demonstrated a willingness to pay premium prices for its food and drinks.

Dutch Bros will have to compete with it, along with others in the coffee shop business, to win over customers and find attractive real estate locations. That seems like an uphill battle.

Playing the odds

Given the competition in the industry, I'm not entirely confident that Dutch Bros can achieve its own internal target of opening 4,000 stores. The executive team can drum up lots of investor interest by throwing out a number like that. But to actually make it happen, a lot of things need to go right for this business. In my opinion, there's simply too much uncertainty to get to where it wants to be.

As of this writing, Starbucks carries a market cap of $98 billion, making it one of the world's most valuable companies. With Dutch Bros' current market cap of $4 billion, I don't think it's in the realm of possibility that the chain can become the next Starbucks. Investors who are hoping for this should lower their expectations.

Should you invest $1,000 in Dutch Bros right now?

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Neil Patel and his clients have no position in any of the stocks mentioned. The Motley Fool has positions in and recommends Starbucks. The Motley Fool has a disclosure policy.

The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.