Greetings, and welcome to the Dutch Bros Inc. First Quarter 2022 Conference Call. At this time, all participants are in a listen-only mode. A question-and-answer session will follow the formal presentation. [Operator instructions] As a reminder, this conference is being recorded. It is now my pleasure to introduce your host Paddy Warren, Dutch Bros’, Director of Investor Relations and Corporate Development. Thank you. You may begin.

Thank you. Good afternoon and welcome. I'm joined today by Joth Ricci, president and CEO; and Charley Jemley, CFO. We issued our earnings press releases for the quarter ended March 31, 2022, after the market closed today, and we will file our 10-Q in the upcoming days. The earnings press release along with a supplemental information deck have now been posted to our investor relations website at investors.dutchbros.com and we will post our 10-Q there as well when it is available. Please be aware that all statements in our prepared remarks and in responses to your questions other than those at historical facts, including statements regarding our future results of operations or financial conditions, strategies, plans, and objectives of management are forward-looking statements, within the meaning of the Private Securities Litigation Reform Act of 1995. All such forward-looking statements are inherently subject to risks, uncertainties, and assumptions, there are not guarantees of performance, and are expressly qualified in their entirety by cautionary statements. The forward-looking statements made are of as today's date, and we undertake no obligation to update them to reflect events or circumstances after today, or to reflect new information, actual results, revised expectations or the occurrence of unanticipated events, except for as required by law. We may not actually achieve these plans, intentions, or expectations disclosed in our forward-looking statements, and therefore you should not place undue reliance upon them. For more details, please refer to our earnings press release and to the risk factors in our other SEC filings, particularly the risk factors described in our quarterly report on Form 10-K for the quarter ended December 31, 2021 filed with the SEC on March 11, 2022 and our upcoming quarterly report on Form 10-Q for the period ended March 31, 2022 to be filed with the SEC. Finally, while we have prepared our consolidated financial statements in accordance with generally accepted accounting principles of the United States, we will also reference non-GAAP financial measures today, which can be useful in evaluating our core operating performance. However, these non-GAAP financial measures, which may be different than similarly titled measures used by other companies, and are not substitutes for measures that are prepared under generally accounted -- generally accepted accounting principles. Rather, they are presented to enhance investors' overall understanding of our financial performance and should not be considered a substitute for or superior to the financial information prepared and presented in accordance with GAAP. Investors should therefore review the reconciliation of these non-GAAP measures to the comparable GAAP results contained in our earnings press release and not rely on any single financial measure to evaluate our business. With that, I would like to turn the call over to Joth.

Thank you, Patty. Good afternoon and welcome, everyone. We certainly appreciate your continued interest in Dutch Bros. Let me begin by with some opening remarks on our business in Q1 performance. Charley will then review our financial results in greater detail, as well as update our full year outlook, before I leave you with some concluding thoughts. Finally, we'll turn the call over for Q&A. As we get started, I want to remind you, who we are as a people and company. Our NorthStar’s long-term sustainable growth predicated on our people. When we started this public company journey, we shared these focus points and promises. One is that we would continue to find and develop our people who are our growth capital. Two, to open new shops wherever people want great beverages with an eye on 4,000 plus shops in the next 10 to 15 years. Three is to increase brand awareness and encourage a deeper customer engagement. Four, to invest in and use digital technology to improve the customer experience. And five, expand margins through operating leverage. We believe our investment thesis holds and we are living up to these promises. That's in large part due to our team, our releases, our leaders and our franchisees. I want to thank everyone for their hard work in the last quarter. At Dutch Bros, we view our culture and our commitment to creating a better future for our employees, customers and communities as the key is to our success. And work our team did in the first quarter helped us live up to our mission and make a massive difference one cap at a time. In the first quarter, we opened 34 new shops, 26% more total shops than a year ago and we entered 11 new markets. We grew total…

Thanks, Joth. Before I begin, I want to highlight that with each earnings release we post a presentation that contain supplemental information and details on our Investor Relations website. I encourage you to reference it as I make my comments. I will begin with the profitability of our overall company-operated shop portfolio. For Q1, company operated shop contribution decreased from 26.8% of company-operated shop revenue to 18.3%. I'll walk you through the key drivers of that decline. It starts with our decision to be conservative on price, considers recent cost pressures and ends with the margin impact of executing our fast-paced company shop led growth strategy. As I discuss these drivers, please see Slide 11 of the investor deck. Beginning in November of 2021, we took our first price increase since the beginning of COVID, a modest 2.9%. This translated to approximately 220 basis points of margin relief. At that time, we believe this was appropriate, given the cost increases we were experiencing. As a company, we tried to avoid taking large price increases. And when we do take price, we try to do it and frequently. We think this is the right way to build lasting relationships with our customers and serves to encourage them to make Dutch Bros a key part of their daily beverage routine. However, as Q1 unfolded, we experienced three significant rapid cost escalations that, on an individual basis, would not have caused distress but when taken collectively did overwhelm our P&L. Faster input cost inflation, especially in dairy and also labor cost increases. The pull forward of expenses related to the ongoing caring condition of shops and new and normal new store inefficiency amplified by the sheer volume of new and ramping units in quarter one. In the first quarter, we encountered 480 basis…

Thank you, Charley and appreciate that perspective. We have all the building blocks for Dutch Bros to remain a successful and enduring company. Powerful authentic brand that shares the love. Strong people systems that drive company culture and fuel our shop growth. A highly engaged customer following, customizable and uniquely curated beverages. Highly consistent and highly attractive unit level economics. A portable model that is successful across geographies, a strong and well capitalized balance sheet and an engaged Co-Founder and experienced leadership team. Nearly nine months after our initial public offering, we are staying true to our core thesis. We've hired more people and facilitated tremendous growth opportunities for our employees. We treated our customers well and we're doing our part to be good partners in our communities. We believe that we are on a 10 to 15 year pass to 4,000 shops. With 30 years Dutch Bros has been in the business of relationships. We've been there for our people and our customers every day. The current environment is without precedent, that know that we will navigate this uncertainty with the same long-term outlook resourcefulness and collective wisdom of our releases, leaders and franchisees that has made this company, what it is today. We want to thank you again for your interest in Dutch Bros. And now we'd be happy to take your questions. Operator, please open up the lines.

Thank you. Ladies and gentlemen, at this time, we will be conducting a question-and-answer session. [Operator Instructions] Our first question comes from the line of Nicole Miller with Piper Sandler. Please proceed with your question.

Thank you. Good afternoon and appreciate the update. I thought I'd ask about the team first, if I heard properly, there was a comment in there about turnover being a little higher. And I was curious what that rate of turnover is? And just thinking about peak periods of stress and having moved past those, why would you be experiencing higher turnover now?

Well, I think that we've kind of looked at what was going on last year, what was going on this year in the market. I think that there -- there was an accelerated return, I would say applicants that we reviewed. I think we reviewed 39,000 applicants year-to-date, if I'm not mistaken. And it's probably just people getting back to work and that Nicole, I don't know exactly the answer to that question. I can give you a lot of theory to that, but I think there's probably just an element of back-to-work like people coming back off COVID, more opportunities presenting themselves in the job market with such low inflation, people might be jumping for more money and so there's a lot of just job related, market related factors that's going on out there.

Yeah.

That’s why our numbers are still really low. So I'm -- so we're still pleased with where we're at.

So it would be fair to conclude up, but you're not talking about a material number at this point. I mean years has been so low. I didn't know how much to read into that comment, frankly. And it kind of sounds like, I mean that's what I would have guessed and don't want to guess. So how have you been able to -- you don't present the same sticker, right wage, but once someone gets in the system with the tips, they understand the process and the benefits. Are you still able to tell that story?

Absolutely. Yeah, I don't think that story has changed at all. And I think our trailing 12-month number at the end of March was like at 66%.

Okay.

So we are still from a relative standpoint. I'd say it's still relatively low kind of low as it was. But I think it's still very manageable. And I think our story and how we're treating our employees is as strong as ever.

And then just a numbers question and realizing we're all doing the same thing real time in terms of modeling, but with the $90 million adjusted EBITDA kind of bogey, it would imply I guess store level margin. And I have to admit, I'm taking preopening out of mine. So if this number, does it make sense to you get it, but just know this isn't without preopening. So like store level margin in 1Q was around 23%. It has to average for the rest of the year, something around 30%. So it seems like the cadence could be lower in 2Q, but then sterile of margin has to pop back up in the back half, and if that is the right assessment of these early read on numbers like how is that going to happen because margin was under pressure with a 6% comp isn't going to be even more under pressure with a flat comp. How can we think about that?

Well, I'd refer you to the investor presentation, understand the seasonality, right. So quarter one and quarter four are lowest average daily unit volumes. Quarter two and quarter three are the higher ones. So part of what's taken place just from a sequence standpoint, as we move through the year, we get more leverage so margin start to rise. And that's very normal, right. So margins have reset because of the higher cost pressure and gone lower, but they still will rise in the summer as we get the higher volumes.

Okay. Thanks a lot. Appreciate it.

Thank you.

Our next question comes from the line of Sara Senatore with Bank of America. Please proceed with your question.

Thanks. A question on the demand side and the top line first and then quick follow-up on the margins. If I look at like kind of the three-year trend versus 2019. So I think you mentioned volumes were up by 10% versus 2019 on the first quarter. I got to move slightly different, but I know people calculate tax differently, but if I assume kind of flattish comps in the second quarter, it looks like a pretty similar tax versus 2019. So I wanted to sort of understand how much of that slowdown may just be speed up really difficult stack comparisons versus the macro situation, particularly as you point out, given how hard the April flat was? And then have you seen any variation, you mentioned in the Western, in particular, but have you seen any other variation in terms of demand, because it does feel like we're hearing a very wide disparity of -- in terms of what different restaurant companies are seeing?

So let me take the Sac question and I'll, again, I think our document on the web or help you see the data on Slide 8, but the rollover we had in Q -- Q1 of ‘21 was -- Q1 of 2021 was a 9.5 comp, Q2 was a 9.9 comp. So to your point, there is not a lot of difference in the rollover from the year-over-year basis. And then the lap gets a little bit easier back part of the year. So what we're really saying is, as I mentioned in my part of the script, sales usually start to build in the spring and hit a peak towards the end of May on an average daily volume basis. And we just are not seeing that growth. We're not declining. We're not seeing that growth that expansion that happens seasonally. And then I'll start on your regional questions, the biggest differential we've seen is where the gas prices, fuel prices, energy prices are elevated. We've seen more of this lack of sales growth coming in those areas, which amongst many other factors points to the discretionary income piece, at the low end of the consumer. And then secondly, we are seeing that afternoon more discretionary day get restricted, which is where you would expect when people are starting to choose between what they've got left over in their wallet at the end of the month and choices around spending.

Sorry, but just to clarify, you said the one-year compares and I understand is the same, but if I look at your two year stack it gets about 400 basis points to 500 basis points tougher. And I guess that's what I'm asking about, which is given that, a lot of us are benchmarking versus 2019 to kind of control for the variability. It does look like that alone would explain a sequential deceleration. And I guess that's, what I'm trying to understand.

Mathematically, yes, but back to what I said earlier, which is I think the stacking thing can be difficult and challenging, you're looking at multiple years. We know our business seasonality and the growth in our business seasonally really stopped in the middle of March. We left February when we had the last earnings call with a really solid comp number through February and then it just decelerated very quickly from that point. So I know you can look at this two-year stack, but the way we analytically look at it is sequentially whether we're getting seasonal sales growth or not.

I see. Okay. And then just on the margins, the actual -- the restaurant level margins were actually pretty consistent. I think with sort of where we thought they might be. And in particular, the COGS headwind. We saw a big one in the fourth quarter. Labor was up in the fourth quarter. So a lot of that actually to me wasn't quite that surprising. I guess, I'm just trying to understand, maybe where the difference was, maybe this is easier said, can you just tell me how to think about G&A for this year because I'm wondering if needed that's where we went wrong or if it's just our expectations versus your own as we think about guidance, because like I said, the restaurant-level margin is all that -- the comparison isn't all that different from what we saw last quarter?

Yeah, I mean I. I don't know what you had down per G&A. G&A for us is pretty uniform by quarter, it grows very steadily because it’s head count driven and its regional operator-driven. There's not a lot of -- there's not a lot of moving parts in that number. The biggest change for us is this ingredient logistics supply chain cost increase that we're feeling and that's why we're pulling our guidance down because relative to our models, we've got that 300 basis points to 400 basis points margin contraction going forward. And I think, we can do a click down with you to understand the G&A piece better that you're looking at.

Okay. Thank you. I’ll pass it on.

Our next question comes from the line of John Ivankoe with JPMorgan. Please proceed with your question.

Hi. Thank you. You do have obviously interesting demographic 55% I think under 25 years of age and also, you said 17% of customers visit before 9:00 AM, which really does leave you quite different than some other beverage focus or coffee focus peers. I mean can you elaborate in terms of like, I think you said that you were seeing weakness in the afternoon daypart 31% of business that this or part of the IPO stuff after 4 o'clock, you were talking about, I guess the challenges and the opportunities that you may have of having a really young afternoon skewed customer. I mean, is there anything that you can or should or would do on the promotion side to kind of bring people you bring these folks back in or is there something that you can do in the morning to better utilize that daypart relative to the afternoon?

Yeah. Hi, John. This is Joth. We have seen morning daypart growth. Actually to your point, we'd have actually seen an uptick in that kind of pre-10:00 AM business and which I think is an indication of back to work and kind of some behavior-based. I think where we've seen our decline, is that 10:00 AM to really actually probably 6:00 PM business has been the largest decline and that we're really kind of chalking it up to a younger demographic with some discretionary income challenges related to what's going on in the marketplace and really how you attack that, as I think a couple of things, one is the I think energy drink and how we utilize the rewards program will be key. I think we will do more promotion with energy use. We continue to connect drive that in that daypart. I continue to think that it's our biggest opportunity as a segment. And I think in a market like this, you work on market share and I think there is a way for us to make that happen in improving the business in that mid-day daypart. So I think that's the key to that daypart and that will be different by region and the beauty of our app is we'll be able to execute at a market level program if we need to dependent on kind of what's happening with traffic balance.

And you guys presumably, you have -- none of this is self-inflicted at all, like you haven't seen your throughput actually slow in terms of how many customers you can get through that line and given our, was there any change in, I know it's probably tough to actually see in terms of what, okay. So it was, it really was demand driven, you were constrained?

Yeah. If anything with the sales transfer we actually help to improve flow and improve the things that we're doing and again, we believe the app has a significant improvement to how we take people through. So we're not seeing anything related to consumer sentiment here. Our consumer sentiment remains very strong. This is purely, I think this is a consumer behavior issue that we're all dealing with related to traffic.

Understood. It's a separate question that my second one that this one was 1B, if you will, you've took up CapEx last quarter pulled down EBITDA this quarter, you are in a slight net debt position. It's not classic that one would finance long-term asset like store growth with a revolver, for example, or I guess maybe $100 million. I know you have on the term loan, which has been drawn, but could you just -- philosophically could talk about your balance sheet, your debt, your capital needs in the context of store growth? In other words, to what extent does the balance sheet in and of itself, you may be give reason for some moderation as we work on our ‘23 and ‘24 forecast?

Yeah. Hey, John. It’s Charley. So yes, I agree if you were taking a long-term asset, you might want to match your financing to the long-term value of that asset. In our case, as we model out the business and worked on our credit facility, we see our needs peaking modestly in ’24, ‘25 and therefore -- and after that we start to generate free cash flow. And so we felt like, let's just shorten this instrument, take a short instrument, keep it flexible, keep the cost of it low and then get to that 23, 24, 25 time frame and reassess where we're at in terms of whether we need to take on any kind of longer term structured debt, I'll call it.

Okay. All right. That's helpful. Thank you.

Our next question comes from the line of Andy Barish with Jefferies. Please proceed with your question.

Hey, guys. Good afternoon. Just a couple of things. First, Charley, on a numbers. I may have missed it, but the sales transfer impact in the quarter and kind of what you're looking for going forward, it sounds like it's a little bit more elevated than it has been?

Little bit. It was about 230 basis points of transfer. We’d typically in prior quarters, we've been seeing about 150 or so that's mostly the timing of accelerating the growth and hitting some pretty high volume stores with sales transfer. I think between 150 basis points and 200 basis points of sales transfer is a good way to look at it going forward in the way we've modeled it out. So slightly elevated, but not out of the range of what we'd expect.

Okay. Understood. And then just I guess philosophically and size wise two things, I mean as you get bigger, is there an opportunity kind of closer at hand on purchasing and supply chain to sort of eliminate. I know the commodity markets are experiencing unprecedented volatility, but is there anything near term that could help on that front? And then secondly, anything on sort of new unit glide path. I mean they do ramp pretty quickly, but anything that you're looking at there. You talked about or mentioned some productivity initiatives once or twice, without specifics. Sorry that's a lot there.

It’s okay, Andy. You are testing my retention here. So I think on the commodity costs in the place that we're at right now to see short-term effective improvement is limited and how we buy and kind of where we're at. We're out long on coffee, dairy, obviously you don't have a lot of control over, and then really we're kind of beholden to some freight impact and some other small basket of goods, because we just don't have that much in our basket. It just so happens with the dairy makes up such a large percentage of that basket. Previously, we have been talking coffee a lot and had said, it makes us just a small percentage we’re okay on coffee, which continues to be the case, but dairy certainly caught us off guard. I do think we have some opportunity to improve internally on our purchasing, in our purchasing capabilities and how we look at that long term, and as we grow that is an area of emphasis for Charley and myself as we kind of, I'd say build that muscle here at Dutch Bros. Two is related to how we manage shops and I will tell you that our retail ops team is looking hard right now at labor. I think we all need to be looking at labor and we all need to be thinking about how we manage labor, especially related to over time and things of that nature. And maybe related to some daypart flexibility just because of the nature of the business is changing a little bit in each of the market is changing a little bit. We need to be flexible on how we do that. So and that would also include new shops, but I'll tell you that the importance of the new shops and why we mentioned it in the script, the way we did is that it is so important for us to get a new shop off the ground, out of the ground in a positive way. And we will leave people in a marketplace until we feel like it can be transitioned over to the operating team. They can be there on a day-to-day basis. So if we have the opportunity to take a team out sooner we will, but we won't skimp on that because the importance of that investment for the long term.

Thank you. Got them all. Thank you very much.

All right. Thanks, Andy.

Our next question comes from the line of Jeffrey Bernstein with Barclays. Please proceed with your question.

Great. Thank you very much. Couple of questions. First one, just on the broader restaurant margin, which seems to be a focus here. I mean, how just you believe the structural headwinds, obviously, you have that slide that walks through kind of all the different factors there, but is there any concern that some of this might limit your long-term restaurant margin recovery opportunity maybe the accelerating new unit growth pressuring restaurant margins long-term or some of these incremental cost pressures that might not a abate? How do you think about what's kind of short-term versus long term in terms of that restaurant margin based on the current headwinds?

Yeah. It's Charley. Thank you for that. I don't think there's anything about the way we go about doing business structurally that would cause us to pause. These are just unprecedented increases in our most -- our highest cost item, dairy amongst other things. At some point, you have to feel like that can normalize and get to some reasonable place. It's typically very cyclical. If it does structurally stay elevated as we mentioned, we will look at our pricing -- menu pricing structure to try to deal with that. And then in terms of long-term returns, as we mentioned our year two cash margin, we look at achieving a 30%. Right now, we're looking at 300 basis points to 400 basis points of margin contraction from these cost pressures. Let's say that that 30% is reduced by 10%. That doesn't really change our 10%, meaning 30 goes to 27. That does not really change our investment thesis because we're doing higher volume in our new units than our original investment thesis, if we do a little less margin near term that’s not really going to change the answer. So we're very comfortable raising our guidance on new units because we know it's a great investment, and we have plenty of room between what we achieve in our cost of funds.

Understood. And then you mentioned earlier that your pricing is clearly below some of your competitive set. I think you said you took less than 3 points in November, and you're taking another 3 points took at last month. How do you test that? I know you have a younger customer, and it's clearly more discretionary in nature, like how do you measure the elasticity that may be, it may not be -- shouldn't be taking it, but the risk that it might accelerate the issue going into a macro slowdown? What kind of testing you do for that?

We do test markets, but the good news about our business is, we have such a fast purchase cycle that we get a quick read and any test market when we do something. Yes, we are concerned, that's why we're very prudent about not raising our prices fast. We're going to make this next step and watch it and read it, but again we'll get a pretty quick read because we have a fast purchase cycle. And then we'll judge how that's landing and we'll assess what to do next.

Understood. And then just lastly because you commented on G&A and you said you leverage it in the first quarter, which is the tested for high growth mode here. I'm just wondering, I think you said steady through the year, but is there thoughts on a 2022 range, maybe growth relative to revenue on the G&A front somewhere any kind of color you can provide on that.

Not off the top of my head, but since our revenue growth rate is going to be pretty consistent quarter-to-quarter. We're expecting to get very similar G&A leverage as we're achieving -- as we achieved in the first quarter, right. We had over 50% revenue growth, even at that temper slightly. G&A is not going to accelerate from a growth perspective, it's pretty steady. So yeah, I think as we speak more we can kind of help with how to model that out.

Our next question comes from the line of David Tarantino with Robert W. Baird. Please proceed with your question.

Yeah. Sales trajectory here, I guess the first question I have is related to that sort of lack of seasonal build, you talked about Charley. And I was wondering, if you're seeing that across the, --- across most of the base including some of the new location. So I guess, is this a macro situation that's affecting all stores maybe not to the same degree. But you're seeing it across the system.

Generally speaking, yes. It is across the system.

Got it. Thank you for that. And then on the clarification on the guidance. I guess what is the assumption for the rest of the year. I guess ignoring the comparisons, if you think about modeling out the seasonally adjusted sales trends or the average daily sales trends as you call that now, are you assuming any improvement or any deceleration or I guess how are you approaching that specifically?

We're not assuming any deceleration pretty much the trend line that we're on today we're extrapolating that forward. So we guided to about flat realized in the first quarter, we had positive comps. So that in itself and first slightly negative comps in the back three quarters of the year.

Got it. Okay. That's helpful.

Our next question comes from the line of Sharon Zackfia with William Blair. Please proceed with your question.

Hi. Good afternoon. I know it's always hard to figure out causality when you have a big shift in your sales, like you had, but I guess I'm wondering are you seeing signs of the consumer trying to manage their check, which would kind of back up the idea that it's may be related to higher gas prices, and I ask because obviously, you have a suburban footprint and I'm wondering if the elevated return to work might also be an impact on your business more broadly.

Yeah. Hey, Sharon without claiming to be a macroeconomist, I will tell you that in mid-March when gas prices jumped the way they did. We saw an immediate flip on our daily sales. It was almost to the day of the way that works. So I think you could infer and we believe that we've done some analysis on the gas prices and influence related to our daily sales and we believe it has influenced it and we believe that if gas prices stay inflated. It will continue to influence it. And I do believe there is some trends we're seeing, we're seeing morning daypart actually grow and I think that actually is going to people going back to work and getting back into their daily routines of either taking kids back to school, especially on the West Coast where we're really just came out of a COVID lockdown, we'll call it, in February. We saw trending move in those markets that were previously affected by school closures and things of that nature. So there is something there to that. And I think as long as gas prices stay high. I think we can continue to see consumer trends or consumer spending will suffer.

Can I ask a follow-up. Have you, I mean, Charley, you said you're kind of assuming similar comps for the rest of the year, and then the flat to slightly down or slightly down. Have you seen the trend stabilize?

Only mildly. It's not as -- we don't have a falling knife. We have a slightly negative sales trend that is just has continued since what Joth mentioned which is mid-March and it is just been trading low negatives.

Okay. Thank you.

Our next question comes from the line of Andrew Charles with Cowen and Company. Please proceed with your question.

Great. Thank you. Charley, can you talk about more about the margin impact reduce store efficiencies mean this is something obviously is a fast-growing system. Do you guys have seen before, but curious if it's a more pronounced impact on margins versus what you've seen in prior quarters. And as a follow-up to that, just how are you better managing that going forward as you guys will be accelerating unit growth as well?

Yeah. So a couple of things. From a quarter-to-quarter sequence, it's not dramatically different. Our comments are related to prior year and of course, we had a lot more openings this year than last year. So I would separate into two areas. One is just absolutely preopening expenses and you can see that in our P&L and you can add that back. And then a little bit of drag, a little bit more drag than normal on the labor side and the cost side because we compressed so many openings into a three or four months cycle, which normally might have gotten spread out over six months. So we don't see a structural problem or challenge in our new store margins, and you can see in the presentation we put up there that were -- those stores are still seasoning out very quickly, but it's just a compression of all those costs in a short timeframe.

That's helpful. And I’m not trying to sound the alarm with my next question, but because I appreciate that the pressure on comps is very recent and you guys are still seeing strong productivity at new stores prompt you to raise the 2022 development guidance, but I appreciate the guidance for same-store sales embeds this level of performance throughout the year, but I guess if we just got I think a little bit more, sincerely what would you have to see that would lead you to take your foot off the gas at 2023 development to help improve trends that are in place?

I think we would have to see that new store volumes are really have gone backwards and they haven’t and we're just not seeing that. Strong openings and as long as we see that, it gives us confidence to keep going.

Very helpful. Thanks, Charley.

Our next question comes from the line of Jeff Farmer with Gordon Haskett. Please proceed with your question.

Thank you. I have a follow-up and a quick question. On the follow-up, I'm just looking for a little bit more color on the magnitude of the gas price driven same-store sales headwind for the West Coast shops versus those in the rest of the country. Again, just trying to get an order of magnitude, given how much greater the gas price inflation has been on the West Coast versus the rest of the country?

Through the work that our analytics team has done. We think it's about 2% hit on same-store sales with gas pricing, and there is variability to that depending on what region of the -- of our markets you're in, but especially on the West Coast and we believe that that number across the system is somewhere around 2%.

Okay. That's helpful. And then again switching gears here a little bit to an entirely new topic. So as you report rewards customer sort of database for lack of a better word continues to grow. I'm just curious if there's been any sort of what do you consider larger or bigger surprises in terms of how your customers are interacting with the concept, anything that's cut you off guard relative to a few years ago when you didn't have all that data versus today when you do have the data?

Yeah. This is Charley. Hi. Candidly, not a lot of surprises and their behaviors seem to be very -- and ways we would expect to predict. So it's not surprising us what we're seeing in frequency or stored value loads, et cetera. It's very reliable outcome.

Okay, I appreciate that. Thank you.

Thanks.

There are no further questions in the queue. I'd like to hand the call back over to Joth Ricci for closing remarks.

Again, we want to thank everyone for your continued interest in Dutch Bros. We are optimistic about our future. We look forward to running this business for the long term. And really can't wait to work with our people, our teams, our leaders, our franchisees and creating the Dutch Bros for the future. So thank you for the time. We're all in this together and we look forward to the future of Dutch Bros. Operator, thank you.

Ladies and gentlemen, this does conclude today's teleconference. Thank you for your participation. You may disconnect your lines at this time and have a wonderful day.