Dunn Brothers Coffee is brewing up some high-octane growth with plans to add 250 more locations over the next five years, starting along the Interstate 35 corridor stretching from Minnesota to Texas.
The Roseville-based coffee shop franchisor currently has about 50 locations, with 28 in Minnesota. The private equity-backed brand also operates in Iowa, North Dakota, South Dakota, Wisconsin, Missouri and Texas.
"We're already entrenched in states surrounding Minnesota, and we'll continue to look at those opportunities for growth," said Scott Harvey, president of Dunn Brothers Coffee. "But as we consider to go outside of the states that we're in, the I-35 corridor is just a great path for us to follow."
I-35 runs through Des Moines, Kansas City, Oklahoma City, the Dallas-Fort Worth metro area and San Antonio.
Dunn Brothers is first planning to open five shops in Minneapolis over the next several months, four of them company-owned, Harvey said. The ratio of new company-owned to franchisee-owned shops has not yet been determined, he said, but the brand's new phase of growth leans on a franchise model.
Meanwhile, the Uptown Minneapolis location at 34th Street and Hennepin Avenue, operated by a franchisee, closed in April, Harvey said. That location will not reopen as a Dunn Brothers coffee shop, he said.
Expanding means competing with larger coffee chains like Starbucks and Dunkin' for real estate and consumer dollars, which are already being stretched amid inflation — a challenge Harvey is well aware of.
"We have to be super conscious of delivering on the expectations of what they're getting for the value of what we're looking to charge," Harvey said. "You have to be very studious in those approaches and really try to find alternate ways of not passing it on to the consumers."
Ed and Dan Dunn founded the coffee chain in St. Paul in 1987. Dunn Brothers gained a following for roasting coffee in small batches in its coffee shops for the freshest possible brews.
California-based private equity firm Gala Capital Partners bought Dunn Brothers in 2022 and promised expansion.
"We believe Dunn Brothers is the best kept secret in the coffee segment and we look forward to working with the management team and franchise partners to bring this great product and brand to the rest of the world," Gala Capital founder Anand Gala said when acquiring the chain.
In the years since, Dunn Brothers has started selling coffee beans and packages of single-serve K-Cups at local grocery stores and is looking at drive-thru-only models for new locations.
"It's a prime time to be able to start scaling the brand," Harvey said.
Gala Capital hired Harvey last summer to come up with a growth plan for the company. Harvey started by upgrading the company's beverage offerings and its real estate footprint.
In addition to building more shops across the central part of the U.S., Harvey said the company is aiming to expand the brand's presence on store shelves in that corridor.
"We're going to continue to do that because it helps us from brand recognition," he said.
For the second half of 2022, Dunn Bros Franchising had $1.4 million in revenue and a $25,000 profit, according to the most recent franchise disclosure documents. Franchisees pay royalties, marketing fees and a franchise fee. Harvey declined to disclose a projected growth rate for company revenue.
