Black Rock Coffee Bar, Inc. (BRCB) June 2026 Conference Transcript

All right, well, welcome everyone. I'm David Tarantino of the restaurants and coffee analyst at Baird, and I'm pleased to welcome you to the session for BlackRock Coffee Bar. BlackRock Coffee is a fairly new public company. They operate just under 200 beverage shops in the mostly western and southwest part of the country, and they specialize in sort of handcrafted beverages, but with really high levels of hospitality, and I think it's a really differentiated experience. Happy to have two key members of the management team here with us today, the CEO, Mark Davis, and CFO, Rod Booth. So welcome, gentlemen. Thanks for joining us.

Thanks for having us.

Good. Well, since you're relatively new to the public markets, I thought it'd be a good idea to maybe start by discussing the BlackRock Coffee Bar brand and what you think makes it unique or special in the marketplace.

It's perfect. First, thanks for having us. We appreciate it very much. I think when you think about BlackRock, we are in seven states. We are going to be everything Dallas, Colorado, West. And as you think about that, we are about 16 years younger than Dutch. our current AUV is going to be about 1.3 million and when you look at the overall concept what you're going to see is there is going to be drive-thrus in every location there is going to be the third party and the order ahead but the biggest thing is we have the lobbies and they're going to be newer cooler hipper lobbies with the furniture the lighting the music all the above our biggest point of difference is going to be our baristas when you look at our baristas we have guest satisfaction that runs somewhere between 93 and 96 percent having been in the industry a long time i was a panera guy way back in the day i've never seen anything like it and again the baristas are such an incredible part of what we do when you look at that great barista engagement with the guests, that's driven by retention. You look at our turnover percentages, we run right around 50%. Industry's running 130 to 150, so incredibly strong there. And I think that when you've got that great barista and you have that great engagement, what it's done is put up incredibly strong same-store sales, same-store transactions. And again, we've had really, really strong profitability growth. And so I think that's in a short, I want to make sure you get Q&A. So I don't want to talk too much here.

That's a good overview. How would you, I guess, your position, in my view, somewhere in between where a Dutch Bros is, because you also have lobbies they don't, and Starbucks has lobbies, but it's a kind of different experience, I guess. How would you position the competition and sort of what occasion you're attracting relative to what, you know, those other two bigger brands might be attracting?

Of course. So when you look at our demo, we're going to be 18 to roughly 45. And when you look at our mix, our coffee is going to be about 55% of the mix. You know, one of the things we're very proud of is that we have the freshest coffee when you go into a store. It's having been roasted and to your cup within 14 days. So it's going to be really, really strong on that attribute. And again, coffee being 55 percent, two years ago, energy was about 19 and has moved to 25. And when you look at food, we have food offerings where we are doing egg bites. we're doing the breakfast tacos, the burritos, and it's a high quality. And the food is again around 13%. I think when you look at the peer group, Dutch is going to be predominantly more blue collar, and it's going to be more energy. Dutch and Seven Brew and Starbucks are most open much later. At the moment, we're open till 7pm. And again, you know, we're looking at how we want to move forward on that. But as you look at all of the particular customer and competition for say, we have Black Rocks that sit next to Starbucks, that sit next to Dutch Brothers, that sit next to Seven Brews, McDonald's, all the above. We started in Oregon, so we've had that for a very long time. And what you end up seeing is it is a different customer, probably a little more mature customer and a little more coffee-based customer.

Yep, makes sense. Rod, maybe you can share a bit about how you expect the company to grow, you know, just in terms of unit growth and same-store growth and how that translates to profitability growth over the next several years.

Yeah, when we think about growth and model our growth long term, we have said we want to grow units at 20% a year. We want to grow revenue at 20% a year. We want to grow profitability at 20% or more a year. And to your point, David, for anyone who's familiar with the story and has seen some of our results, we're really, really proud of our operating model. I think our team, you know, Mark mentioned it, our team is really what makes us different. And I think of the way our team engaged with the guests, they really understand the performance of their stores, how they go after it, and how they deliver really strong results. I think that's ultimately all we could ask for and we're really, really proud of. You know, we're running margins north of 29% at our store level. I think when you think about the size of the business, how we're continuing to grow, where we're going to reinvest those dollars, you know, across the company, it really provides a lot of opportunity for us to not only hit those longer-term growth targets that I mentioned, but also how we're taking care of the business, reinvesting support that growth, and then ultimately reinvesting our teams who take care of the business and make sure that we perform at a high level.

Yeah, makes sense. On the subject of growth, you know, one question I get a lot on is, you know, the competition. You know, so there's a lot of companies growing in the space now. There's a lot of brands introducing products that are similar to the ones you sell, like McDonald's is doing energy drinks. And I guess can you just kind of discuss your thoughts on the competition and whether you think that's going to be an issue or not an issue? I guess, how would you frame it up?

Yeah, I think, you know, starting in the Pacific Northwest, it is the most heavily penetrated coffee beverage market there is, and all of the brands are there, and they all do very well. I spoke to earlier that we have stores that sit, as an example, right next to a Dutch, and you will see both stores doing very well. It's just a different customer. And I think if you thought about everybody in the room, there is a day when you want to go through the drive-thru and you want your coffee as quickly as possible. I think there is a day where some people choose to do third party. I think there is a group out there that does order ahead and they come in and pick it up and walk right back out. but there is a significant group that wants to come in and you and I would love to sit down at a table and be able to have a conversation and talk and I think when you think about that particular differentiation you can only do that at a Starbucks or you can do that with us because in the other two brands it's going to be drive-thru only and so we see it as as we expand and continue to have new offerings and all the above, that you've got to have all four components, but certainly having the lobby is something that's important to us. And I would say to everybody in the room, it's pretty rare that you can go anywhere and spend $6.50 and have an experience where you literally go, wow, that was as good as I'm going to have in the day. And so we're really proud of that and we try to promote that.

Great. Maybe shifting to a few questions on the near term. So in the first quarter you had healthy mid-single digit comps and it was up against a tough comparison. But I guess can you, it wasn't quite as strong as what it had been running. So I guess can you unpack why you saw that moderation in comps in your view and whether that's something investors should be concerned about or not.

Yeah, I would start with, you know, 5.2, to your point, David, in the first quarter coming off 9.4 the prior year, the 14.2 is a great number. And we were certainly very pleased with the 5.2 for the first quarter. And I think when you look at, you know, where we're at and where we're going, you know, really mid-single digits is a really good place where we want to be. I think when you think back a year ago, and I even and go back a little bit further, in June of 24, when we rolled out the new loyalty program, it was really that first time we had the ability to engage with our guests digitally. We saw tremendous acceleration in the program. We also saw coming into the first quarter of 2025 and really the first half of 2025, we had really accelerated transactions growth through the program. We had new offers. We had new promotions. We also made some adjustments to the program because what we found was we had a lot of guests who were accruing all of their free drinks, keeping all their free drinks, but we ultimately wanted them to come back in, have an experience, earn points, come back in again for another experience, earn those free drinks. And so we did make adjustments to the program where they would expire points. And so really through the first half of last year, I know we had spoken about that, David, but there were a significant number of transactions, also higher discounts at the same time with that, where it was really just acceleration of the program, some small adjustments we made, but when you look at the 5.2 in the first quarter, I think we're really pleased with that because, as I mentioned, on a two-year basis, it's trending well, and we really want to continue to leverage that program to grow, and I think when you look at all the things we can now do with that program, 18 months under our belt, a lot of data, we really now have the ability to segment offers and really use the program and the data and what our customers want to really go after additional transactions and opportunities to engage with the guests.

I guess there's been a lot of concern about consumer spending broadly, and given your first quarter results, are you seeing any signs that consumers are pulling back in their spending behaviors? Any changes in your mix of business or any traffic concerns related to the consumer environment?

Yeah, I think to what Rod spoke to earlier, when you look at the transaction growth from last year, it was about 10, 10.5%. So big, big number. And when you look at the first quarter, as David pointed out, we were down 0.6. And so on a two-year stack against industry running negative 2, negative 3, we're going to sit at about 9.5, which is really, really strong. When you look at the second quarter, we are trending relatively in the same spot. I think when you look at, and I'll use Dutch and their earnings, I'll talk about some of the stuff Seven Brews has brought up, what you can see is the consumer is moving towards beverage, and beverage is having a pretty strong growth trajectory when you look at it. I think it would be impossible to deny that a $2.50 price per gallon of gas versus a $4.50 doesn't have some implications. But I think for the moment, what we're seeing is pretty consistent coming out of what we saw in the first quarter. And again, we try to use that two-year stack to make sure we're relative, and it seems to be moving in that direction.

Makes sense. One topic that came up on the call recently was some cannibalization sort of densification, I think is the word you used, in Phoenix. So can you just maybe elaborate on why that happened and what the impacts of that were and what they should be for the rest of this year?

So maybe I'll explain why and you can explain the future, if that works okay. So naively, I think when we spoke to the earnings call, I came forward and said we were up against nine and change. We ran 5.2 on a two-year basis. We were in a really, really good place. we use the term sales transfer and what we did is we had two and a half two to three stores in phoenix that were really high volume stores we chose to put stores next to them call it within under three miles and what we saw was some sales transfer well i think if any of us in the room own the market, you would love to have two stores that do four and a half million versus one store that does two and a half. And so that was the decision we made. I think where we're going is that John Vingo, who's brand new, and he walked through it with Rod and I, we looked at it. And again, there will be five more stores this year that will not cannibalize, no sales transfer whatsoever in Phoenix. The two that are feeling the sales transfer will fall out in September, so you won't have that lap anymore. And then when you look at next year, there are currently six in Phoenix going in and there'll be no sales transfer.

Got it. And I think just, you know, really to what Mark said and to elaborate on, you know, the go forward and what we can expect. I mean, I think undoubtedly we'll still see some of that in the second quarter and to Mark's point in the third quarter. But really, when you look at it, it's really, really concentrated to our most dense market, Phoenix, where we've opened the most stores in the last several years. We still very much believe in our Phoenix market. It's doing really well, and we have a ton of opportunity. And then I think when you look at the other markets and areas we're growing, there's just so much white space that we don't really see it as an issue. Historically, we haven't had much sales transfer between stores. Again, going back to Mark's point, in Phoenix, it's really more the opportunities. We look at lots and lots of real estate, lots of opportunities and sites. And when we've looked at some of these stores closer to these high-volume stores, we still look at it as a great opportunity to continue to invest in the market, feel the new stores will perform very well. They have. And that ultimately, the returns we're getting on the capital we're going after or we're allocating to those stores is strong. And that's ultimately what we want. And so nothing structurally has changed within the business. And that ultimately, as we continue to balance each class and each cohort, we have still have plenty of markets to grow, still have plenty of markets that have high volume opportunity. And we're just trying to balance all of that as we continue to move forward.

And just so I understand this, so I guess, you know, when you open those locations, did you expect to see the sales transfer? Or did something in the real estate model surprise you?

I think to Mark's point, the handful of stores where we did see that. We knew they were going to be closer in proximity. Historically, we haven't seen much transfer at all. And really, when we looked at it, we said, well, there could be, but we didn't really have the data, and it is a new data point for us. But again, because they were closer to high-volume stores in a concentrated portion of the city that we thought really has a lot of opportunity still for us, that we thought there could be some. But it was really hard for us to tell, just given our lack of transfer in the past. I think it also has provided a great opportunity for us to learn from that, and to Mark's point, hey, stores within three miles, high volume or not, we want to pay very close attention to that. But ultimately, when you look at the existing store that was there, the new store that we opened, the volumes are still strong, the returns are still great, and it's still ultimately what we think is best for the business.

And I think, you know, one thing, we had modeled, you're aware, 1-1 at 18 months. That's what we do for all of our stores. And I think in the sales transfer conversation, what's kind of lost on everybody is we've now got two or three stores in that particular example that are now ramping 1.3, 1.4, pushing 1.5, which is great from an AUV and opening the right stores and new stores that are performing well. you know to the example i gave earlier when you have two stores within three miles that are going to do four and a half million that's a pretty good number it's just not super accretive to same store sales or transactions right makes sense um thank you for that explanation on on unit growth

um the uh i guess you know your your intermediate target i don't know if i would call this a long from Target, but it is kind of long term, is 1,000 locations by 2035. Can you talk about how you arrived at that number and I guess how dependent are new markets versus just filling in your current markets to getting to that number?

Of course. So when we were looking at IPOing and we were talking about how many stores can you build, what does it look like, we tried to come in in a way that we could give a concrete answer that was realistic and predictable and consistent. What we ultimately landed on is over the next 10 years, we would grow at at least 20%. And if you compound where we sit today, times the 20% each year, you arrive at the 1,000. Going to the seven states we're in, you know, at the moment, we have 18 in Colorado, they average about 1.4 to 1.5. They do incredibly well, and you could easily build 50 in Colorado without trying very hard. We originally had three stores in California that were the highest volume and the most profitable, and we have opened two this year that are pacing right along with them, brand new, work great, all the above, and by the end of 2027, we'll have at least 20 in California, And so I think all of this point is not only bringing John on, but the idea that we're working to be more predictable on store weeks. We're working to be more predictable on the openings. You know, one of the things, if you look on our social media, I know you've seen this, we are coming out and saying three months in advance where we're opening stores. And so you can literally see the count and see it. And we're trying to make sure, you know, one of the things you've taught us is be predictable and don't surprise anybody. So we're trying to make sure we're in front of it. And, you know, what it does is it tells a really good story about where the store weeks are going. But it also tells a really good story of where the unit count's going and where we're opening. And I think all of that is in the efforts to be transparent.

And on the store weeks issue, since you brought it up, if we're going to call it an issue. either way, so I figure I'll beat you to it. We've had a few. I'll say I mismodeled it. No, it was on us, for sure. I guess, are you getting to the point where you think that issue is now behind you, where you have kind of a more even-weighted, you know, cadence throughout the quarters and kind of hitting what we would expect from that standpoint?

So the first quarter we came in flat to the model. The second quarter we will be ahead of the model and when you look at it we had guided to 36. We on a eight we told everybody we would do we did nine in the first quarter. In the second quarter we said 10 and as of today we're at five so we're halfway through halfway through the quarter and there are already five in that social media post that show for June. When you look at July, there are already five shown for July. So when you see it, everything is in a place where there's transparency and you can literally see that we've adjusted and moved it forward.

Great. Good to hear. Rod, can you share your targeted unit economics for new units? For those that might not be familiar, what do you typically target in terms of AUV, margin, investment costs? Yeah.

So to Mark's comment earlier, when we thought about and modeled everything a year ago and how we've continued to flow that through 26 and beyond, we essentially have our stores coming in at around a million and one when they enter the comp set. And they really have store level margins in the low 20s. And when you think about, I'll go back to 2025, when you think about the average investment cost net of any contributions from landlords of about $650,000 per store, the return is really strong and we're really essentially targeting stores blended across all of our markets of course that will continue to ramp and do better but ultimately we're looking at that 30 to 40 percent return in the first year and then of course they get better as the stores continue to ramp and scale and get more profitable.

And what's that maturity curve typically look like? How many years does it take to get to, maybe you don't know because they're still all maturing but I guess what is it?

It's really more, it's a great question, it's really more market dependent if you look at like a market like phoenix where we are the most penetrated you know typically it's around two to two and a half years where that store continues to ramp and then of course sort of level off in a steady state sense but really when you look at some of our new markets they're really two to three years out before they really continue where the sales continue to accelerate and then where profitability hits more of what we would expect from a charity standpoint and so i would say generally it's about three years across all markets but of course Some of our more dense markets where we have more brand awareness, it's about two years.

Got it. Good. And then you just hired, you mentioned John as chief development officer. I guess what does he bring to the table that you maybe didn't have before? I guess what are his skills that you're excited about?

Yeah, when you look at our company, I think we're incredibly strong on culture. We've got an unbelievable product. I think the team members do really well. We have a model that works exceptionally well, and it generates the right cash on cash. I think from a process, especially around development, we were opening stores, and again, we opened beautiful stores, and they are performing and growing, and everything works really, really well. I think from an opportunity, we were doing build-to-suits prior that obviously help on cost, but I think the opportunity is they're less predictable as you're counting on a landlord. And so when you look at reverse build-to-suits or you do end caps or some of that type of stuff, having a leader that's done it before and I think can come in and predict and then come through on the predictions and be consistent really matters to us. If you look at the first three quarters, while we've hit the growth on sales, we've hit the growth on EBITDA, we've hit the growth on units, to your point, the stores have been behind. And so we've really tried hard to make sure that we are hitting that part because it's so important to what we do.

Yep.

Makes sense. on the comps outlook i guess what what would you characterize as the main drivers of same store sales growth for the next few years like what are the key buckets to drive auvs higher so we look at this every day i think the first thing to call out uh we are using paid media we've doubled our marketing budget so it went from about a million dollar or a one percent call it 18 months ago to we're at 2% now. And so programmatic is going to be the way, digital, paid marketing, where we go after consumers that have never been in the stores before. So that's the first one. Segmentation would be the second one. This is, again, where if everybody in the room, I would say a year ago, received a Carmel Blondie offer, there would be some people that love it. There would be some people that wish, you each being finance people, cold brew or Americanos, and we would make sure moving forward that it's segmented to everybody specifically in what they drink. So that's the second part of the marketing. Food attachment is a third. We feel that our food is differentiated, and we feel that it's a way of making sure we don't have a veto vote, that when people come in, they can get both. So we're working hard on that. If you look on social media, we just started testing the grilled cheese in the Pacific Northwest and in Arizona, and the idea there is to go after the afternoon day part. So that's, again, going to be a way. And then the last one, and we haven't addressed this as of yet, but when you look at our stores, our stores typically on an annual basis close at 7 p.m. And when you look at Starbucks, Dutch, and Seven Brew, they're going to be open, again, closer to that 10, 11 midnight. And so there'll be an opportunity to extend that as well and obviously grow the AUV that way.

And will you do it across, on that latter point, will you do it across the chain or will you do it very much specific to each location?

I think having done this a long time, it has to be specific to the locations because, again, I think, you know, Marie and I were talking earlier, in a place where it's more dense, I think you can stay open later. I think when you think about places that may be suburban a little quieter, maybe you close a little earlier type deal. And so we'll do that on a case-by-case basis, but I think there's significant opportunity there.

On food, you rolled out very successfully egg bites last year, and I think there's maybe a little bit of nervousness about how you cycle that. So I guess what's, you know, how would you characterize the outlook on what the food contribution to comp might look like after you cycle that?

Yeah, I mean, you mentioned it, David. I think our launch of the Egg Bites was really successful. We felt it was very successful. I think like anything we do from an innovation standpoint, especially around food, we're really trying to connect with the guests on the things that they want. So Mark mentioned grilled cheese. That's something that we're testing. We have that, obviously, that will help with the lap. But when you think about the launch of Egg Bites in July of last year, it doesn't just pop and grow and then stay where it's at. Like, we feel like there's a really good runway for it to continue to run and grow. And I think when you look back at the first quarter, you look back at the fourth quarter of last year, you really saw that check grow through the attach, and that's certainly what we're going after. And like anything we do, we want it to be something that, one, our guests really are asking for. we think that we'll connect with our guests, but it's also something that our team can execute at a high level and still make sure that we're hitting the turn times, the speed of service, all of the above, quality. And so I think anything we do from an innovation standpoint, there's always going to be the question, well, how do you lap that the next year? But I think we're always trying to think about what is the next thing that, again, we feel is accretive, our guests will enjoy it, and our team members can execute on it. And so at the moment, grilled cheese looks like it might be something that will not only help support the lap of egg bites, but also support the afternoon-day part, which is certainly an opportunity for us as we continue to grow.

Yep. Good. And then maybe one question on margin. You mentioned your store-level margins are almost 30%, 29%. What's the philosophy on how you manage that going forward? Is that a good level to think about long-term? Is there opportunity for that to go higher? Do you reinvest any upside into the business? How do you think about that?

Yeah, I think when you look at our AUVs at 1.3, and if you said 29% store level margin, we don't feel we have a margin issue. We think our teams do an incredibly good job managing their stores, operating them as if they're their very own. And I think long term, certainly with more AUV growth, leveraging some fixed costs, there's certainly upside and opportunity to that from a margin standpoint. But to your point, David, one of the things we continue to think about is how do we reinvest that in the team, whether that's the store team, whether it's the support in the home office team. What are the things we can do? Because we don't believe we have a margin issue at all. We have really strong margins. We're happy with the execution that the team is providing today. And I think ultimately that's the thing that we'll continue to manage and look at is with that continued expansion of margin, how do we want to reinvest that back in the team?

One quick one, I think I've got a minute left, but, you know, AI is a big theme and how companies are using that is varied. I guess, how is AI part of the technology roadmap? And, I guess, what are you doing on that front, you know, using the technology?

So we are using it specifically in the back of house. I think when you look at sales forecasting, scheduling, inventory, any of that type of stuff. When you look at our concepts, so much of it is going to be around people connecting. And so we like very much the way we run the front of the house and the connection and all of the above. And we want to continue with that. But you'll see the AI more and how do we make the tools and systems better for the teams.

Makes sense. I think we're out of time by nature of the door opening there. So please join me in thanking the team for being here today.