Despite a ton of volatility, shares of Dutch Bros (BROS 2.99%) are still up 98% in the past 12 months (as of April 22). The up-and-coming coffeehouse chain is starting to win over investors who are interested in growth potential for their portfolios.

However, the industry is extremely competitive. It's dominated by incumbent Starbucks (SBUX -0.01%). The Seattle-based enterprise has seen its shares drop meaningfully, as they are down 28% from the 52-week high in March.

Investors looking to put capital to work in the retail coffee industry are looking at Dutch Bros and Starbucks. Which of these two is the best stock to buy right now?

Aiming for 7,000 stores

Dutch Bros is relatively small in the domestic restaurant sector. It recently opened its 1,000th location. It has attracted customers with its drive-through locations that emphasize convenience, a big list of menu options that allow for customization, and friendly customer service. The store count was just at 503 about three and a half years ago, so expansion has been and will continue to be a key part of the strategy.

The company has a notable presence in the western and southern parts of the U.S. Zooming out and focusing on the big picture, it's clear that Dutch Bros has a huge opportunity to rapidly expand the store base across the country. This is exactly what management is trying to do.

The total addressable market is 7,000 locations. That figure is up significantly from a previous target of 4,000 stores. Clearly, the leadership team is very optimistic about how Dutch Bros is performing, which would push them to introduce an even loftier goal.

If the business is able to expand its footprint seven-fold, revenue and net income would be astronomically higher. And that would eventually make the current price-to-earnings ratio of 174 not matter.

Dominating the industry

It's not hard to be pessimistic about the current state of affairs at Starbucks. During the fiscal 2025 first quarter (ended Dec. 29), the company reported a same-store sales decline of 4%. This was the fourth straight quarter of a year-over-year drop, highlighting ongoing struggles to drive foot traffic and get back to registering growth.

Consumers weren't happy with price increases, long wait times for orders, and the complexity of the menu. Starbucks also might have lost customers due to political or social issues. But CEO Brian Niccol is working hard to turn things around by improving the customer experience, supporting employees, and highlighting the brand.

It's not all bad news. Starbucks has an economic moat that Dutch Bros can only dream of. Despite what the latest financial data suggests, Starbucks still has one of the most recognizable brands on the planet. It also has the scale, with over 17,000 stores in the U.S. alone and nearly 41,000 worldwide, to benefit from cost advantages, particularly when sourcing critical inputs and investing in marketing or tech enhancements.

After forecasting a decline in fiscal 2025, consensus analyst estimates call for earnings per share to rise 24% in fiscal 2026 and 19% the following year. Maybe better days are on the horizon.

What's your risk tolerance?

If we look out over the next decade, I don't think anyone would argue with the view that Dutch Bros stock has a higher upside. But that's dependent on the leadership team executing its growth plan flawlessly, which will lead to substantially higher earnings power over time. The issue, though, is that there is a lot of uncertainty about this outcome. Investors who are comfortable taking on more risk might still be drawn to this opportunity.

However, I think Starbucks is the better stock of these two to buy right now. It has the durable competitive strengths that Dutch Bros doesn't possess, which matters a lot in a hyper-competitive industry. And the leadership team is working hard to orchestrate a successful turnaround.