Sweetgreen is gearing up to introduce two restaurants powered by the automated production line it calls Infinite Kitchen. The company has been working to determine where and when it will deploy the tool—which utilizes a conveyor belt to precisely dispense portions of ingredients—since 2021 when it acquired Spyce, a two-unit fast-casual concept powered by the robotic system.
The first store to feature the automated production line will open Wednesday in Naperville, Illinois. A second Infinite Kitchen is slated to open later this year. It will be a retrofit of a current restaurant, which will help the company learn how to best integrate the system into existing sites down the road.
“We believe this new concept powered by automation unlocks efficiency that will enable us to grow more quickly and have higher profit margins,” CEO Jonathan Neman said during the company’s Q1 earnings call. “While we’re still testing and learning, we expect the Infinite Kitchen will be increasingly integrated into our pipeline.”
The robotic production line will prepare 100 percent of orders, eliminating the need for a front line and a secondary make line. Around half of sweetgreen’s variable labor in restaurants is production—or assembly-related, which means the system will free up employees to focus on guest-facing experiences.
Infinite Kitchen is expected to bring about significant throughput gains, something Neman said has been a “huge focus” for sweetgreen over the past six months. Staffing and labor improvements, enhanced training materials, and a new leadership structure that removed a layer of middle management have all yielded increases in speed-of-service. New formats, including the first drive-thru and pickup-only stores that launched last year, are seeing faster throughput, too.
“As our staffing and labor environment has gotten better, we’ve really focused on increasing our throttles on our digital make lines,” Neman said. “We were able to, across our fleet, increase throttles by 20 percent, which means we’re serving 20 percent more people.”
The company also is working to improve speed of service on the front line as the world opens back up and more customers return to dining rooms.
“There’s huge growth on the front line and a big focus on increasing our throughput on the front line as well,” Neman said. “Those customers that start in our dining rooms typically move into our digital ecosystem and become very valuable customers for us.”
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To that end, the company recently unveiled Sweetpass, its first loyalty program in two years. Members receive curated rewards and challenges as well as access to new menu items and limited-edition merch drops. The two-tiered program also includes Sweetpass+, a $10 per month subscription that rewards loyalists with $3 off daily sweetgreen orders, priority customer support, delivery perks, premier access to merch drops, and other exclusive experiences.
“We had a very smooth launch with great buzz,” Neman said. “We believe the program will drive margin improvements not only from the underlying membership fees, which come at limited costs, but also through incrementality across our customer base.”
He said sweetgreen is seeing strong interest in both the free version as well as the paid version, both of which allow for plenty of customization and tailored benefits.
“The way we built it gives us a lot of personalization,” he said. “We can be very efficient in our marketing and promo spend and how we actually increase the frequency of guests without a one-size-fits-all approach.”
Digital sales accounted for 61 percent of sweetgreen’s first-quarter revenue, with around two-thirds of those sales coming through the brand’s direct channels. Accelerated digital adoption underscored a solid quarter that saw sweetgreen deliver strong topline sales while narrowing its losses. The results are giving Neman confidence in the company’s ability to turn a profit for the first time by 2024.
Sales increased 22 percent to $125.1 million in Q1, with same-store sales up 5 percent. The comps growth consisted of a 2 percent increase in transactions and a 3 percent benefit from menu price increases that were implemented in January. The company’s AUV increased to $2.9 million from $2.8 million in Q1 of 2022.
Restaurant-level margin remained relatively stable at 14 percent, compared to 13 percent a year ago. Adjusted EBITDA loss for the quarter was $6.7 million, down from $17 million in Q1 of 2022. Excluding the impact of an employee tax retention credit related to the CARES Act, restaurant-level margin would have been 12 percent and adjusted EBITDA loss would have been $13.6 million.
Food, beverage, and packaging costs were 28 percent of revenue for the quarter, which was 200 basis points higher than in 2022. The increase stemmed from a packaging disruption the company experienced at the beginning of the year. Labor and related costs were 31 percent of revenue down 200 basis points from the same period a year ago.
Sweetgreen’s G&A expenses for the quarter were $34.98 million, down $15.3 million from last year, which was attributed to a $7.9 million decrease in stock-based compensation expenses, a $5.1 million benefit related to the employee tax retention credit, and a $2.2 million decrease in management salaries and benefits.
The decrease in expenses, combined with an increase in restaurant-level profits, helped sweetgreen narrow its loss to $33.7 million from $49.7 million a year ago.
In addition to streamlining its leadership structure, the company earlier this year announced it is taking steps to manage expenses by reducing its support center spend from $108 million in 2022 to $98 million in 2023. Neman expects support center spend as a percentage of revenue will be between 16-17 percent for the full year, compared to 30 percent in 2019.
“Make no mistake, continuing to drive operational leverage at the support center is a top priority for our management team,” he said. “We will continue to grow the support center only to the extent that further investments drive tangible returns on capital.”
Sweetgreen also is taking a more disciplined approach to growing its footprint by pulling back on the rate of new openings and focusing on “quality over quantity” when it enters new markets. It plans to open 30-35 new stores this year, down from the 39 stores it opened in 2022. The company opened 12 restaurants and closed three restaurants in Q1, ending the quarter with a total of 195 units. CFO Mitch Reback said all of the shuttered locations have neighboring stores that offer a “better customer and team member experience,” which allows sweetgreen to drive incremental profitability by moving volume from one store to another.
Along with cutting costs and taking a more measured approach to development, sweetgreen sees the loyalty program as a catalyst for driving sales and achieving profitability. Another catalyst is offering a broader menu.
A brief legal scuffle with Chipotle Mexican Grill didn’t dampen Neman’s optimism over the brand’s latest menu addition. Just days after the company debuted its Chipotle Chicken Burrito Bowl—billed as its first bowl made without any greens—Chipotle filed a lawsuit accusing the salad chain of copyright infringement. The fast-casual rivals quickly reached an agreement that saw sweetgreen change the item's name to Chicken + Chipotle Pepper Bowl.
Even with the post-launch rename, the burrito bowl outperformed targets and exceeded goals for new customer acquisition, becoming one of sweetgreen’s top five best-performing items.
Neman said the company has a “robust menu roadmap” that includes testing heartier grains and proteins as well as collaborations with influential chefs. Expanding attachments is another area of focus. The brand recently introduced hummus as a side served with focaccia bread. It also broadened its beverage offerings with new healthy soda options and added new chocolate treats to its dessert menu.
“While still early, we’ve seen attachment dollars grow nearly 25 percent in the first three weeks of launch,” Neman said. “We believe the margin opportunity with attachments presents another significant opportunity for sweetgreen in the coming years.”