Since 2014, Sweetgreen has grown fivefold across the country. Yet this remains a young story for a brand created 15 years ago by three college friends in a 560-square-foot Washington, D.C. restaurant. The fast casual ended 2021 with 150 stores. What this mission looks like at scale, or as co-founder and CEO Jonathan Neman says, can Sweetgreen become “the category-defining food brand of our generation?”—are questions still on the table.
The brand’s November IPO is going to deliver answers quickly, executives said Thursday in Sweetgreen’s first quarterly report as a public company. Neman said the chain is on track to double in the next three to five years, and sees clear runway for 1,000 locations by the end of the decade.
In 2022, Sweetgreen expects to open at least 35 new venues, including landing in two to three new markets alongside infilled growth.
Year-to-date so far, the company brought six restaurants to market and entered San Diego for the first time. This follows a fiscal 2021 that saw 31 restaurants open, despite pandemic delays and setbacks, comprised of 13 urban, 18 suburban, and one residential location. Atlanta (three stores) and Dallas (one) represented fresh trade areas. Sweetgreen CFO Mitch Reback believes this class will achieve year-two revenues targets between $2.8 million and $3 million.
Sweetgreen’s revenue last year of $340 million was a company high mark, and an increase of 54 percent from 2020. Same-store sales climbed 25 percent compared to negative 26 percent, year-over-year. Average-unit volumes upped to $2.6 million from $2.2 million and restaurant-level margins were 13 percent, rebounding from negative 4 percent in 2020.
Sweetgreen expects revenue from $100 million to $102 million in Q1 and margins of 10–11 percent (the chain projects margins of 16–17 percent for the full year). It swung a net loss of $153.2 million last year.
While deciphering pandemic results often feels like trying to breathe on the moon, there are underlying currents Sweetgreen feels point to sustained growth.
For one, its total digital revenue percentage in 2021 was 67 percent. But “owned digital” was 46 percent (versus 75 and 56 percent, respectively, in the year-ago period).
This is something that stretches back nine years. Sweetgreen introduced digital pickup then, and followed with its B2B “Outposts” in 2018. The latter are trademarked offsite drop-off points, which Sweetgreens places in offices, residential buildings, and hospitals.
And Sweetgreen was an early mover in developing its own native delivery experience (2020) alongside marketplace options. “We consider ourselves an industry leader in the shift to digital,” Neman said.
To the earlier statistics, two-thirds of Sweetgreen’s digital sales came through its own manual channels last year—app and website. In addition to the profitability gain, Neman said this enabled the brand to deliver a seamless and personalized experience that provides “several strategic advantages” coming out of the pandemic.
Greater order frequency, larger average order value, and access to data are the core aims. Sweetgreen’s ability, Neman said, to understand consumer preferences and behavior is going to allow it to better balance a post-COVID world where physical and digital infrastructure share critical mass for quick-serves. “We have a clearly defined strategy to drive owned digital acquisition, make our app the best way to order Sweetgreen, offer the best value in app, and enable exclusive experiences, including our seasonal menu, personalized promotions, curated collections, and chef and influencer collaborations.”
It gives Sweetgreen a chance to convey what it makes it different through digital channels, why it stands apart from traditional fast food—all vital as the brand enters new markets.
“We see our new stores adopting our digital ordering and app at a much faster rate than the historical stores have gone,” Neman said.
Neman said Sweetgreen is just beginning efforts to create tailored promotions and loyalty to drive incremental customer frequency and improve guest spend. In January, it piloted “Sweetpass,” a subscription program where consumers spend $10 and earn a $3 credit (max one per day) on qualifying delivery, pickup, and Outpost digital purchases made through the company’s app or website. It was not available on third-party delivery marketplaces.
“The results really exceeded our expectations across all cohorts, especially with new and last customers and low frequency customers,” Neman said.
As much as initiatives like this, as well as digital-exclusive offers (such as gaming personality Rachell “Valkyrae” Hofstetter creating a personal salad that can only be ordered online), have helped off-premises sales stick, Neman said restaurants, “are one of our best customer acquisition vehicles.” There are clear tactics in place to move front-line customers to digital channels. When Sweetgreen does so, historically, the guest comes in at least 1.5 times more often. And they spend 20 percent more per transaction. Once they evolve into a “two-channel customer,” they show up 2.5 times more, Neman said. “For us, it’s a healthy ecosystem of having that customer discover us on the front line, and then being moved to a digital customer,” he said. “Over time, we’re going to continue to lean into a lot of strengths we have from a digital perspective. So today, we do things like digital exclusives, our menu and our deliveries cheaper … It’s more affordable for our customers, our native apps, and in different marketplaces.”
“With every home digital purchase, we understand who our customer is, when and where they visit us,” Reback added.
Speaking to delivery in particular, Sweetgreen transitioned in November to DoorDash as its primary courier partner for orders made through its app. Neman said the change resulted in improved per-delivery rates and faster delivery times. The company is also considering expanding delivery radiuses to broaden reach.
The brand’s Outpost initiative is also providing product to more than 500 households today. Seventeen are launching just next week, Reback said.
Sweetgreen spent a good portion of its first earnings call talking about labor. Namely, how it’s spent resources in recent years sharing a long-term view with hourly workers. In as few as three years, employees can become a “head coach,” which is what Sweetgreen labels general managers. They earn six-figure packages, including equity in the company.
During COVID, Neman added, Sweetgreen cross-trained staff regularly, like much of the industry, in an effort to do more with less. The brand simplified operations and emerged with a “much more resilient,” labor pool, he said, where employees can work across different positions. This helped it flex up and down through recent hurdles, like Omicron.
Sweetgreen invested in holiday pay, higher wages, and introduced a “retention grant” that ran from December through January as cases surged. Before the IPO, it implemented a “gratitude grant” as well for every employee.
Sweetgreen took 6 percent in price at the beginning of the year and expects wages to represent a 7 percent inflation factor in 2022.
“We believe as a company that we have a lot of pricing power with our customer,” Reback said. “We think that comes from the fact that we have a very cult-like following with a lot of customer love that we built to marketing over many, many years. … We also are recognizant that our mission is to connect more people to real food and … [we] like our price points to be accessible. So when we look at our pricing architecture, what we’ve done in the past few years is spread out our price points to be sure we always maintain high-value entry price points to bring new customers in.”
Neman said the brand’s turnover has stabilized of late, and average tenure is climbing. Today, the figure is 2.5 years for “head coaches” and a year for team members. The biggest hurdle comes in the first 90 days. After, “we’re seeing a lot of stickiness,” Neman said.
“And I think that says a lot about the growth opportunities we offer for our team members, and the environment, culture, and lifelong skills that we’re providing for them,” he added.
