SINCE 1988

Sweetgreen Sees 5% Same-Store Sales Increases Amid Rising Labor Costs in California

Sweetgreen.png

Los Angeles-based Sweetgreen is besting many of its restaurant competitors in the first quarter. The fast-casual chain reported 5% same-store sales increases and a 26% revenue increase year-over-year on Thursday.

Sweetgreen CEO Jonathan Neman stated that while January was tough with weather, the benefit of two holidays in the first quarter was a boon to business.

The quarter, ended March 31, saw most of its success from 41 net new store openings over the past year, resulting in $21.1 million in additional revenue.

CFO Mitch Reback mentioned that Sweetgreen was impacted by AB1228, increasing wages in late February. While it’s too early to see the full results, he said, the brand has made some adjustments.

In the California market, Sweetgreen took 5% price and raised wages by the high single-digits to comply with the new $20 minimum wage.

Sweetgreen opened six net new units in the first quarter, compared with nine in Q1 the previous year. Those don’t include retrofits of existing stores that are in the works.

Those retrofits will be the brand’s Infinite Kitchens, which are currently open in two markets. These store designs use an automated makeline and have increased check sizes as well as throughput.

“We’re very excited about the results we’re seeing with the Infinite Kitchen,” said Neman. “Not only are we seeing great feedback from a customer perspective, we’re seeing we’re delivering on what we expected from a unit economics perspective.”

The two existing Infinite Kitchens, one near Chicago and one in Orange County, Calif., had $2.6 million AUVs and a 28% margin in the quarter. According to Neman, that is about 10 points ahead of the rest of the fleet. That beats estimates last quarter from Sweetgreen, which were seven points ahead.

Neman said the plan is to retrofit three to four stores into Infinite Kitchens this year, with one being in New York City, and open seven additional units throughout the country.

“There’s definitely a huge chunk of very high-volume stores that we think have an opportunity for retrofit,” he said.

He also said the restaurant plans on launching several new formats early next year. Those include a smaller format as well as a drive-thru.

“We do see other formats as a huge part of our of our playbook,” Neman said.

General and administrative expenses were $36.9 million, or 23% of revenue, for the first quarter of 2024, as compared to $34.9 million, or 28% of revenue in the prior year period. Reback credited the company’s increase in general and administrative expenses to a $5.1 million benefit from the Employee Retention Tax credit in 2023 along with a $4.6 million decrease in stock-based compensation bonuses.

The chain introduced steak earlier this week as a new protein option, after a successful test in Boston, to increase traffic at dinner and promote that it’s “not just a salad chain” as Neman said.

“A lot of the consumer insights surveys that we had is there’s a lot of fast-casual customers that won’t go somewhere unless there is a meat option,” Neman said. “It’s a big opportunity.”

In newer markets, Neman said part of the double-digit cops are from an increase in dinner traffic, especially on weekends. That’s due to the new protein plates that the brand launched late last year.

Sweetgreen is also working on its throughput in the next few quarters. While some of the chain’s best-performing stores are doing 90 orders on the digital makeline in 15 minutes, others are doing 40-50. Neman said he wants to “unlock throttles” on the makeline to increase efficiency at the traditional stores.

 

Original Article:
[H/T] RestaurantBusinessOnline.com