Why Sweetgreen Is Losing Millions of Dollars Every Month | WSJ The Economics Of

The Nugget

Sweetgreen has been losing millions of dollars each month due to high overhead costs, expensive fresh ingredients, and investments in technology and infrastructure. Despite struggles, they are focused on expanding, improving profitability through loyalty programs and automation, and eventually becoming a national business.

Key quotes

"Most restaurants process their food centrally and ship it out around the country. In order to maximize the taste and the freshness, we believe food should be made closer to where the guests are eating the food."
"Our path to profitability in a net income basis comes from a few levers: continuing to grow our footprint, growing sales in existing stores, and being very disciplined on our cost structure."
"In general, restaurants are really pushing these loyalty programs because it makes a lot of sense to try to get someone hooked."
"Sweetgreen hasn't shared how many people have signed up for its loyalty program, which it still considers a pilot."
"Sweetgreen is only profitable based on EBITDA, which excludes various costs, but doesn't follow generally accepted accounting principles."

Sweetgreen sources high-quality ingredients directly from farms, driving up costs compared to traditional restaurants that use distributors.
Labor costs are also high as Sweetgreen staff assembles meals and does significant food prep in-house to maintain taste and freshness.
Beyond ingredients and labor, Sweetgreen has heavily invested in technology, including developing apps for customers and employees.

Continuing to grow their footprint by opening new restaurants.
Increasing sales in existing stores to lift profitability.
Maintaining discipline in cost structure to ensure incremental profit flows to the bottom line.
Emphasizing loyalty programs like Sweetpass to retain customers who are essential for profitability.

Sweetgreen has closed some restaurants in certain cities and had layoffs, focusing on expanding outside urban areas.
The company hired former Chipotle executives to broaden its customer base, especially as it expands into new markets.
Automation is a key strategy for Sweetgreen, with plans to implement robotic salad assembly lines to improve efficiency and reduce costs.

💸 High-quality ingredients directly from farms drive up Sweetgreen's costs.
🥗 Loyalty programs like Sweetpass are crucial for retaining customers and improving profitability.
🤖 Automation through robotic salad assembly lines is a key strategy for Sweetgreen to enhance efficiency and reduce labor costs.
💡 Sweetgreen's profitability is measured through EBITDA, which excludes various costs and differs from traditional accounting principles.

This summary contains AI-generated information and may be misleading or incorrect.