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Many of our competitors have existed longer and have a more established market presence with substantially greater financial, marketing, personnel, and other resources than we do, and as a result, these competitors may be better positioned to succeed in the highly competitive restaurant industry.
−Removed: Among our competitors are a number of multi-unit, multi-market, fast-food, or fast-casual restaurant concepts, some of which are expanding nationally, including companies like Chipotle, McDonald's, Panera Bread, and Shake Shack, as well as other quick service salad and health food concepts.
+Added: Among our competitors are a number of multi-unit, multi-market, fast-food, or fast-casual restaurant concepts, some of which are expanding nationally, including companies like Chipotle, CAVA, McDonald's, Panera Bread, and Shake Shack, as well as other quick service salad and health food concepts.
As we expand into new geographic markets and further develop our digital channels (including our Owned Digital Channels), we will face competition from these restaurants as well as new competitors that strive to compete with our market segments, particularly as many of our competitors have increased their digital presence over the last few years, including by enabling delivery and take-out through their digital applications.
−Removed: In particular, we will face increasing competition from delivery kitchens, food aggregators and food delivery marketplaces (such as DoorDash, GrubHub, Uber Eats, and others), grocery stores (particularly those that focus on freshly prepared and organic food), and other companies that are enabling the delivery of food to customers, including delivery marketplaces that we partner with to deliver sweetgreen food to customers.
+Added: In particular, we will face increasing competition from delivery kitchens, food aggregators and food delivery marketplaces (such as DoorDash, GrubHub, Uber Eats, ezCater, Sharebite and others), grocery stores (particularly those that focus on freshly prepared and organic food), and other companies that are enabling the delivery of food to customers, including delivery marketplaces that we partner with to deliver Sweetgreen food to customers.
These food delivery marketplaces own the customer data for Sweetgreen orders placed on such marketplaces and may use such customer data to encourage these customers to order from other restaurants on their marketplaces.
−Removed: Competition from food aggregators and food delivery marketplaces has also increased in recent years, particularly with the significant increase in restaurants that previously focused on dine-in service and have increased their reliance on take-out or delivery during the COVID-19 pandemic, and competition is expected to continue to increase.
+Added: Competition from food aggregators and food delivery marketplaces has also increased in recent years, particularly with the significant increase in restaurants that previously focused on dine-in service.
Any of these competitors may have, among other things, greater operational or financial resources, lower operating costs, better locations, better facilities, better management, better digital technology, increased automation and production efficiency, more effective marketing, and more efficient operations.
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Our sales could decline due to changes in popular tastes, “fad” food regimens, and media attention on new restaurants.
−Removed: We cannot make any assurances regarding our ability to effectively respond to changes in consumer health perceptions or our ability to adapt our
−Removed: menu offerings to trends in eating habits.
−Removed: Because of the ample competition in our industry, if our menu does not continue to innovate and provide premier quality food, we may lose customers as a result of a lack of variety or quality.
−Removed: In addition, both fast-food and fast-casual dining segments have implemented deep discounting strategies to attract customers which may increase competition, while in fiscal year 2022 we focused on more targeted promotions and increased the menu prices of certain items.
−Removed: Additionally, during fiscal year 2022, we implemented certain cost cutting measures to manage operating expenses at the sweetgreen Support Center with a focus on achieving profitability on an Adjusted EBITDA basis (the “Plan”), and may in the future have to implement additional cost cutting measures.
−Removed: If we are unable to continue to compete effectively, our traffic, sales, and restaurant contribution could decline, which would have an adverse effect on our business, financial condition, and results of operations.
−Removed: Pandemics or disease outbreaks, such as the ongoing COVID-19 pandemic, have disrupted, and may continue to disrupt, our business, and have adversely affected our operations and results of operations.
−Removed: Pandemics or disease outbreaks such as the ongoing COVID-19 pandemic have impacted and are likely to continue to impact our business and results of operations, in particular due to the negative impact on in-restaurant foot traffic and working from the office, difficulties staffing our restaurants, challenges in obtaining supplies, and increasing commodity costs.
−Removed: Additionally, during the COVID-19 pandemic, many state and local authorities mandated various public health measures, compliance with which has been challenging, costly and requires significant management attention and oversight.
−Removed: The ongoing effects of COVID-19 and its variants could lead to future capacity restrictions, mask and vaccination mandates, staffing challenges, product cost inflation, and disruptions in the supply chain that could further impact our operations and results of operations.
−Removed: We have also had to incur significant additional costs to ensure the setup and maintenance of our restaurants comply with any regulations, which have changed frequently during the COVID-19 pandemic and may continue to change.
−Removed: The COVID-19 pandemic may also continue to adversely affect our ability to implement our growth plans, recruit new team members, and cause delays in construction, permitting, or opening of new restaurants, as well as have an adverse impact on our overall ability to successfully execute our plans to enter into new markets.
−Removed: These and any additional changes may adversely affect our business or results of operations in the future, and may impact our liquidity or financial condition, particularly if these changes are in place for a significant amount of time.
−Removed: In addition, our operations have been further disrupted when employees are suspected of having, or test positive for, COVID-19 or other illnesses (or are suspected to have been exposed to or a close contact of someone who has tested positive for COVID-19) since this has required us to quarantine some or all those employees for a period of time and at times, close and disinfect the impacted restaurant facilities.
−Removed: The number of our employees who have tested positive for COVID-19 increased significantly with the spread of the Omicron variant, which has resulted in staffing shortages in many of our restaurants and, at times, the reduction of operating hours and/or the temporary closures of certain of our Pick-Up and Delivery Channels in certain restaurants, which has had and may continue to have a significant impact on our business, financial condition and results of operations.
−Removed: Moreover, in addition to the COVID-19-related sick leave that we previously adopted voluntarily, many jurisdictions, such as New York and California, have required that companies provide mandatory supplemental sick leave for COVID-19-related leave, including to care for a sick family member and to receive (and recover from) a COVID-19 vaccination.
−Removed: In addition, we are required by local and state regulations to report employees who have contracted or been exposed to the virus.
−Removed: Additional regulation or requirements with respect to the compensation of our employees could also have an adverse effect on our business.
−Removed: Furthermore, viruses such as COVID-19 may be transmitted through human contact and airborne delivery, and the risk of contracting such viruses could continue to cause customers or employees to avoid gathering in public places, which has had, and could further have, adverse effects on our restaurant customer traffic, the ability to adequately staff restaurants, and Outpost given work-from-home policies and reduced office schedules.
−Removed: Even if a virus or other disease does not spread significantly within a specific area, the perceived risk of infection or health risk in such area may adversely affect our business, liquidity, financial condition, and results of operations.
−Removed: Additionally, different jurisdictions have seen varying levels of outbreaks or resurgences in outbreaks particularly during the spread of the Omicron variant and subvariants, and corresponding differences in government responses, which may make it difficult for us to plan or forecast an appropriate response.
−Removed: Changes in economic conditions and the customer behavior trends they drive, including long-term customer behavior trends following the COVID-19 pandemic, which are uncertain, could have an adverse effect on our business, financial condition, and results of operations.
+Added: We cannot make any assurances regarding our ability to effectively respond to changes in consumer health perceptions or our ability to adapt our menu offerings to trends in eating habits.
+Added: Because of the ample competition in our industry, if our menu does
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+Added: not continue to innovate and provide premier quality food, we may lose customers as a result of a lack of variety or quality.
+Added: In addition, both fast-food and fast-casual dining segments have implemented and may continue to implement deep discounting strategies to attract customers which may increase competition or require us to implement discounting strategies to remain competitive.
+Added: Beginning in August 2022, we implemented certain cost cutting measures to manage operating expenses at the Sweetgreen Support Center and increased menu prices of certain items in 2022 and 2023, with a focus on achieving profitability on an Adjusted EBITDA basis (the “Plan”).
+Added: We may have to implement additional cost cutting measures or implement additional menu price increases to achieve this goal in future fiscal periods.
+Added: These cost cutting measures may reduce our ability to compete effectively, which would have an adverse effect on our business, financial condition, and results of operations.
+Added: Changes in economic conditions and macroeconomic, geopolitical, and other major events, such as the recent COVID-19 pandemic, drive customer behavior trends, and could have an adverse effect on our business, financial condition, and results of operations.
The restaurant industry depends on customer discretionary spending.
−Removed: The United States in general, or the specific markets in which we operate, is experiencing heightened inflation and economic uncertainty and may suffer from further depressed economic activity, higher inflation, increased interest rates, recessionary economic cycles, higher fuel or energy costs, low customer confidence, high levels of unemployment, reduced home values, increases in home foreclosures, investment losses, personal bankruptcies, reduced access to credit or other economic factors that may affect customer discretionary spending and have an adverse effect on our business and financial condition.
+Added: The United States recently experienced heightened inflation and economic uncertainty.
+Added: Going forward, the United States, or one or more of the geographic regions in which we operate, may suffer from depressed economic activity, continued or higher inflation, increased interest rates, recessionary economic cycles, higher fuel or energy costs, low customer confidence, high levels of unemployment, reduced home values, increases in home foreclosures, investment losses, personal bankruptcies, reduced access to credit or other economic factors that may affect customer discretionary spending and have an adverse effect on our business and financial condition.
Consumer preferences tend to shift to lower-cost alternatives during recessionary periods and other periods in which disposable income is adversely affected, including as a result of inflation.
−Removed: Traffic in our restaurants and the volume of pick-up on our Native Delivery, Outpost, and Marketplace Channels has been adversely affected during the COVID-19 pandemic and could further decline if customers choose to reduce the amount they spend on meals or choose to spend more on food from grocery stores as opposed to ordering from our restaurants.
+Added: Traffic in our restaurants and the volume of pick-up on our Native Delivery, Outpost and Catering, and Marketplace Channels was adversely affected during the COVID-19 pandemic and could decline again if customers choose to reduce the amount they spend on meals or choose to spend more on food from grocery stores as opposed to ordering from our restaurants.
Negative economic conditions might cause customers to make long-term or permanent changes to their discretionary spending behavior, including as it relates to dining out, picking up, or ordering delivery.
−Removed: For example, our customers may choose to order from us less frequently, purchase meals at a lower-priced competitor or order through a delivery marketplace, such as Uber Eats or DoorDash, which could have an adverse effect on our business, financial condition, and results of operations.
−Removed: COVID-19 has had a negative impact on our assumptions for restaurant level cash flows, which resulted in elevated impairment charges in fiscal years 2021 and 2022.
−Removed: Current macroeconomic conditions, such as inflation and increasing interest rates, increase the risk of a potential recession.
+Added: For example, our customers may choose to order from us less frequently or purchase meals at a lower-priced competitor.
+Added: Current macroeconomic conditions, such as inflation and high interest rates, increase the risk of a potential recession.
These macroeconomic conditions can negatively impact consumer discretionary spend for our products.
−Removed: External conditions have become more challenging and uncertain during fiscal year 2022.
−Removed: For example, beginning June 2022, we saw, and may continue to see, sales growth rates slow, or decrease, which may be attributable to a combination of these macroeconomic conditions and an unprecedented increase in summer travel, a wave of COVID cases, a slower than expected return to office and an erratic urban recovery.
−Removed: We have in the past determined to close certain restaurants due to performance and expect to close additional restaurants in 2023.
−Removed: In addition, during fiscal year 2022, we implemented the Plan to manage operating expenses at our sweetgreen Support Center with a focus of achieving profitability on an Adjusted EBITDA basis, which included workforce reductions affecting approximately 5% of employees and a reduction of our real estate footprint at our sweetgreen Support Center.
−Removed: The Plan may not have the intended effect.
−Removed: Further negative trends in sales, including as a result of the impact of the COVID-19 pandemic or as a result of prolonged adverse changes in macroeconomic conditions, could cause us in the future to, among other things, further reduce our workforce, reduce the number and frequency of new restaurant openings, close restaurants or delay remodeling our existing restaurants, or recognize further asset impairment charges.
−Removed: Further, during the COVID-19 pandemic, our in-restaurant foot traffic has significantly declined, our Outpost Channel has significantly diminished, and our Native Delivery and Marketplace Channels have significantly increased.
−Removed: During fiscal year 2022, we saw increased sales in our In-Store Channel compared to fiscal year 2021, but it has not recovered to pre-pandemic levels, and it is uncertain if it ever will.
+Added: For example, beginning June 2022, we saw, and may continue to see, sales growth rates slow, or decrease, which may be attributable to a combination of these macroeconomic conditions and an unprecedented increase in summer travel and a slower than expected return to office.
+Added: Negative trends in sales, including as a result of prolonged adverse changes in macroeconomic conditions, have in the past caused us and could cause us in the future to, among other things, further reduce our workforce, reduce the number and frequency, or location of new restaurant openings, close restaurants or delay remodeling our existing restaurants, or recognize further asset impairment charges.
+Added: Further, during the COVID-19 pandemic, our in-restaurant foot traffic significantly declined, our Outpost Channel significantly diminished, and our Native Delivery and Marketplace Channels significantly increased.
+Added: During fiscal year 2023, we continued to see increased sales in our In-Store Channel compared to fiscal year 2022 and 2021, but it has not recovered to pre-pandemic levels, and it is uncertain if it ever will.
+Added: We believe that we are seeing customers shift from our Owned Digital Channels to our In-Store Channel and Marketplace Channel, and this is one reason why our percentage of revenue from our Owned Digital Channels has recently declined.
+Added: Our owned digital users have historically been our most frequent customers, and the average order value for orders placed on our Owned Digital Channels is higher than Non-Digital Orders placed through our In-Store Channel.
Both short and long-term customer behavior trends are uncertain for all of our channels and the duration of such trends is unknown.
In particular, it is uncertain whether, and how frequently, workers will return to offices in urban centers, such as midtown Manhattan or downtown Chicago, on a consistent basis, and even if they do, whether they will have a more flexible work schedule, which could reduce our revenues at our urban locations.
−Removed: To date, employees have returned to offices at a slower rate than anticipated.
−Removed: If the shift toward remote work continues even after the COVID-19 pandemic has abated or ended and workers do not return to offices in urban centers, or work from those locations less frequently, our business, financial condition, and results of operations could be adversely affected for an uncertain period of time, even if customers otherwise resume pre-pandemic levels of discretionary spending.
−Removed: Additionally, as consumer behavior trends have changed during and following the COVID-19 pandemic, we have seen an unprecedented increase in summer travel, which may impact the demand for our products.
−Removed: As a result of all of these factors, we may make the decision to temporarily or permanently close certain of our impacted locations.
+Added: To date, employees have returned to offices at a slower rate than anticipated and many companies have shifted to a fully remote or hybrid workforce.
+Added: If the shift toward remote work continues and workers do not return to offices in urban centers, or work from those locations less frequently, our business, financial condition, and results of operations could be adversely affected for an uncertain period of time, even if customers otherwise resume pre-pandemic levels of discretionary spending.
+Added: Additionally, as consumer behavior trends have changed during and following the COVID-19 pandemic, we have seen an increase in summer travel, which has and may continue to impact the demand for our products.
+Added: As a result of all of these factors, we may make the decision to
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+Added: temporarily or permanently close certain of our impacted locations, or change our plans for future restaurant locations.
Our future growth depends significantly on our ability to open new restaurants and is subject to many unpredictable factors.
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In fiscal year 2023 , we had 35 Net New Restaurant Openings, and in fiscal year 2022 we had 36 Net New Restaurant Openings.
−Removed: In the past, we have experienced delays in opening a significant number of our restaurants due to, among other things, supply chain challenges, wage and commodity cost increases as a result of inflation, construction, and permitting delays in new developments.
−Removed: Such delays could happen again in future restaurant openings, especially as the COVID-19 pandemic continues and due to macroeconomic factors, which has significantly impacted our ability to complete construction of our new restaurants and also our ability to receive the necessary permits to open new restaurants.
−Removed: Additionally, due to recent significant staffing and hiring issues in the restaurant industry throughout the country, we may not have sufficient staffing or labor in order to open our new restaurants on schedule, or at full capacity.
+Added: In the past, we have experienced delays in opening restaurants due to, among other things, supply chain challenges, wage and commodity cost increases as a result of inflation, construction delays, and permitting delays in new developments.
+Added: Such delays could happen again in future restaurant openings.
Delays or failures in opening new restaurants, or in launching new restaurant formats (including walk-up, drive-in, or drive-thru formats or store formats incorporating automation technology), could cost significant company resources (including lost sales and additional labor and marketing costs) and have an adverse effect on our growth strategy and our business, financial condition, and results of operations.
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There is no guarantee that a sufficient number of suitable sites will be available in desirable areas or on terms that are acceptable to us in order to achieve our growth plan or meet our economic objectives in new or existing geographic markets.
−Removed: Our ability to identify, secure, and open new restaurant sites also depends on other factors, many of which are likely to be more challenging as the COVID-19 pandemic continues, including:
−Removed: • identifying and securing an appropriate site and selecting the best restaurant format for that given site and market (including determining whether to test new restaurant formats, including any formats incorporating automation technology), which includes maximizing the effectiveness of our multi-channel approach, the size of the site, traffic patterns, local retail and business attractions and infrastructure that will drive high levels of customer traffic and sales, proximity of potential restaurant sites to existing restaurants, and anticipated commercial, residential and infrastructure development near the potential restaurant site;
+Added: Our ability to identify, secure, and open new restaurant sites also depends on other factors, including:
+Added: • identifying and securing an appropriate site and selecting the best restaurant format for that given site and market (including determining whether to test new restaurant formats, including any formats incorporating automation technology), which requires consideration of the likely effectiveness of our multi-channel approach at the site, the size of the site, traffic patterns, local retail and business attractions and infrastructure that may drive high levels of customer traffic and sales, proximity of the site to existing restaurants, and anticipated commercial, residential and infrastructure development near the site, all of which has become more challenging with the uncertainty of companies’ return-to-office plans in various locations;
• negotiating leases with acceptable terms;
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• managing construction and development costs of new restaurants, particularly in competitive markets;
−Removed: • obtaining construction materials and labor at acceptable costs, particularly with the recent increase in inflation;
+Added: • obtaining construction materials and labor at acceptable costs, particularly with the increase in inflation;
• maintaining qualified real estate and construction resources to source and manage construction of new sites;
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• securing required governmental approvals, permits and licenses (including construction, certificates of occupancy and other permits) in a timely manner and responding effectively to any changes in local, state or federal laws and regulations;
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Given the numerous factors involved, we may not be able to successfully identify and secure a sufficient number of attractive restaurant sites in existing, adjacent or new markets, which could have an adverse effect on our business, financial condition, and results of operations.
−Removed: And, for those locations where we are able to secure an attractive restaurant site, our progress in opening new restaurants may occur at an uneven rate.
+Added: For those locations where we are able to secure an attractive restaurant site, our progress in opening new restaurants may occur at an uneven rate.
If we do not open new restaurants in the future according to our current plans, the delay could have an adverse effect on our business, financial condition, and results of operations.
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We may also need to make greater investments than we originally planned in advertising and promotional activity in new markets to build brand awareness and attract new customers, particularly if we don’t have high brand awareness in such markets.
−Removed: In addition, because we try to locally source as much of our supply chain as practicable, we may have difficulty sourcing our ingredients from local suppliers and distributors that are in close proximity to our new markets and that meet our quality standards and are appropriate for our distribution model and Food Ethos.
−Removed: For example, since the fourth fiscal quarter of 2022, as a result of extreme weather conditions, we experienced and have been experiencing supply chain disruptions for key ingredients, such as romaine, arugula and tomatoes, which resulted in higher prices for those products or resulted in temporarily discontinuing those products in certain geographic markets.
−Removed: Additionally, since the beginning of 2023, we have been experiencing supply chain disruptions for our bowls and plates which has resulted in use of alternative packaging solutions.
+Added: In addition, because we try to locally source as many of our food ingredients as practicable, we may have difficulty sourcing our ingredients from local suppliers and distributors that are in close proximity to our new markets and that meet our quality standards and are appropriate for our distribution model and Food Ethos.
Because of the local nature of our supply chain, our costs of goods may increase significantly in a new market and supply chain availability may be limited by the climate and the grower network in a specific market.
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In the event we expand our operations outside of the United States, any such expansion may require partnering with and becoming reliant upon a third party, via a partnership, licensing agreement, joint venture, or other contractual relationship.
+Added: Severe weather conditions or natural disasters may adversely affect our restaurant sales and results of operations, and climate change may further increase these adverse effects.
+Added: Food service businesses such as ours can be materially and adversely affected by severe weather conditions or natural disasters, such as severe rain and snow storms, earthquakes, wildfires, tornadoes, hurricanes, flooding, prolonged drought, protracted heat or cold waves or other natural disasters.
+Added: Such occurrences have in the past caused and can cause temporary closures of our restaurants, which impacts our sales at those restaurants.
+Added: Such conditions may also delay construction of our new restaurants, cause damage to our restaurants that require costly repairs, or result in lost products and interruptions in supply.
+Added: Global climate change has caused, and may continue to cause, more volatile and severe weather and natural disasters, including more severe storms, droughts, hurricanes, tornadoes, wildfires, and other natural disasters, may cause a rise in temporary or permanent closures of our restaurants, increased damage to those restaurants, and growing construction
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+Added: delays with respect to our new restaurant openings.
+Added: Accordingly, volatile weather is likely to adversely affect our business, financial condition, and results of operations.
+Added: These events are beyond our control and, in many instances, unpredictable.
+Added: In addition, adverse weather conditions, particularly in the winter months in some of our largest markets such as New York City, Boston, the Washington, D.C./Virginia/Maryland metropolitan region and Chicago or unexpected adverse weather conditions in markets such as Los Angeles, Georgia, Texas or Florida, may also impact customer traffic at our restaurants, and, in more severe cases, cause temporary restaurant closures, sometimes for prolonged periods, which could have an adverse impact on our revenues.
+Added: Many of our restaurants have outdoor seating, and the effects of adverse weather may impact the use of these areas and may negatively impact our revenue.
+Added: As a result of adverse weather conditions, temporary or prolonged restaurant closures may occur and customer traffic may decline due to the actual or perceived effects of future weather-related events.
+Added: Pandemics or disease outbreaks have disrupted, and may continue to disrupt, our business, and have adversely affected our operations and results of operations.
+Added: Pandemics or disease outbreaks such as the COVID-19 pandemic have impacted and are likely to continue to impact our business and results of operations, in particular due to the negative impact on in-restaurant foot traffic and working from the office, difficulties staffing our restaurants, challenges in obtaining supplies, and increasing commodity costs.
+Added: For example, during the COVID-19 pandemic, many state and local authorities mandated various public health measures, compliance with which was been challenging, costly and required significant management attention and oversight.
+Added: Any pandemics or disease outbreaks could adversely affect our ability to implement our growth plans, recruit new team members, and cause delays in construction, permitting, or opening of new restaurants, as well as have an adverse impact on our overall ability to successfully execute our plans to enter into new markets.
+Added: These and any additional changes may adversely affect our business or results of operations in the future, and may impact our liquidity or financial condition, particularly if these changes are in place for a significant amount of time.
+Added: Furthermore, as we experienced during the COVID-19 pandemic, in the event of a pandemic or disease outbreak, the risk of contracting such disease could cause customers or employees to avoid gathering in public places, which could have adverse effects on our restaurant customer traffic, the ability to adequately staff restaurants, and our Outpost Channel given work-from-home policies and reduced office schedules.
+Added: Even if a virus or other disease does not spread significantly within a specific area, the perceived risk of infection or health risk in such area may adversely affect our business, liquidity, financial condition, and results of operations.
New restaurants, once opened, may not be profitable, and new restaurants may negatively impact sales at our existing restaurants.
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Existing restaurants could also make it more difficult to build our customer base for a new restaurant in the same market.
−Removed: When we open new restaurants we do not believe that such new restaurants will adversely affect sales at our existing restaurants, but we may selectively open new restaurants in and around areas of existing restaurants that are operating at or near capacity to effectively serve our customers.
−Removed: Sales cannibalization among our restaurants may become significant in the future as we continue to expand our operations and could affect our sales growth, in particular if the delivery radius of an existing restaurant overlaps with that of a new restaurant, which could, in turn, adversely affect our business, financial condition, and results of operations.
−Removed: Additionally, our restaurants and locations must be able to support growth of not only our In-Store and Pick-Up Channels, but also, depending on location, orders through our Native Delivery, Outpost, and Marketplace Channels.
−Removed: While we attempt to select our locations to maximize all of our channels, we may not be effective in doing so (particularly as a result of the potential long-term change in customer behavior as a result of the COVID-19 pandemic), which could lead certain restaurants to be under capacity and other restaurants to be at, or over, capacity.
−Removed: We may also prioritize the development of hybrid restaurants that have larger capacity for supporting our Native Delivery, Outpost, and Marketplace Channels or the development of new restaurant formats, such as walk-up, drive-in, or drive-thru formats or store concepts incorporating automation technology.
−Removed: We do not have significant experience in operating such hybrid locations or such new restaurant formats (including any store formats incorporating automation technology), and we may not be able to operate them as efficiently as we operate our restaurants.
+Added: We may selectively open new restaurants in and around areas of existing restaurants that are operating at or near capacity to effectively serve our customers.
+Added: Sales cannibalization among our restaurants may become significant in the future as we continue to expand our operations and could
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+Added: affect our sales growth, in particular if the delivery radius of an existing restaurant overlaps with that of a new restaurant, which could, in turn, adversely affect our business, financial condition, and results of operations.
+Added: Additionally, our restaurants and locations must be able to support growth of not only our In-Store and Pick-Up Channels, but also, depending on location, orders through our Native Delivery, Outpost and Catering, and Marketplace Channels.
+Added: While we attempt to select our locations to maximize all of our channels, we may not be effective in doing so (particularly as a result of potential long-term changes in customer behavior, such as may be the case with respect to companies’ return-to-office plans and remote or hybrid work environments as a result of the COVID-19 pandemic), which could lead certain restaurants to be under capacity and other restaurants to be at, or over, capacity.
+Added: We have begun to develop store concepts including automation technology, which we refer to as our Infinite Kitchen, and may also prioritize the development, or future development, of new restaurant formats, such as walk-up, drive-in, or drive-thru formats.
+Added: We do not have significant experience in operating such new restaurant formats (including any store formats incorporating the Infinite Kitchen), and we may not be able to operate them as efficiently as we operate our traditional restaurant formats.
+Added: We have in the past determined to close certain restaurants due to performance and may do so again in the future, which may adversely affect our business, financial condition and results of operations.
Our success depends substantially on the value of our brand and failure to preserve its value or changes in customer recognition of our brand, including due to negative publicity, could have a negative impact on our business, financial condition, and results of operations.
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Brand value is based in part on customer perceptions on a variety of subjective qualities.
−Removed: Business incidents, whether isolated or recurring and whether originating from us or our business partners, from any of our third-party spokespersons that represent the brand, or even from unrelated food services businesses, if customers associate those businesses with our own operations, that erode customer trust can significantly reduce brand value, potentially trigger boycotts of our restaurants or result in civil or criminal liability and can have a negative impact on our financial results.
−Removed: Such incidents include actual or perceived breaches of data privacy, claims by current or former employees, particularly claims of discrimination or harassment, contaminated or unsafe food, including allergens, product recalls, workforce reductions, store employees or other food handlers infected with communicable diseases, including COVID-19, failure to follow proper safety protocols, customer complaints, or other potential incidents discussed in this risk factors section.
−Removed: Customer demand for our products and our reputation could diminish significantly if we, our employees, delivery partners, or other business partners fail to preserve the quality of our products, do not provide orders in a timely fashion, act or are perceived to act in an unethical, illegal, racially biased, unequal, or socially irresponsible manner, including with respect to the sourcing, content, or sale of our products, service and treatment of customers at our restaurants, or the use of customer data for general or direct marketing or other purposes.
+Added: Business incidents, whether isolated or recurring and whether originating from us or our business partners, from any of our employees or third-party spokespersons that represent the brand, or even from unrelated food services businesses, if customers associate those businesses with our own operations, that erode customer trust can significantly reduce brand value, potentially trigger boycotts of our restaurants or result in civil or criminal liability and can have a negative impact on our financial results.
+Added: Such incidents include actual or perceived breaches of data privacy, claims by current or former employees, particularly claims of discrimination or harassment, controversial social media posts by current or former employees or by other individuals that we work with to market our products, contaminated or unsafe food, including allergens, product recalls, workforce reductions, store employees or other food handlers infected with communicable diseases, failure to follow proper safety protocols, customer complaints, or other potential incidents discussed in this risk factors section.
+Added: Customer demand for our products and our reputation could diminish significantly if we, our employees, delivery partners, or other business partners fail to preserve the quality of our products, do not provide orders in a timely fashion, act or are perceived to act in an unethical, illegal, racially biased, unequal, or socially irresponsible manner, including with respect to the sourcing, content, or sale of our products, our employment practices, service and treatment of customers at our restaurants, or the use of customer data for general or direct marketing or other purposes.
Additionally, if we fail to comply with laws and regulations, publicly take controversial positions or actions, or fail to deliver a consistently positive customer experience in each of our markets, including by failing to invest in the right balance of wages and benefits to attract and retain employees that represent the brand well, our brand value may be diminished, which could have an adverse effect on our business, financial condition, and results of operations.
−Removed: We have also invested in technology to support our back of house operations and simplify the work of our team members.
−Removed: If our customers react negatively to these operational changes (in particular the use of automation in our restaurants), our brand value may be diminished, which could have an adverse effect on our business, financial condition, and results of operations.
+Added: We have also invested in technology, including our Infinite Kitchens, to support our back of house operations and simplify the work of our team members.
+Added: If our customers react negatively to these operational changes (in particular the use of automation in our restaurants equipped with Infinite Kitchens), our brand value may be diminished, which could have an adverse effect on our business, financial condition, and results of operations.
In addition, our future results depend on various factors, including local market acceptance of our restaurants and customer recognition of the quality of our food and operations.
Although we have received national and regional recognition for the high quality of our food and operations, we cannot guarantee that we will continue to receive similar recognition in future periods.
−Removed: Failure to receive continued national and regional recognition may impact customer recognition of our brand, which could have an adverse effect on our business, financial condition, and results of operations.
+Added: Failure to receive continued national and regional recognition may
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+Added: impact customer recognition of our brand, which could have an adverse effect on our business, financial condition, and results of operations.
Food safety and foodborne illness concerns could have an adverse effect on our business.
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In addition, we freshly prepare many of our menu items at our restaurants, which may put us at even greater risk for foodborne illness and food contamination outbreaks than some of our competitors who use processed foods or commissaries to prepare their food.
−Removed: The risk of foodborne illness may also increase whenever our menu items are served outside of our control, including orders through our Pick-Up, Native Delivery, Outpost, and Marketplace Channels, particularly if such food is not delivered or consumed within the 30-minute period that we recommend to our customers.
+Added: The risk of foodborne illness may also increase whenever our menu items are served outside of our control, including orders through our Pick-Up, Native Delivery, Outpost and Catering, and Marketplace Channels, particularly if such food is not delivered or consumed within the recommended time period.
In the event of a potential food safety incident, the protocols and procedures that we have in place, and the public statements we make, to respond to such an incident may not be sufficient and any disruption to these protocols, procedures and public statements could also adversely impact the safety of our customers and our reputation.
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coli infection to romaine lettuce produced in a certain region in the United States.
−Removed: The occurrence of a similar incident at one or more of our restaurants, or negative publicity or
−Removed: public speculation about an incident, even if such publicity or speculation were to prove unfounded, could have an adverse effect on our business, financial condition, and results of operations.
−Removed: Further, in August 2019, we received significant negative publicity because, at the time, our molded fiber bowls contained per- and polyfluoroalkyl substances (“PFAS”), which are chemicals associated with certain adverse health effects in humans, even though such substances are approved for use by the U.S.
−Removed: Food and Drug Administration.
−Removed: In addition, products containing PFAS may not be 100% compostable as required pursuant to BPI compostability certification.
−Removed: Although we have since transitioned to alternative bowls that do not contain more than trace amounts of PFAS, these alternatives could present other health or food safety risks.
−Removed: The inability to continue to source alternative bowls, or any negative publicity or public speculation around such prior incident or similar future incidents, could have an adverse effect on our business, financial condition, and results of operations.
+Added: The occurrence of a similar incident at one or more of our restaurants, or negative publicity or public speculation about an incident, even if such publicity or speculation were to prove unfounded, could have an adverse effect on our business, financial condition, and results of operations.
We have incurred significant losses since inception.
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add new products and offerings;
−Removed: and develop, enhance or invest in technologies to help grow our business, including our acquisition of Spyce Food Co.
−Removed: (“Spyce”) and any other investments to automate portions of our ingredient preparation and menu item assembly as well as investments to improve our smartphone application.
−Removed: Additionally, our restaurants require costly ongoing maintenance and renovations, and we may need to temporarily close our restaurants while we perform maintenance and renovations, which could further affect our results of operations.
+Added: and develop, enhance or invest in technologies to help grow our business, including our Infinite Kitchen technology and our smartphone application.
+Added: Additionally, our restaurants require costly ongoing maintenance and renovations, and we expect to temporarily close certain of our restaurants while we perform maintenance and renovations, which is likely to further affect our results of operations.
As a result, our net losses may increase while we continue our planned expansion.
We will need to generate and sustain increased revenue levels and decrease proportionate expenses in future periods to achieve profitability in many of our largest markets, and even if we do, we may not be able to maintain or increase profitability.
−Removed: These efforts may prove more expensive than we anticipate, and we may not succeed in increasing our revenue sufficiently to offset expenses.
−Removed: For example, during fiscal year 2022, we implemented the Plan, with a focus of achieving profitability on an Adjusted EBITDA basis.
−Removed: If as a result of current macroeconomic conditions, wage rates or costs of goods sold continue to increase, or if consumer demand continues to soften, we may have to implement additional cost cutting measures in order to achieve profitability, and such measures may or may not be successful.
−Removed: Many of our efforts to generate revenue, particularly our investment in our Native Delivery, Outpost, and Marketplace Channels are new and unproven, and any failure to adequately increase revenue or contain the related costs of these channels could prevent us from attaining or increasing profitability, particularly if these channels are not as successful as we forecast.
−Removed: For example, orders through our Native Delivery, Outpost, and Marketplace Channels are susceptible to delivery delays, or orders being cancelled by couriers, which are largely as a result of our reliance on third-party fulfillment services and are outside of our control.
−Removed: Additionally, due to the fact that our Native Delivery, Outpost, and Marketplace Channels require the payment of third-party delivery fees in order to fulfill deliveries, sales through these channels have historically had lower margins than our In-Store and Pick-Up Channels, particularly in California.
−Removed: If we are unable to operate our Native Delivery, Outpost, and Marketplace Channels effectively and achieve scale, or if these lower margin channels increase as a total percent of company sales relative to higher margin ordering channels, we may not be able to achieve profitability in the near term or at all.
+Added: These efforts may prove more expensive than we anticipate, and we may not succeed in
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+Added: increasing our revenue sufficiently to offset expenses.
+Added: We have previously implemented cost cutting measures, including workforce reductions, to offset these pressures.
+Added: If as a result of macroeconomic or geopolitical conditions, or as a result of legal regulations, wage rates or costs of goods sold continue to increase, or if consumer demand softens, we may have to implement additional cost cutting measures in order to achieve profitability, and such measures may or may not be successful.
+Added: Many of our efforts to generate revenue, particularly our investment in our Native Delivery, Outpost and Catering, and Marketplace Channels are new and unproven, and any failure to adequately increase revenue or contain the related costs could prevent us from attaining or increasing profitability, particularly if these channels are not as successful as we forecast.
+Added: For example, orders through our Native Delivery, Outpost and Catering, and Marketplace Channels are susceptible to delivery delays, or orders being cancelled by couriers, which are largely as a result of our reliance on third-party fulfillment services and are outside of our control.
+Added: Additionally, due to the fact that our Native Delivery, Outpost and Catering, and Marketplace Channels require the payment of third-party delivery fees in order to fulfill deliveries, sales through these channels have historically had lower margins than our In-Store and Pick-Up Channels, particularly in California.
+Added: If we are unable to operate our Native Delivery, Outpost and Catering, and Marketplace Channels effectively and achieve scale, or if these lower margin channels increase as a total percent of company sales relative to higher margin ordering channels, we may not be able to achieve profitability in the near term or at all.
+Added: If we are not able to build, deploy, and maintain our proprietary kitchen automation technology, known as the Infinite Kitchen, in a timely and cost-effective manner, our growth plan, financial condition, and results of operations could be adversely affected.
+Added: In 2021, we acquired Spyce primarily to further develop and deploy Spyce’s kitchen automation technology, which we refer to as the Infinite Kitchen.
+Added: We have deployed Infinite Kitchen units in two of our restaurants, and expect to deploy additional Infinite Kitchen units in new and existing Sweetgreen restaurants.
+Added: Our operations in restaurants that use the Infinite Kitchen heavily depend on the seamless functioning of those systems.
+Added: Any technical malfunctions, software glitches, hardware failures, or other disruptions to the operations of the Infinite Kitchen could result in reduced efficiency, dissatisfaction amongst our customers, harm to our reputation, food loss and its associated costs, and revenue loss.
+Added: A significant and continuing malfunction or failure of an Infinite Kitchen may require us to close the store containing that Infinite Kitchen, and we may not be able to repair that Infinite Kitchen and reopen that store in a timely manner or at all.
+Added: We have limited operating experience with the Infinite Kitchen technology so as to determine its reliability, and we have limited experience conducting maintenance activities and repairs with respect to this technology.
+Added: Any store closures caused by the significant malfunction or failure of an Infinite Kitchen unit could have an adverse effect on our business, financial condition, and results of operations.
+Added: Our growth plan contemplates the deployment of additional Infinite Kitchen units in new and existing Sweetgreen restaurants.
+Added: We may be unable to manufacture and deploy Infinite Kitchen units in the time, and at the quantity, necessary to meet that growth plan.
+Added: We rely on third party vendors and suppliers for the manufacture of Infinite Kitchen units.
+Added: Any issues with these vendors and suppliers, such as supply chain disruptions, contractual disputes, or business continuity issues, could adversely affect our ability to manufacture and deploy Infinite Kitchen units in a timely manner or at all.
+Added: Further, the costs associated with Infinite Kitchen technology components, and the manufacturing and assembly thereof, may increase in the future.
+Added: Any such increases may cause the manufacture and deployment of additional Infinite Kitchen units to become cost-prohibitive for our business.
+Added: If we fail to manufacture and deploy Infinite Kitchen units in a timely manner, we may cause delays in the opening of new restaurants that are designed for those units, which may result in delays in the realization of revenue from those new restaurants, a failure to achieve our growth plan, and adverse impact on our financial condition and results of operations.
+Added: The kitchen automation industry is characterized by rapid technology advancements and innovation.
+Added: Several third parties have developed, or are seeking to develop, technology that competes with our Infinite Kitchen technology.
+Added: If any of those third parties are successful in developing and deploying such technology, and if that technology is made available to our competitors at a lower price than what we pay for Infinite Kitchen units, or if that technology offers significant additional benefits to our competitors, our business may suffer.
+Added: Additionally, if any third party owns or acquires intellectual property rights related to kitchen automation technology, those intellectual property rights may limit our ability to develop, manufacture, and deploy our Infinite Kitchen
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+Added: technology, and may result in one or more disputes with that third party with respect to our Infinite Kitchen technology.
If we are not able to hire, train, reward, and retain a qualified workforce and/or if we are not able to appropriately optimize our workforce or effectively manage our growth in our restaurants, our growth plan and profitability could be adversely affected.
−Removed: We rely on our restaurant-level employees to consistently provide high-quality food and positive experiences to our customers, which we refer to as the “sweet touch.” In addition, our ability to continue to open new restaurants depends on our ability to recruit, train and retain high-quality restaurant team members to
−Removed: manage, lead and work in our restaurants.
+Added: We rely on our restaurant-level employees to consistently provide high-quality food and positive experiences to our customers, which we refer to as the “sweet touch.” In addition, our ability to continue to open new restaurants depends on our ability to recruit, train and retain high-quality restaurant team members to manage, lead and work in our restaurants.
Maintaining appropriate staffing in our existing restaurants and hiring and training staff for our new restaurants requires precise workforce planning, which has become more complex due to recent significant staffing and hiring issues in the restaurant industry throughout the country, as well as laws related to wage and hour violations or predictive scheduling (“fair workweek”) in many of our markets and New York City’s “just cause” termination legislation applicable to our industry, which went into effect in July 2021.
−Removed: Additionally, we have historically had high turnover rates.
+Added: Additionally, while our employee turnover rate has recently decreased, we have historically had high turnover rates.
We believe our high turnover rate is caused by a number of factors, including that our restaurants tend to be very busy during peak lunch and dinner hours, and that our restaurant employees perform a significant amount of prep work in our restaurants.
−Removed: We have taken, and will continue to take, a number of steps in order to reduce our turnover, but we cannot be certain that our turnover rates will decrease, and they may continue to increase in the future.
+Added: We have taken, and will continue to take, a number of steps in order to reduce our turnover, but we cannot be certain that our turnover rates will continue to decrease, and they may instead increase in the future.
If we fail to appropriately plan our workforce and/or fail to reduce our turnover at our restaurants, it could adversely impact guest satisfaction, operational efficiency, and restaurant profitability.
−Removed: Moreover, to optimize our organizational structure, including in response to the COVID-19 pandemic and recent macroeconomic conditions and their impact on our business, since the beginning of fiscal year 2020, we have undergone reductions in workforce at our sweetgreen Support Center, including most recently in the third quarter of fiscal year 2022 and may in the future implement other reductions in workforce or restructurings.
+Added: Moreover, to optimize our organizational structure, including in response to the COVID-19 pandemic and recent macroeconomic conditions and their impact on our business, since the beginning of fiscal year 2020, we have undergone reductions in workforce at our Sweetgreen Support Center, including in the third quarter of fiscal year 2022 and may in the future implement other reductions in workforce or restructurings.
Any reduction in workforce or restructuring may yield unintended consequences and costs, such as attrition beyond the intended reduction in workforce, delay in development of critical technology or business optimization programs due to gaps in knowledge transfer and new employee ramp up time, the distraction of employees, and reduced employee morale, and could adversely affect our reputation as an employer, which could make it more difficult for us to hire new employees in the future and increase the risk that we may not achieve the anticipated benefits from the reduction in workforce.
−Removed: The COVID-19 pandemic and recent low levels of unemployment have also resulted in aggressive competition for talent, wage inflation, and pressure to improve benefits and workplace conditions to remain competitive, both in our restaurants and in our sweetgreen Support Center.
−Removed: However, in connection with the Plan, during fiscal year 2022 we planned and subsequently enacted changes to certain employee benefit programs in our restaurants and in our sweetgreen Support Center to be more in line with industry benchmarks, which could have an impact on our ability to recruit and retain team members or corporate employees.
If we fail to recruit and retain restaurant team members or corporate employees in a timely or efficient manner or experience higher employee turnover levels in either our restaurants or Sweetgreen Support Center, our ability to open new restaurants and grow sales at existing restaurants may be adversely affected, and we may experience higher than projected labor costs and otherwise impact our Restaurant Level Profit Margin.
−Removed: In addition, if we fail to adequately monitor and proactively respond to employee dissatisfaction or complaints, it could lead to poor employee satisfaction, higher turnover, litigation, and unionization efforts, which have started to become more prevalent in the hospitality industry.
−Removed: Increases in labor costs, labor shortages, and any difficulties in attracting, motivating, and retaining well-qualified employees could have an adverse effect on our business, financial condition, and results of operations.
+Added: Increases in labor costs, labor shortages, and any difficulties in attracting, motivating, and retaining well-qualified employees, as well as any unionization or attempt to unionize at any of our restaurants, could have an adverse effect on our business, financial condition, and results of operations.
Labor is a significant component in the cost of operating our restaurants.
−Removed: If we face labor shortages, particularly due to recent labor shortages in the restaurant industry as a result of the COVID-19 pandemic, increased labor costs because of increased competition for employees and inflation, higher employee turnover rates, inefficiency in scheduling our employees, increases in the federal, state, or local minimum wage, or other employee benefits costs (including costs associated with health insurance coverage), our operating expenses could increase and our growth could be negatively impacted.
+Added: We may experience increased labor costs because of increased competition for employees and inflation, higher employee turnover rates, inefficiency in scheduling our employees, increases in the federal, state, or local minimum wage, or increases in other employee benefits costs (including costs associated with health insurance coverage).
+Added: If we experience increased labor costs, our operating expenses would increase and our growth could be negatively impacted.
+Added: Starting in April 2024, California legislation will require certain restaurant chains, including Sweetgreen, to pay a minimum per hour wage of $20 to restaurant employees in California.
+Added: A state-appointed council may increase this minimum wage annually.
+Added: We expect to offset the increased labor costs from such legislation by increasing our menu prices, but our customers may be unwilling to pay those higher prices.
+Added: If we are unable to offset these increased labor costs by increasing our menu prices, this legislation may negatively impact our Restaurant Level Profit Margin.
Our success depends in part upon our ability to attract, motivate, and retain a sufficient number of well-qualified restaurant operators and management personnel, as well as a sufficient number of other qualified employees, including customer service and kitchen staff, to align with our expansion plans and multi-channel approach.
−Removed: In the event we cannot sufficiently staff our restaurants, we may from time to time have to temporarily close some of our channels (including potentially certain of our Owned Digital Channels) or close for certain portions of the day and/or days of the week.
+Added: In the event we cannot sufficiently staff our restaurants, we may from time to time have to temporarily close some of our channels (including potentially certain of our Owned Digital Channels) or close for certain portions of the
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+Added: day and/or days of the week.
Because of the busy nature of our restaurants, it is critical that we have a high level of labor productivity and if we do not maintain high engagement or deployment in our restaurants (including in new restaurants and in new markets), it could have an adverse effect on our business.
As described above, we have historically had turnover rates that are higher than industry average.
−Removed: Our ability to recruit and retain restaurant employees, particularly as a result of recent significant labor shortages in the restaurant industry, may delay the planned openings of new restaurants, limit the operations of our existing restaurants or result in higher employee turnover in existing restaurants, which could have an adverse effect on our business, financial condition, and results of operations.
+Added: Our ability to recruit and retain restaurant employees may delay the planned openings of new restaurants, limit the operations of our existing restaurants or result in higher employee turnover in existing restaurants, which could have an adverse effect on our business, financial condition, and results of operations.
Competition for these employees could require us to pay higher wages, which could result in higher labor costs.
+Added: In addition, if we fail to adequately monitor and proactively respond to employee dissatisfaction or complaints, it could lead to poor employee satisfaction, higher turnover, litigation, and unionization efforts, which have started to become more prevalent in the hospitality industry.
Although none of our employees are currently covered under collective bargaining agreements, if any of our restaurants were to become unionized and collective bargaining agreement terms were significantly different from our current compensation arrangements, it could adversely affect our business, financial condition, and results of operations, and lead to significant management distraction.
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If we are unable to continue to recruit and retain sufficiently qualified individuals, our business and our growth could be adversely affected.
−Removed: If we are unable to introduce new or upgraded products, menu items, services, channels, or features that our customers recognize as valuable, we may fail to attract additional customers to use and continue using our mobile and website ordering platforms.
−Removed: Our efforts to develop new and upgraded products, menu items, services, channels, and features on our smartphone and website ordering platforms could require us to incur significant costs.
−Removed: To continue to attract and retain digital customers, we will need to continue to invest in the development of new products, menu items, services, channels, and features that add value for customers, and that differentiate us from our competitors.
−Removed: For example, in fiscal year 2021, we launched our native application delivery in our Android smartphone application and completed the acquisition of Spyce to allow us to serve our food with even better quality, consistency, and efficiency in our restaurants via automation;
−Removed: in fiscal year 2020, we launched our native application delivery in our iOS smartphone application and through website ordering;
−Removed: and in fiscal year 2018, we launched our Outpost Channel whereby we deliver salads in bulk to commercial or other locations with no delivery fee.
−Removed: We also frequently launch seasonal and exclusive bowls, as well as digital exclusive items and menu collections throughout the year to attract and retain customers.
−Removed: For example, in November 2022 we launched a dessert option in the form of Crispy Rice Treats.
−Removed: The success of such new products, menu items, services, channels, and features depend on several factors, including the timely completion, introduction and market acceptance of such products, menu items, services, channels, or features.
−Removed: If our customers do not recognize the value of our new products, menu items, services, channels or features, they may choose not to use our online and mobile ordering platforms, which could have an adverse effect on our business, financial condition, and results of operations.
−Removed: Developing and delivering these new or upgraded products, menu items, services, channels, or features may increase our expenses, as this process is costly and we may experience difficulties in developing and delivering these new or upgraded products, menu items, services, channels, or features, which may prevent us from achieving or maintaining profitability.
−Removed: Moreover, any such new or upgraded products, menu items, services, channels, or features may not work as intended, provide the intended level of functionality or provide intended value to our customers.
−Removed: In particular, our planned investment in developing automation technology after our acquisition of Spyce could cost more and could take longer to develop than we initially expect.
+Added: If we are unable to introduce new or upgraded products, menu items, services, channels, technology or features that our customers recognize as valuable, we may fail to retain existing customers and attract additional customers.
+Added: Our efforts to develop new and upgraded products, menu items, services, channels, technology, and features on could require us to incur significant costs.
+Added: To continue to attract and retain customers, we will need to continue to invest in the development of new products, menu items, services, channels, technology and features that add value for customers, and that differentiate us from our competitors.
+Added: For example, in fiscal year 2023, we deployed Infinite Kitchen units in two restaurants to allow us to serve our food with even better quality, consistency, and efficiency in our restaurants;
+Added: Also in fiscal year 2023, we began cooking our ingredients exclusively using olive oil, and we also launched protein plates, which is our first major entree category expansion in three years and is part of our long-term strategy to appeal to a larger number of potential customers.
+Added: We also frequently launch seasonal and limited time offers, as well as digital exclusive items and menu collections throughout the year to attract and retain customers.
+Added: We have recently reduced the frequency of seasonal and limited time offers.
+Added: The success of such new products, menu items, services, channels, technology and features depend on several factors, including the timely completion, introduction and market acceptance of such things.
+Added: If our customers do not recognize the value of our new products, menu items, services, channels, technology or features, they may choose not to continue to purchase products from us, or may reduce the size or frequency of their purchases, which could have an adverse effect on our business, financial condition, and results of operations.
+Added: Developing and delivering these new or upgraded products, menu items, services, channels, technology or features may increase our expenses, as this process is costly and we may experience difficulties in developing and delivering these new or upgraded offerings, which may prevent us from achieving or maintaining profitability.
+Added: Moreover, any such new or upgraded products, menu items, services, channels, technology, or features may not work as intended, provide the intended level of functionality or provide the intended value to our customers.
+Added: In particular, our planned investment in developing, deploying, and maintaining our Infinite Kitchen technology could cost more and could take longer to develop than we initially expect.
Efforts to enhance and improve the ease of use, responsiveness, functionality and features of our existing websites and applications have inherent risks, and we may not be able to manage these product developments and enhancements successfully.
−Removed: If we are unable to continue to develop new or upgraded products, menu items, services, channels, or features, our customers may choose not to order through our online and mobile platforms in favor of other restaurants or delivery marketplaces, which could have an adverse effect on our business, financial condition, and results operations.
+Added: If we are unable to continue to develop new or upgraded products, menu items, services, channels, technology, or features, our customers may choose not to order through certain of our channels or at all, and instead order from other restaurants or delivery marketplaces, which could have an adverse effect on our business, financial condition, and results operations.
Our competitors may have larger or more experienced engineering teams as well as more resources to dedicate to developing or upgrading digital ordering platforms via third-party engineering partners, which may make such competitors’ products or services more attractive to customers.
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We may choose to license or otherwise integrate applications, content and data from third parties into our online and mobile ordering platforms.
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Our profitability depends in part on our ability to anticipate and react to changes in food and supply costs, and our ability to maintain our menu depends in part on our ability to acquire ingredients that meet our specifications from our suppliers.
−Removed: Shortages or interruptions in the availability of certain supplies caused by unanticipated demand, our inability to accurately forecast our supply needs, problems in production or distribution (including any imbalances and freight supply and demand), food contamination, inclement weather, the COVID-19 pandemic, or other conditions could adversely affect the availability and cost of food and supplies or the quality of our ingredients (including requiring distributors to provide substitute products, which may not be of equal quality), which could harm our operations and expose us to risk.
−Removed: We have a localized set of suppliers, and typically rely on a single regional distributor for each of our fresh food products and another single regional distributor for dry goods in each geographical market where we operate, which may make our supply chain inherently more difficult to manage than if we partnered with national distributors, which is the approach of many of our competitors.
+Added: Shortages or interruptions in the availability of certain supplies caused by unanticipated demand, our inability to accurately forecast our supply needs, problems in production or distribution, food contamination, inclement weather, or other conditions could adversely affect the availability and cost of food and supplies or the quality of our ingredients (including requiring distributors to provide substitute products, which may not be of equal quality), which could harm our operations and expose us to risk.
+Added: We have a localized set of suppliers, and typically rely on a single regional distributor for each of our produce items and another single regional distributor for grocery products in each geographical market where we operate, which may make our supply chain inherently more difficult to manage than if we partnered with national distributors, which is the approach of many of our competitors.
In addition, we partner with small and medium-sized farmers that have lower inventory levels and experience supply disruptions that place our business at risk.
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We have developed a process to monitor food safety certifications and standards of our farmers and we do not generally source products from farmers that do not have a comprehensive a food safety plan.
−Removed: We periodically audit our farmers’ compliance with our food safety standards, and in the event of material noncompliance with our standards (which occurred with one of our largest chicken suppliers in fiscal year 2020), our policy is to pause our relationship with such farmer until they become compliant.
+Added: We periodically audit our farmers’ compliance with our food safety standards, and in the event of material noncompliance with our standards (which occurred with one of our pickle suppliers in fiscal year 2023 and with one of our chicken suppliers in fiscal year 2022), our policy is to pause our relationship with such farmer until they become compliant.
Any increase in the prices, or lack of availability, of the food products most critical to our menu due to natural forces like weather or climate change, due to companies offering more competitive terms to our local farmers, inflation, or other reasons could have an adverse effect on our business, financial condition, and results of operations.
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We do not control the businesses of our suppliers or distributors, and our efforts to specify and monitor the standards under which they perform may not be successful.
−Removed: Subsequent to the end of fiscal year 2022, there has been an interruption by our supplier to the supply of packaging to our stores.
−Removed: This has caused and may continue to cause a disruption in our stores, as well as higher costs of materials, and could cause store closures in the future.
−Removed: While we are working to identify alternative suppliers, there can be no assurance we will be able to do so on a timely basis, at commercially reasonable terms, or at all, and an interruption in supply of packaging could adversely affect our business, financial condition and results of operations, including in particular our margins.
+Added: Since the beginning of fiscal year 2023, we have been experiencing supply chain disruptions for our bowls and plates, which has resulted in the use of alternative packaging solutions.
+Added: This caused and may continue to cause a disruption in our stores and customer dissatisfaction, as well as higher costs of materials, and could cause store closures in the future.
+Added: While we have secured alternative suppliers to address these disruptions, there can be no assurance we will be able to do so in the future on a timely basis, at commercially reasonable terms, or at all, and an interruption in supply of packaging could adversely affect our business, financial condition and results of operations, including in particular our margins.
If any of our distributors or suppliers performs inadequately or is unable to grow and scale with our business, or our distribution or supply relationships are disrupted for any reason, there could be an adverse effect on our business, financial condition, and results of operations.
−Removed: Currently, we typically have shorter-term contracts for the purchase or distribution of most of our food products and supplies.
−Removed: As a result, we may not be able to anticipate or react to changing food or supply costs by adjusting our purchasing practices or menu prices, which could cause our results of operations to deteriorate.
−Removed: Generally, our agreements range from one to three years, depending on the outlook for prices of the particular ingredient.
+Added: Currently, we typically have shorter-term contracts for
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+Added: the purchase or distribution of most of our food products and supplies.
+Added: As a result, we may see certain of our food or supply costs increase with limited or no notice, and we may not be able to anticipate or react to such increases by adjusting our purchasing practices or menu prices, which could cause our results of operations to deteriorate.
+Added: When we have fixed-price agreements in place for particular ingredients, the durations of those agreements typically range from six months to three years, depending on the outlook for prices of the particular ingredient.
In some cases, we have minimum purchase obligations.
We have tried to increase, where practical, the number of suppliers for our ingredients, which we believe can help mitigate pricing volatility, and we follow industry news, trade issues, exchange rates, foreign demand, weather, crises, and other world events that may affect our ingredient prices.
−Removed: In the event of a dispute with a distributor or supplier, we may not have adequate contractual recourse, and any insurance maintained by our distributors and/or suppliers may not be sufficient to cover the cost of a potential claim.
−Removed: cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, that could increase our expenses and cause shortages of food and other items at our restaurants such as packaging or paper products, which could cause a restaurant to remove items from its menu.
+Added: In the event of a dispute with a distributor or supplier, we may not have adequate contractual recourse, and any insurance maintained by our distributors and/or suppliers, or by us, may not be sufficient to cover the cost of a potential claim.
+Added: If we cannot replace or engage distributors or suppliers who meet our specifications in a short period of time, that could increase our expenses and cause shortages of food and other items at our restaurants such as packaging or paper products, which could cause a restaurant to remove items from its menu.
If that were to happen, affected restaurants could experience significant reductions in sales during the shortage or thereafter, if customers change their dining habits as a result.
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We could likewise encounter supply shortages and incur higher costs to secure adequate supplies, which would have an adverse effect on our business, financial condition, and results of operations.
−Removed: For example, since the fourth fiscal quarter of 2022, as a result of extreme weather conditions, we have experienced supply chain disruptions for key ingredients, such as romaine, arugula and tomatoes, which resulted in higher prices for those products or resulted in temporarily discontinuing those products in certain geographic markets.
+Added: For example, during the fourth fiscal quarter of 2022, as a result of extreme weather conditions, we experienced supply chain disruptions for key ingredients, such as romaine, arugula and tomatoes, which resulted in higher prices for those products or resulted in temporarily discontinuing those products in certain geographic markets.
There can be no assurance that we will be able to identify or negotiate additional or alternative sources on terms that are commercially reasonable to us, if at all.
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The failure of any of these vendors to fulfill their obligations could disrupt our operations.
−Removed: For example, we use DoorDash as our preferred third-party delivery partner to power our Native Delivery Channel, and if DoorDash, or any future third-party delivery partner fails to fulfill its obligations or delivers unsatisfactory delivery service, for instance, by delivering orders late, by not having sufficient couriers to fulfill our orders, or by having a system outage, the risks of which may be increased during our transition to DoorDash on our Native Delivery Channel, we will not be able to provide the proper delivery services to our customers through our native application, which is likely to lead to customer dissatisfaction and higher refunds or credits.
−Removed: We, and many of our third party vendors, also rely on Amazon Web Services to operate our digital channels, and in the fourth quarter of fiscal year 2021, Amazon Web Services had an outage that disabled all of our digital channels for nearly an entire day, having a material impact on our business.
−Removed: Additionally, we partner with LevelUp for account management for customers who have signed up on our smartphone application, including processing payments through our smartphone application.
−Removed: If LevelUp or any future third-party payment processing or account management partner, experiences any significant downtime, is unable to provide certain of its services or has a data security incident, it could have an adverse effect on our business, financial condition, and results of operations.
+Added: For example, we use DoorDash as our preferred third-party delivery partner to power our Native Delivery Channel, and if DoorDash, or any future third-party delivery partner fails to fulfill its obligations or delivers unsatisfactory delivery service, for instance, by delivering orders late, by not having sufficient couriers to fulfill our orders, or by having a system outage, we will not be able to provide the proper delivery services to our customers through our native application, which is likely to lead to customer dissatisfaction and higher refunds or credits.
+Added: We, and many of our third-party vendors, also rely on Amazon Web Services to operate our digital channels, and in the fourth quarter of fiscal year 2021, Amazon Web Services had an outage that disabled all of our digital channels for nearly an entire day, having a material
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+Added: impact on our business.
+Added: Additionally, beginning in the fourth fiscal quarter of 2023, we started using technology from Stripe for account management for customers who have signed up on our smartphone application, including processing payments through our smartphone application.
+Added: If Stripe, or any future third-party payment processing or account management partner, experiences any significant downtime, is unable to provide certain of its services or has a data security incident, it could have an adverse effect on our business, financial condition, and results of operations.
Additionally, any changes we may make to the services we obtain from our vendors, or from any new vendors we employ, may disrupt our operations.
These disruptions could have an adverse effect on our business, financial condition, and results of operations.
−Removed: Additionally, we, our advertisers and our partners are subject to or affected by the technical requirements, terms of service, and policies of the third-party operating system platforms and application stores on which our mobile application depends, including those operated by Apple and Google.
−Removed: The operators of these platforms and application stores have broad discretion to impose technical requirements and change or
−Removed: interpret their policies in a manner unfavorable to us and our partners, such as by imposing fees associated with access to their platforms, restricting how we collect, use, and share data, and limiting our ability to track users.
+Added: Additionally, we and certain of our vendors are subject to or affected by the technical requirements, terms of service, and/or policies of the third-party operating system platforms and application stores on which our mobile application depends, including those operated by Apple and Google.
+Added: The operators of these platforms and application stores have broad discretion to impose technical requirements and change or interpret their policies in a manner unfavorable to us and our vendors, such as by imposing fees associated with access to their platforms, restricting how we collect, use, and share data, and limiting our ability to track users.
For example, Apple recently announced restrictions that could adversely affect our advertising and marketing strategies by requiring iOS mobile applications to obtain a user’s opt-in consent to track them for advertising purposes.
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Our existing restaurant management systems and other technology, financial and management controls, leadership team and information systems may be inadequate to support our planned expansion and investments, which may negatively impact the quality of service provided to our customers.
−Removed: Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train and retain managers and team members.
+Added: Managing our growth effectively will require us to continue to enhance these systems, procedures and controls and to hire, train, and retain qualified managers and team members.
We may not respond quickly enough to the changing demands that our expansion will impose on our management, restaurant teams and existing infrastructure, which could harm our customer experience, and in turn, our business, financial condition, and results of operations.
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If customers are not persuaded that we offer a good value for their money, we may not be able to grow or maintain our customer base, which would have an adverse effect on our business, financial condition, and results of operations.
−Removed: Current macroeconomic conditions, such as inflation and increasing interest rates, which have become more challenging during 2022 and which we expect to continue to be challenging in fiscal year 2023, increase the risk of a potential economic downturn.
−Removed: These macroeconomic conditions can also negatively impact consumer discretionary spend and, coupled with slower than expected return to office during and following the COVID-19 pandemic (including as a result of many workplaces adopting remote or hybrid models), has led to our revenue growth slowing (and much of such revenue regrowth was driven by a price increase taken in the first quarter of fiscal year 2022).
+Added: Current macroeconomic conditions, such as inflation and higher interest rates, which have become more challenging during 2023 and 2022 and which we expect to continue to be challenging in fiscal year 2024, increase the risk of a potential economic downturn.
+Added: An economic downturn negatively impacts consumer discretionary spend and, coupled with companies’ slower than expected return to office following the COVID-19 pandemic (including as a result of many workplaces adopting remote or hybrid models), has led to our revenue growth slowing.
Additionally, as a result of continued inflation, we experienced an increase in wage rates and costs of goods sold during fiscal year 2023, which has had a negative impact on our Restaurant Level Profit.
In order to mitigate these risks, we have gradually increased menu prices or other customer fees and have implemented and may in the future have to implement additional cost-cutting measures, as described in the section titled “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in this Annual Report.
−Removed: There can be no assurance that future cost increases, including as a result of inflation, can be offset by increased menu prices or that our current or future menu prices will be fully absorbed by our customers without any resulting change to their demand for our products.
+Added: There can be no assurance that future cost increases, including as
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+Added: a result of inflation, can be offset by increased menu prices or that our current or future menu prices will be fully absorbed by our customers without any resulting change to their demand for our products.
Changes in commodity and other operating costs, particularly due to climate change, could adversely affect our results of operations.
−Removed: The profitability of our restaurants depends in part on our ability to anticipate and react to changes in commodity costs, including food, paper, supplies, fuel, utilities and distribution, and other operating costs.
−Removed: Additionally, the commodity markets, including markets for key items, such as chicken, kale, and avocado, will likely continue to increase over time and may also become volatile due to climate conditions and other macroeconomic conditions, all of which are beyond our control and, in many instances, extreme and unpredictable (such as more frequent and/or severe fires and hurricanes).
−Removed: We can only partially address future
−Removed: price risk due to climate change through hedging and other activities, and therefore increases in commodity costs, particularly due to climate change, could have an adverse impact on our ability to achieve or maintain profitability.
+Added: The profitability of our restaurants depends in part on our ability to anticipate and react to changes in commodity costs, including food, paper, supplies, fuel, utilities, and other operating costs.
+Added: Additionally, prices in certain of the commodity markets, including markets for key items, such as chicken, kale, and avocado, will likely continue to increase over time and may also become volatile due to climate conditions and other macroeconomic and geopolitical conditions, all of which are beyond our control and, in many instances, extreme and unpredictable (such as more frequent and/or severe fires and hurricanes).
+Added: We can only partially address future price risk due to climate change through hedging and other activities, and therefore increases in commodity costs, particularly due to climate change, could have an adverse impact on our ability to achieve or maintain profitability.
There can be no assurance that future cost increases can be offset by increased menu prices or that current or future menu prices will be fully absorbed by our guests without any resulting change to their demand for our products.
In addition, there can be no assurance that we will generate revenue growth in an amount sufficient to offset inflationary or other cost pressures, particularly with the high rates of inflation in fiscal years 2023 and 2022.
−Removed: Additionally, in the third quarter of fiscal year 2022, we implemented the Plan, with a focus of achieving profitability on an Adjusted EBITDA basis, which included workforce reductions of approximately 5% of our employees at the sweetgreen Support Center and a reduction of our real estate footprint at the sweetgreen Support Center, pursuant to which we incurred total pre-tax restructuring and related charges of approximately $14.4 million during fiscal year 2022.
−Removed: If as a result of current macroeconomic conditions, wage rates or costs of goods sold continue to increase, as they did throughout fiscal year 2022, or if consumer demand softens, we may have to implement additional cost cutting measures.
The profitability of our restaurants is also adversely affected by increases in the price of utilities, such as natural gas, electricity and water, whether as a result of inflation, shortages or interruptions in supply, or otherwise.
−Removed: We have recently experienced an increase in freight related surcharges, an increase in food costs, and supply shortages from our vendors as a result of increased inflation and higher gas prices, which we expect to continue into fiscal year 2023.
+Added: We have recently experienced an increase in freight related surcharges, an increase in food costs, and supply shortages from our vendors as a result of inflation and higher gas prices, which we expect to continue into fiscal year 2024.
Our ability to respond to increased costs by increasing prices or by implementing alternative processes or products will depend on our ability to anticipate and react to such increases and other more general economic and demographic conditions, as well as the responses of our competitors and guests.
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We also rely on our leadership team in setting our strategic direction and culture, operating our business, identifying, recruiting and training key personnel, identifying expansion opportunities, arranging necessary financing and general and administrative functions.
−Removed: We have had significant changes in our senior management historically, and, from time to time, there may be changes in our executive management team resulting from the hiring or departure of executives, which could disrupt our business.
−Removed: The loss of one or more of our executive officers, or other key employees could seriously harm our ability to successfully implement our business strategy and could impede the achievement of our growth objectives, including with respect to scaling the number of our restaurants and expansion into new markets and restaurant formats, improving our operations and advancing technological developments of our website and mobile application, which would have an adverse effect on our business.
+Added: We have recently had significant changes in our executive management team, and from time to time, may experience additional changes in our executive management team resulting from the hiring or departure of executives.
+Added: While we seek to manage these transitions carefully, these and any other such changes may result in a loss of institutional knowledge and cause disruptions to our business.
+Added: The loss of one or more of our executive officers, or other key employees could seriously harm our ability to successfully implement our business strategy and could impede the achievement of our growth objectives, including with respect to scaling the number of our restaurants and expansion into new markets and restaurant formats, improving our operations, advancing technological developments of our website and mobile application, and further developing, building, deploying, and maintaining our Infinite Kitchen units, which would have an adverse effect on our business.
The replacement of one or more of our executive officers or other key employees would involve significant time and expense and may significantly delay or prevent the achievement of our business objectives.
To continue to execute our growth strategy, we also must identify, hire, and retain highly skilled personnel.
−Removed: In particular, in connection with increasing our store count as well as our expansion into new revenue channels and new restaurant formats that rely on online ordering platforms and focus on the digital customer, such as our Native Delivery, Outpost, and Marketplace Channels, we must identify, hire and retain highly skilled software engineers, the hiring of which is competitive, and for which we may not be successful.
−Removed: In addition, since the beginning of fiscal year 2020, we have undergone reductions in workforce at our sweetgreen Support Center including most recently in the third quarter of fiscal year 2022, and we may take similar actions in the future.
+Added: In particular, in connection with increasing our store count as well as our expansion into new revenue channels and new restaurant formats that rely on online ordering platforms and focus on the digital customer, such as our Native Delivery, Outpost and Catering, and Marketplace Channels, we must identify, hire and retain highly
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+Added: skilled software engineers, the hiring of which is competitive, and for which we may not be successful.
+Added: We have previously implemented workforce reductions, and we may take similar actions in the future.
Failure to retain or identify, hire, and motivate necessary key personnel could have an adverse effect on our business, financial condition, and results of operations.
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In the future, we may find it difficult to maintain the innovation, teamwork, passion, and focus on execution that we believe are important aspects of our corporate culture.
−Removed: For example, we have undergone reductions in workforce at our sweetgreen Support Center since the beginning of fiscal year 2020, including most recently in the third quarter of fiscal year 2022, and these actions, together with the general impact of the COVID-19 pandemic, have negatively impacted and may continue to negatively impact our corporate culture and company morale.
+Added: For example, we have previously implemented workforce reductions, and these actions have negatively impacted and may continue to negatively impact our corporate culture and company morale.
Additionally, in connection with the Plan, in the third quarter of fiscal year 2022 we made changes to certain employee benefit programs in our restaurants and in our Sweetgreen Support Center to be more in line with industry benchmarks.
These changes could have an impact on our brand, corporate culture and company morale.
−Removed: As we have grown and increased our focus on simplifying our operations at scale and targeting the digital customer, we have also hired leaders from a variety of different backgrounds and experiences and have historically had a significant amount of management turnover.
+Added: As we have grown, we have hired leaders from a variety of different backgrounds and experiences and have historically had a significant amount of management turnover.
Any failure to preserve our culture could negatively affect our future success, including our ability to retain and recruit personnel and to effectively focus on and pursue our corporate objectives.
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We incur significant costs and expend other resources in our marketing efforts to attract and retain customers.
−Removed: Our strategy includes public relations, digital and social media, targeted promotions (including free delivery), and in-store messaging, which require less marketing spend as compared to traditional marketing programs.
−Removed: As the number of restaurants increases, as our Native Delivery, Outpost, and Marketplace Channels expand and as we grow into new markets, we expect to increase our investment in advertising and consider additional promotional activities.
+Added: Our strategy includes public relations, digital and social media, targeted promotions (including reduced delivery fees), and in-store messaging, which require less marketing spend as compared to traditional marketing programs.
+Added: As the number of restaurants increases, as our Native Delivery, Outpost and Catering, and Marketplace Channels expand and as we grow into new markets, we expect to increase our investment in advertising and consider additional promotional activities.
Accordingly, in the future, we will incur greater marketing expenditures, resulting in greater financial risk and a greater impact on our company.
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Should our competitors increase spending on marketing and advertising or our marketing funds decrease for any reason, if our marketing strategies or pricing methodologies change, or should our marketing strategies or pricing methodologies be less effective than those of our competitors, it could result in an adverse effect on our business, financial condition, and results of operations.
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New information or attitudes regarding diet and health could result in changes in regulations and customer consumption habits, which could have an adverse effect on our business, financial condition, and results of operations.
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For example, a growing number of people are consuming plant-based meat substitutes, which we currently do not offer on our menu.
−Removed: Such changes may include responses to scientific
−Removed: studies on the health effects of particular food items or federal, state, and local regulations that impact the ingredients and nutritional content of the food and beverages we offer.
+Added: Such changes may include responses to scientific studies on the health effects of particular food items or federal, state, and local regulations that impact the ingredients and nutritional content of the food and beverages we offer.
The success of our restaurant operations is dependent, in part, upon our ability to effectively respond to changes in any customer attitudes or health regulations and our ability to adapt our menu offerings to trends in food consumption, especially fast-moving trends.
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We may not be able to effectively respond to changes in customer health perceptions, comply with further nutrient content disclosure requirements or adapt our menu offerings to trends in eating habits, which could have an adverse effect on our business, financial condition, and results of operations.
−Removed: Our focus on environmental sustainability and social initiatives may increase our costs, and our inability to meet our sustainability goals could harm our reputation and adversely impact our financial results.
+Added: Our focus on environmental sustainability and social initiatives may increase our costs, and our inability to meet our sustainability goals and any related disclosures requirements could harm our reputation and adversely impact our financial results.
There has been increasing public focus by investors, environmental activists, the media, and governmental and nongovernmental organizations on a variety of environmental, social, and other sustainability matters.
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Achieving this commitment, as well as any other environmental, social, and governance initiatives we may pursue, could be costly to implement, and we may not be successful.
−Removed: Additionally, we have transitioned to alternative bowls that do not contain more than trace amounts of PFAS.
+Added: Furthermore, we are currently offering steak as an ingredient at certain of our restaurants on a trial basis and, if we decide to offer steak as an ingredient at any or all of our restaurants in the future, we expect this decision will increase the difficulty and cost of achieving carbon neutrality by 2027.
+Added: In addition to our carbon neutrality commitment, we have transitioned to alternative bowls
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+Added: that do not contain more than trace amounts of PFAS.
If we are not effective in addressing environmental, social, and other governance matters affecting our industry, setting and meeting relevant sustainability goals, diversity, equity, and inclusion targets, or fulfilling our mission or sustainability plans, our brand image may suffer.
We may experience increased costs in order to execute upon our sustainability goals and measure achievement of those goals, which could have an adverse impact on our business and financial condition.
+Added: Conversely, maintaining focus on our environmental sustainability goals may also expose us to scrutiny from members of the investment community or enforcement authorities who may disagree with aspects of our approach to environmental, social, and other sustainability matters.
We may require additional capital to support business growth, and this capital might not be available on reasonable terms or at all.
−Removed: We intend to continue to make significant investments to support our business growth, including with respect to investments in expansion of our restaurant footprint and our multiple distribution channels, the introduction of new store formats and technology to enhance our operating efficiency, each of which might require additional funds to respond to business challenges or opportunities.
+Added: We intend to continue to make significant investments to support our business growth, including with respect to investments in expansion of our restaurant footprint and our multiple distribution channels, the introduction of new store formats, and the development of technology to enhance our operating efficiency, each of which might require additional funds to respond to business challenges or opportunities.
For example, we may need to open additional restaurants, develop new products and menu items or enhance our products and menu items, and enhance our operating infrastructure.
−Removed: In particular, our planned investment in developing automation technology after our acquisition of Spyce could cost more and could take longer to develop than we initially expect, which could require additional capital.
−Removed: Additionally, if our operating losses continue as a result of a slower-than-anticipated recovery from the COVID-19 pandemic or other factors, we may need to raise additional capital sooner than anticipated.
+Added: In particular, the continued development of our Infinite Kitchen technology could cost more than we currently expect.
+Added: Additionally, if our operating losses continue or grow we may need to raise additional capital.
Accordingly, we might need to engage in equity or debt financings to secure additional funds.
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In addition, we might not be able to obtain additional financing on terms favorable to us, if at all.
−Removed: Our ability to raise additional funds may be adversely impacted by potential worsening global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the United States and worldwide, resulting from increased volatility in the trading, the ongoing pandemic, or otherwise.
+Added: Our ability to raise additional funds may be adversely impacted by worsening global economic conditions or disruptions to, or volatility in, the credit or financial markets in the United States or worldwide.
If we are unable to obtain adequate financing or financing on terms satisfactory to us when we require it, our ability to continue to support our business growth and to respond to business challenges could be significantly limited.
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Also, as we open and operate more restaurants, our rate of expansion relative to the size of our existing restaurant base will decline, making it increasingly difficult to achieve levels of sales and profitability growth that we achieved in prior years.
−Removed: We are obligated under long-term, non-cancelable leases for almost all of our restaurants and both phases of our sweetgreen Support Center.
+Added: We are obligated under long-term, non-cancelable leases for all of our restaurants and both phases of our Sweetgreen Support Center.
Our restaurant leases generally require us to pay a proportionate share of real estate taxes, insurance, common area maintenance charges and other operating costs.
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If an existing or future restaurant is not profitable and we decide to close it, we may nonetheless be committed to perform our obligations under the applicable lease (or negotiate a buyout with the landlord) including, among other things, paying the base rent for the balance of the lease term.
−Removed: For example, we recently implemented the Plan pursuant to which we vacated the premises for the former sweetgreen Support Center and moved to a smaller office space adjacent to its existing location, and in connection with which we incurred $14.4 million of restructuring expense during fiscal year 2022.
+Added: For example, we recently implemented the Plan pursuant to which we vacated the premises for the former Sweetgreen Support Center and moved to a smaller office space adjacent to its existing location, and in connection with which we incurred $7.4 million and $14.4 million of restructuring expense during fiscal year 2023 and 2022, respectively.
To date, we have been unsuccessful in subleasing the vacated portion of the Sweetgreen Support Center, and it is unknown if we will be successful in doing so, and if so, on what commercial terms.
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In addition, as each of our leases expires, we may fail to negotiate renewals, either on commercially acceptable terms or at all, which could cause us to pay increased occupancy costs or to close restaurants in desirable locations.
These potential increased occupancy costs and closed restaurants could have an adverse effect on our business, financial condition, and results of operations.
−Removed: Furthermore, if we are unable to renew existing leases in key metropolitan areas where we operate or such leases are terminated, any inability to
−Removed: operate in such metropolitan area, as well as the publicity concerning any such termination or non-renewal, could adversely affect our business, financial condition, and results of operations.
+Added: Furthermore, if we are unable to renew existing leases in key metropolitan areas where we operate or such leases are terminated, any inability to operate in such metropolitan area, as well as the publicity concerning any such termination or non-renewal, could adversely affect our business, financial condition, and results of operations.
A significant portion of our restaurants are located in large urban areas, and if our operations in these geographies are negatively affected, our financial results and future prospects would be adversely affected.
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As a result, adverse economic or other conditions in any of these areas could have an adverse effect on our overall results of operations.
−Removed: In addition, given our geographic concentrations, negative publicity regarding any of our restaurants in these areas could have an adverse effect on our business and operations, as could other regional occurrences such as local strikes, terrorist attacks, increases in energy prices, inclement weather, or natural or man-made disasters.
+Added: In addition, given our geographic concentrations, negative publicity regarding any of our restaurants in these areas could have an adverse effect on our overall business and operations.
As a result of our geographic concentration, our business and financial results are susceptible to economic, social, weather, and regulatory conditions or other circumstances in each of these densely populated urban areas, and any regional occurrences in the markets in which we operate, such as local strikes, terrorist attacks, increases in energy prices, health-related incidents, adverse weather conditions, tornadoes, earthquakes, storms, hurricanes, floods, droughts, fires or other natural or man-made disasters, could have an adverse effect on our business, financial condition, and results of operations.
−Removed: For example, the COVID-19 pandemic has significantly impacted our financial results in these urban locations far more negatively than our suburban locations, and as of the end of fiscal year 2021, our AUVs for our urban locations were still materially lower than our AUVs for our urban locations as of the end of fiscal year 2019.
Furthermore, the long-term change in behavior as a result of the COVID-19 pandemic could lead to a sustained decline in the desirability of living, working, and congregating in the densely populated urban areas in which we operate.
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In addition, any changes to local laws or regulations within these key metropolitan markets that affect our ability to operate or increase our operating expenses in these markets would have an adverse effect on our business.
−Removed: In addition, adverse weather conditions, particularly in the winter months in some of our largest markets such as New York City, Boston, the Washington, D.C./Virginia/Maryland metropolitan region and Chicago, or unexpected adverse weather conditions in markets such as Georgia, Texas or Florida, may also impact customer traffic at our restaurants, and, in more severe cases, cause temporary restaurant closures, sometimes for prolonged periods, which could have an adverse impact on our revenues.
−Removed: Many of our restaurants have outdoor seating, and the effects of adverse weather may impact the use of these areas and may negatively impact our revenue.
−Removed: As a result of adverse weather conditions, temporary or prolonged restaurant closures may occur and customer traffic may decline due to the actual or perceived effects of future weather-related events.
Acquisitions could be difficult to identify, pose integration challenges, divert the attention of management, disrupt our business, dilute stockholder value, and adversely affect our results of operations and expansion prospects.
We have in the past and may in the future make acquisitions of other companies, technologies, or products.
−Removed: Competition within our industry for acquisitions of businesses, technologies in areas such as automation and logistics (such as our recent acquisition of Spyce), and assets (including retail spaces) may become intense, and we have limited experience in acquisitions.
+Added: Competition within our industry for acquisitions of businesses, technologies in areas such as automation and logistics (such as our acquisition of Spyce), and assets (including retail spaces) may become intense, and we have limited experience in acquisitions.
As such, even if we are able to identify a target for acquisition, we may not be able to complete the acquisition on commercially reasonable terms, or such target may be acquired by another company including, potentially, one of our competitors.
Negotiations for such potential acquisitions may result in diversion of management time and significant out-of-pocket costs.
−Removed: If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, and any
−Removed: acquisitions we complete could be viewed negatively by customers, employees, or investors or result in the incurrence of significant other liabilities.
+Added: If we do complete acquisitions, we may not ultimately strengthen our competitive position or achieve our goals, and any acquisitions we complete could be viewed negatively by customers, employees, or investors or result in the incurrence of significant other liabilities.
We may expend significant cash or incur substantial debt to finance such acquisitions, which indebtedness may restrict our business or require the use of available cash to make interest and principal payments.
In addition, we may finance or otherwise complete acquisitions by issuing equity or convertible debt securities, which may result in further dilution of our existing stockholders.
−Removed: For example, we spent significant time and resources and issued a significant amount of equity securities to acquire Spyce, and expect to spend significant additional resources on developing Spyce’s automation technology and integrating the Spyce technology into our restaurants, and doing so may take more time or use more resources, than we expect, and we may not be successful at all in realizing our goals in the transaction.
+Added: For example, we spent significant time and resources and issued a significant amount of equity securities to acquire Spyce, and have spent and expect to continue to spend significant additional resources on developing Spyce’s automation technology and integrating the Spyce technology into our restaurants, and doing so may take more time or use more resources,
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+Added: than we expect, and we may not be successful at all in realizing our goals in the transaction.
Additionally, the time and resources we spend toward developing Spyce’s automation technology and integrating the Spyce technology into our restaurants may be a significant distraction in successfully growing the rest of our business.
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3 amended our 2020 Credit Agreement, including, among other things, by replacing LIBOR with the one-month term SOFR as the reference rate for determining the interest rate under our 2020 Credit Agreement.
−Removed: Since the initial publication of SOFR, daily changes in the rate have, on occasion, been more volatile than daily changes in comparable benchmark or market rates, and SOFR over time may bear little or no
−Removed: relation to the historical actual or historical indicative data.
+Added: Since the initial publication of SOFR, daily changes in the rate have, on occasion, been more volatile than daily changes in comparable benchmark or market rates, and SOFR over time may bear little or no relation to the historical actual or historical indicative data.
It is possible that the volatility of and uncertainty around SOFR as a LIBOR replacement rate could have an adverse effect on our business, financial condition, cash flows and results from operations and could cause the market value of our Class A common stock to decline.
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Risks Related to Legal and Governmental Regulation
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Our restaurants are also subject to state and local licensing and regulation by health, sanitation, food and occupational safety, and other agencies, which regulation has increased in the wake of the COVID-19 pandemic.
−Removed: We may experience difficulties or failures in obtaining the necessary licenses, approvals, or permits for our restaurants, which could delay planned restaurant openings (and has become significantly more difficult during the COVID-19 pandemic) or affect the operations at our existing restaurants.
+Added: We may experience difficulties or failures in obtaining the necessary licenses, approvals, or permits for our restaurants, which could delay planned restaurant openings or affect the operations at our existing restaurants.
In addition, stringent and varied requirements of local regulators with respect to zoning, land use, and environmental factors could delay or prevent development of new restaurants in particular locations.
Our operations are subject to the U.S.
−Removed: Occupational Safety and Health Act, which governs worker health and safety, as well as rules and regulations regarding COVID-19, the U.S.
+Added: Occupational Safety and Health Act, which governs worker health and safety, the U.S.
Fair Labor Standards Act, which governs such matters as minimum wages and overtime, and a variety of similar federal, state and local labor and employment laws (such as predictive scheduling laws, various wage & hour laws, laws governing the employment of minors, leave laws, termination laws, and state occupational safety regulations) that govern these and other employment law matters.
We may also be subject to lawsuits or investigations from our current or former employees in our restaurants or in the Sweetgreen Support Center, the U.S.
−Removed: Equal Employment Opportunity Commission, or others alleging violations of federal and state laws regarding workplace and employment matters, discrimination, and similar matters, and we have been a party to a number of such matters in the past.
+Added: Equal Employment Opportunity Commission, or others alleging violations of federal and state laws regarding workplace and employment matters, discrimination, and similar matters.
+Added: We are currently a party to such matters, and we have been a party to a number of such matters in the past.
These lawsuits and investigations require significant resources from our senior management and can result in fines, penalties and/or settlements, some or all of which may not be covered by insurance.
These lawsuits and investigations can also result in significant remediation efforts that may be costly and time consuming, and which we may not implement effectively.
−Removed: We have made payments to settle these types of lawsuits and/or investigations in the past, and additional lawsuits or investigations could have an adverse effect on our business, brand and reputation, financial condition, and results of operations.
−Removed: Additional federal, state, and local proposals related to paid sick leave or similar matters, particularly as a result of the COVID-19 pandemic, could, if implemented, also have an adverse effect on our business, financial condition, and results of operations.
+Added: We have made payments to settle these types of lawsuits and/or investigations in the past, and current and additional lawsuits or investigations could have an adverse effect on our business, brand and reputation, financial condition, and results of operations.
+Added: Additional federal, state, and local proposals related to paid sick leave or similar matters, could, if implemented, also have an adverse effect on our business, financial condition, and results of operations.
We are also subject to the Americans with Disabilities Act (the “ADA”) and similar state laws that give civil rights protections to individuals with disabilities in the context of employment, public accommodations and other areas, including our restaurants, website, and smartphone applications.
In the past, we have settled various lawsuits related to our alleged ADA non-compliance, which resulted in accommodations to our website, smartphone applications, and physical restaurants.
−Removed: We may face additional litigation in the future or have to further modify our digital platforms (including any digital kiosks that we may implement in our restaurants) by providing auxiliary aids to disabled persons, or restaurants by adding access ramps or redesigning certain interior layouts or architectural fixtures to provide service to or make reasonable accommodations for disabled persons.
+Added: We are currently engaged in ADA-related litigation, and we may face additional litigation in the future.
+Added: We may have to further modify our websites or other digital platforms (including any digital kiosks that we may implement in our restaurants) or our restaurants by adding access ramps or redesigning certain interior layouts or architectural fixtures to provide service to or make reasonable accommodations for disabled persons.
The expenses associated with these modifications could be material, and there is no guarantee that we will be able to adjust our business practices appropriately to limit additional claims in the future.
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In the event we fail to maintain such best practices, or do not comply with any required government regulation, it could lead to incidents related to foodborne illnesses that could have an adverse effect on their brand and operations.
−Removed: Local, state, and federal regulatory requirements are always evolving, and we
−Removed: anticipate compliance with these requirements may increase our costs and present challenges and risk to our company.
−Removed: The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements (including the requirement to provide for reasonable accommodations for those with disabilities), and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and other costs of doing business and, therefore, have an adverse effect on our business, financial condition, and results of operations.
+Added: Local, state, and federal regulatory requirements are always evolving, and we anticipate compliance with these requirements may increase our costs and present challenges and risk to our company.
+Added: The impact of current laws and regulations, the effect of future changes in laws or regulations that impose additional requirements (including the requirement to provide for reasonable accommodations for those with disabilities), and the consequences of litigation relating to current or future laws and regulations, or our inability to respond effectively to significant regulatory or public policy issues, could increase our compliance and other
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+Added: costs of doing business and, therefore, have an adverse effect on our business, financial condition, and results of operations.
Failure to comply with the laws and regulatory requirements of federal, state, and local authorities could result in, among other things, revocation of required licenses, administrative enforcement actions, fines, and civil and criminal liability.
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Various federal, state, and labor laws govern the relationship with our employees and impact operating costs.
−Removed: These laws include employee classification as exempt or non-exempt for overtime and other purposes, minimum wage requirements, predictive scheduling, wage and hour requirements, unemployment tax rates, workers’ compensation rates, immigration status, laws governing the employment of minors, and other wage and benefit requirements.
+Added: These laws include employee classification as exempt or non-exempt for overtime and other purposes, predictive scheduling, wage and hour requirements, unemployment tax rates, workers’ compensation rates, immigration status, laws governing the employment of minors, and other wage and benefit requirements.
Significant additional government-imposed increases in the following areas could have an adverse effect on our business, financial condition, and results of operations:
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• termination requirements;
−Removed: • paid leaves of absence, including paid sick leave and COVID-19-related leave;
−Removed: • COVID-19 related vaccination and/or mask mandates;
+Added: • pandemic-related vaccination and/or mask mandates;
• employment of minors;
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These changes have increased our labor costs and may have a further negative impact on our labor costs in the future.
−Removed: For example, several jurisdictions in which we operate, including New York City, Philadelphia, Chicago, Seattle, and San Francisco, have implemented fair workweek legislation, which impose complex requirements related to scheduling for certain restaurant and retail employees that are often difficult to comply with, and the regulations with respect to such requirements have changed and may continue to change from time to time.
−Removed: We were previously under investigation by the NYC Department of Consumer and Worker Protection for fair workweek violations for one of our New York City locations, and we may in the future be subject to similar investigations.
+Added: For example, several jurisdictions in which we operate, including but not limited to New York City, Philadelphia, Chicago, Seattle, and San Francisco, have implemented fair workweek legislation, which impose complex requirements related to scheduling for certain restaurant and retail employees that are often difficult to comply with, and the regulations with respect to such requirements have changed and may continue to change from time to time.
+Added: We are currently under investigation by the NYC Department of Consumer and Worker Protection for fair workweek violations for one of our New York City locations, and we may in the future be subject to similar investigations in New York City or other locations.
Other jurisdictions where we operate are considering enacting similar legislation.
−Removed: In addition, New York City passed a “just cause” termination legislation as part of its fair workweek legislation, which restricts companies’ ability to terminate employees unless they can prove “just cause” or a “bona fide economic reason” for the termination, which went into effect in July 2021.
−Removed: All of these regulations impose additional
−Removed: obligations on us and could increase our costs of doing business and cause us to make changes to our business model.
+Added: In addition, New York City passed a “just cause” termination legislation as part of its fair workweek legislation, which went into effect July 2021.
+Added: This law restricts fast food restaurant companies’ ability to terminate employees unless they can prove “just cause” or a “bona fide economic reason” for the termination.
+Added: All of these regulations impose additional obligations on us and could increase our costs of doing business and cause us to make changes to our business model.
Our failure to comply with any of these laws and regulations could lead to higher employee turnover and negative publicity, and subject us to penalties and other legal liabilities, which could adversely affect our business and results of operations and potentially cause us to close some restaurants in these jurisdictions.
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In addition, a significant number of our restaurant employees are paid at rates impacted by the applicable minimum wage.
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Several states in which we operate have approved minimum wage increases that are above the federal minimum.
+Added: For example, since January 1, 2024, the State of California has a minimum wage of $16 per hour and starting in April 2024, California legislation will require certain restaurant chains, including Sweetgreen, to pay a minimum per hour wage of $20 to restaurant employees in California.
+Added: A state-appointed council may increase this minimum wage annually.
+Added: Moreover, municipalities may set minimum wages above the applicable state standards, including in the municipalities in which we operate.
As more jurisdictions, or if the federal government (including as a result of the Biden administration’s commitment to a $15 federal minimum wage), implement minimum wage increases, we expect our labor costs will continue to increase.
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We have been and will likely continue to be party to litigation that could distract management, increase our expenses, or subject us to monetary damages or other remedies.
−Removed: We have been subject to a number of claims from our employees alleging violations of federal and state law regarding workplace and employment matters, including off-the-clock work (including meal and rest break compliance), predictive scheduling, equal employment opportunity, harassment, discrimination, failure to pay timely wages, employee misclassification, retaliation, wrong termination, and similar matters, and we could become subject to class action or other lawsuits related to these or different matters in the future.
−Removed: We may not have valid arbitration agreements with all current or former employees, and the arbitration agreements that are in place may not protect us from certain claims in certain states (including Private Attorney General Act claims in California).
−Removed: In addition, customers may file complaints or lawsuits against us alleging we caused an illness or injury they suffered at or after a visit to our restaurants, including in the context of claims related to exposure to COVID-19, or that we have problems with food quality or operations.
−Removed: In recent years, a number of restaurant companies, including sweetgreen, have been subject to such claims.
+Added: We have been in the past and are currently subject to a number of claims from our employees alleging violations of federal and state law regarding workplace and employment matters, including off-the-clock work (including meal and rest break compliance), predictive scheduling, equal employment opportunity, harassment, discrimination, failure to pay timely wages, employee misclassification, retaliation, wrongful termination, and similar matters We are party to class action litigation regarding certain of these claims, and could become subject to additional class action litigation or other lawsuits related to these or different matters in the future.
+Added: We may not have valid arbitration agreements with all current or former employees, and the arbitration agreements that are in place may not protect us from certain claims in certain states (including Private Attorney General Act (“PAGA”) claims in California).
+Added: Customers have filed complaints and lawsuits against us alleging we caused an illness or injury they suffered at or after a visit to our restaurants or that we have problems with food quality or operations.
+Added: Certain of those lawsuits are ongoing, and additional complaints and lawsuits with such allegations may occur in the future.
Additionally, because we do not perform background checks on all employees, we have been and may in the future be exposed to certain risks, including allegations of negligence in our hiring practices, as well as needing to terminate existing employees who do not pass any background check that we may conduct after an employee has been hired.
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Such regulations are subject to change from time to time.
−Removed: For example, during the COVID-19 pandemic, the timeline for obtaining licenses and permits has increased significantly.
+Added: For example, during the COVID-19 pandemic, the timeline for obtaining licenses and permits increased significantly.
The failure to obtain and properly maintain and comply with these licenses, permits and approvals in a timely manner could have an adverse effect on our business, financial condition, and results of operations.
−Removed: Typically, licenses must be renewed annually and may
−Removed: be revoked, suspended, or denied renewal for cause or we could be subject to fines or temporary restaurant closures at any time if governmental authorities determine that our conduct violates applicable regulations.
+Added: Typically, licenses must be renewed annually and may be revoked, suspended, or denied renewal for cause or we could be subject to fines or temporary restaurant closures at any time if governmental authorities determine that our conduct violates applicable regulations.
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Difficulties or failure to maintain or obtain the required licenses and approvals could adversely affect our existing restaurants and delay or result in our decision to cancel the opening of new restaurants.
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Compliance with these regulations become increasingly more complicated as we expand into additional markets.
−Removed: We primarily partner with a third-party vendor to manage the disposal of our waste and are reliant on them to ensure that our waste is transferred, recycled, or disposed of in accordance with our standards and applicable regulations.
+Added: We primarily partner with third-party vendors to manage the disposal of our waste and are reliant on them to ensure that our waste is transferred, recycled, or disposed of in accordance with our standards and applicable regulations.
Third parties may also make claims against owners or operators of properties for personal injuries and property damage associated with releases of, or actual or alleged exposure to, such hazardous or toxic substances at, on or from our restaurants.
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Further, environmental laws, and the administration, interpretation, and enforcement thereof, are subject to change and may become more stringent in the future, each of which could make our waste management more complex and have an adverse effect on our business, financial condition, and results of operations.
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The effect of changes to healthcare laws in the United States may increase the number of employees who choose to participate in our healthcare plans, which may significantly increase our healthcare costs and negatively impact our financial results.
−Removed: In 2010, the PPACA, which required health care coverage for many uninsured individuals and expanded coverage the coverage of those already insured, was signed into law in the United States.
+Added: In 2010, the PPACA, which required health care coverage for many uninsured individuals and expanded the coverage of those already insured, was signed into law in the United States.
The PPACA requires us to offer healthcare benefits to all full-time employees (including full-time hourly employees) that meet certain minimum requirements of coverage and affordability, or face penalties.
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The future costs and other effects of these new healthcare requirements cannot be determined with certainty, but they may significantly increase our healthcare coverage costs and could have an adverse effect on our business, financial condition, and results of operations.
−Removed: Additionally, the modifications made under the Tax Cuts and Jobs Act enacted in 2017 (the “Tax Act”) had no impact on the employer mandate.
−Removed: However, we cannot predict the ultimate content, timing, or impact of any changes to the PPACA or other federal and state reform efforts.
−Removed: There is no assurance that federal or state health care reform will not adversely affect our business, financial condition, and results of operations, and we cannot predict how future federal or state legislative, judicial, or administrative changes relating to healthcare reform will affect our business.
+Added: Additionally, there is no assurance that federal or state health care reform will not adversely affect our business, financial condition, and results of operations, and we cannot predict how future federal or state legislative, judicial, or administrative changes relating to healthcare reform will affect our business.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
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Similar rules may apply under state tax laws.
−Removed: We are still evaluating the impact of our recent IPO on a potential change in ownership, and the corresponding impact on our ability to use NOLs and other tax attributes.
+Added: We are still evaluating the impact of our IPO on a potential change in ownership, and the corresponding impact on our ability to use NOLs and other tax attributes.
Our ability to use NOLs and other tax attributes to reduce future taxable income and liabilities may be subject to annual limitations as a result of prior ownership changes and ownership changes that may occur in the future.
−Removed: Under the Tax Act, as amended by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), net operating losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five taxable years preceding the tax year of such loss, but net operating losses arising in taxable years beginning after December 31, 2020 may not be carried back.
+Added: Under the Tax Cuts and Jobs Act enacted in 2017 (the “Tax Act”), as amended by the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), net operating losses arising in taxable years beginning after December 31, 2017 and before January 1, 2021 may be carried back to each of the five taxable years preceding the tax year of such loss, but net operating losses arising in taxable years beginning after December 31, 2020 may not be carried back.
Additionally, under the Tax Act, as modified by the CARES Act, net operating losses from tax years that began after December 31, 2017 may offset no more than 80% of current taxable income annually for taxable years beginning after December 31, 2020, but the 80% limitation on the use of net operating losses from tax years that began after December 31, 2017 does not apply for taxable income in tax years beginning before January 1, 2021.
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However, in future years, if and when a net deferred tax asset is recognized related to our NOLs, the changes in the carryforward and carryback periods as well as the new limitation on use of NOLs may significantly impact our valuation allowance assessments for NOLs generated in taxable years beginning after December 31, 2017.
−Removed: There is also a risk that due to regulatory changes, such as suspensions of the use of NOLs and tax credits by certain jurisdictions, including in order to raise additional revenue to help counter the fiscal impact from the COVID-19 pandemic, possibly with retroactive effect, or other unforeseen reasons, our existing NOLs and tax credits could expire or otherwise be unavailable to offset future income tax liabilities.
+Added: There is also a risk that due to regulatory changes, such as suspensions of the use of NOLs and tax credits by certain jurisdictions, including in order to raise additional revenue to help counter the fiscal impact from the COVID-19 pandemic, possibly with retroactive effect, or other unforeseen reasons, our existing NOLs and
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+Added: tax credits could expire or otherwise be unavailable to offset future income tax liabilities.
For these reasons, we may not be able to realize a tax benefit from the use of our NOLs and tax credits.
−Removed: We may expand our independent contractor driver network with respect to our expanding delivery program.
+Added: We use an independent contractor driver network with respect to our food delivery program.
The status of the drivers as independent contractors, rather than employees, may be challenged.
A reclassification of the drivers as employees could harm our business or results of operations.
−Removed: In 2019, our subsidiary, SG Logistics, LLC (“SG Logistics”), commenced engaging drivers to deliver products for certain of our Outpost orders through our technology platform.
+Added: In 2019, our subsidiary, SG Logistics, LLC (“SG Logistics”), commenced engaging drivers to deliver products for certain of our Outpost and Catering orders through our technology platform.
These drivers may also fulfill certain delivery orders made through our native smartphone application or our website in the future.
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In the event of a reclassification of members of SG Logistics’ independent contractor driver network as employees, SG Logistics could be exposed to various liabilities and additional costs.
−Removed: These liabilities and costs could have an adverse effect on our business, financial condition, and results of operations for our Outpost business and/or make it cost prohibitive for SG Logistics to deliver orders using its driver network, particularly in geographic areas where we do not have significant volume.
+Added: These liabilities and costs could have an adverse effect on our business, financial condition, and results of operations for our Outpost and Catering business and/or make it cost prohibitive for SG Logistics to deliver orders using its driver network, particularly in geographic areas where we do not have significant volume.
These liabilities and additional costs could include exposure (for prior and future periods) under federal, state, and local tax laws, and workers’ compensation, unemployment benefits, labor, and employment laws, as well as potential liability for penalties and interest.
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and other adverse consequences.
−Removed: Operating our business and platform involves the collection, use, storage, and transmission of sensitive, proprietary, and confidential information, including personal information of customers, personnel, business contacts, and others, and our sensitive, proprietary and confidential business information.
+Added: Operating our business and platform involves the collection, use, storage, and transmission of sensitive, proprietary, and confidential information, including personal information of customers, our personnel, the personnel of our business partners, and others.
For example, we collect certain customers’ home and/or business addresses for processing delivery orders, mobile phone numbers from users of our platform, and personal information from our personnel, including in the administration of our benefit plans.
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During times of war and other major conflicts, we and the third parties upon which we rely may be vulnerable to a heightened risk of these attacks, including retaliatory cyber-attacks, that could materially disrupt our systems and operations, supply chain, and ability to produce, sell and distribute our goods and services.
−Removed: and the third parties upon which we rely may be subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, software bugs, supply chain attacks, server malfunctions, software or hardware failures, loss of data or other information technology assets, adware, telecommunications failures, and other similar threats.
+Added: We and the third parties upon which we rely are subject to a variety of evolving threats, including but not limited to social-engineering attacks (including through phishing attacks), malicious code (such as viruses and worms), malware (including as a result of advanced persistent threat intrusions), denial-of-service attacks (such as credential stuffing), credential harvesting, personnel misconduct or error, ransomware attacks, software bugs, supply chain attacks, server malfunctions, software or hardware failures, loss of data or other information
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+Added: technology assets, adware, telecommunications failures, and other similar threats.
In particular, severe ransomware attacks are becoming increasingly prevalent and could lead to significant interruptions in our operations, loss of sensitive data and income, reputational harm, and diversion of funds.
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Security incidents have occurred in the past, and may occur in the future, resulting in unauthorized, unlawful, or inappropriate access to, inability to access, disclosure of, or loss of the sensitive, proprietary and confidential information that we handle.
−Removed: We have experienced an increase in credential stuffing activity in which malicious third parties try to access an online service by using credentials compromised in security incidents suffered by different services.
+Added: We have experienced an increase in what we believe to be credential stuffing activity, in which malicious third parties try to access an online service by using credentials compromised in security incidents suffered by different services.
We have security measures in place to mitigate our risk to vulnerabilities, but these measures may not be adequate to ensure that our operations are not disrupted or that security incidents do not occur.
Risks relating to security incidents are likely to increase as we continue to grow and collect, process, store, and transmit increasingly large amounts of data.
−Removed: We also rely on a number of third parties to support and operate our critical business systems and process sensitive, proprietary, and confidential information, such as LevelUp, our account management provider, the payment processors that process customer credit card payments, and other third-party providers of services including cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.
+Added: We also rely on a number of third parties to support and operate our critical business systems and process sensitive, proprietary, and confidential information, such as Stripe, our account management provider, the payment processors that process customer credit card payments, and other third-party providers of services including cloud-based infrastructure, data center facilities, encryption and authentication technology, employee email, content delivery to customers, and other functions.
Our ability to monitor these third parties’ information security practices is limited, and these third parties may not have adequate security measures and could experience a security incident that compromises the confidentiality, integrity, or availability of the systems they operate for us or the information they process on our behalf.
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Because of the prominence of our brand, we believe that we are an attractive target for cyberattacks, which have increased recently in the industry.
−Removed: We have implemented security measures designed to detect and prevent security incidents, and to protect the confidentiality, integrity, and availability of our systems and the sensitive, proprietary, and confidential information under our control.
−Removed: However, despite any measures that we have taken by us to increase our cybersecurity, we cannot assure you that the measures that we or the third parties we work with have implemented will always be followed and/or be effective against current or future security threats.
−Removed: We may expend significant resources or modify our business activities to try to protect against security incidents.
+Added: We have implemented security measures designed to detect and remediate vulnerabilities in our information security systems (such as our hardware and/or software, including that of third parties upon which we rely), prevent security incidents, and to protect the confidentiality, integrity, and availability of our systems and the sensitive, proprietary, and confidential information under our control.
+Added: However, despite any measures that we have taken by us to increase our cybersecurity, we cannot assure you that the measures that we or the third parties we work with have implemented will always be followed and/or be effective against current or future security threats or detect, mitigate and remediate all vulnerabilities on a timely basis.
+Added: We may need to expend significant resources or modify our business activities to try to protect against security incidents.
+Added: The costs to respond to a security incident and/or to mitigate any security vulnerabilities that may be identified could be significant and these problems could result in unexpected interruptions, delays, cessation of service, negative publicity, and other harm to our business and our competitive position.
Further, we may experience delays in developing and deploying remedial measures designed to address any such identified vulnerabilities.
−Removed: If we or the third parties we work with suffer, or are perceived to have suffered, a security incident, we may experience a loss of customer and partner confidence in the security of our platform and damage to our
−Removed: brand, reduced demand for our offerings, and disruption of normal business operations.
−Removed: Such an incident may also require us to spend resources to investigate and correct the issue and to prevent recurrence, expose us to legal liabilities, including litigation, regulatory enforcement, and indemnity obligations, which could have an adverse effect on our business, financial condition or results of operations.
−Removed: Additionally, our agreements with our material third-party partners, such as LevelUp and DoorDash, require us to maintain adequate security measures and not subject their confidential information to a security incident.
+Added: If we or the third parties we work with suffer, or are perceived to have suffered, a security incident, we may experience a loss of customer and partner confidence in the security of our platform and damage to our brand, reduced demand for our offerings, and disruption of normal business operations.
+Added: Such an incident may also
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+Added: require us to spend resources to investigate and correct the issue and to prevent recurrence, expose us to legal liabilities, including litigation, regulatory enforcement, and indemnity obligations, which could have an adverse effect on our business, financial condition and results of operations.
+Added: Additionally, our agreements with our material third-party partners, such as Stripe and DoorDash, require us to maintain adequate security measures and not subject their confidential information to a security incident.
If we were to breach those contractual obligations, we could be responsible for indemnifying our partners for any losses associated with such an incident.
−Removed: Future acquisitions could also expose us to additional cybersecurity risks and vulnerabilities from any newly acquired information technology infrastructure.
+Added: Future acquisitions of, or utilization of, new information technology infrastructure could also expose us to additional cybersecurity risks and vulnerabilities.
Laws in all states and U.S.
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We also cannot be certain that our existing insurance coverage will continue to be available on acceptable terms or in amounts sufficient to cover the potentially significant losses that may result from a security incident or breach or that the insurer will not deny coverage of any future claim.
+Added: In addition to experiencing a security incident, third parties may gather, collect, or infer sensitive information about us from public sources, data brokers, or other means that reveals competitively sensitive details about our organization and could be used to undermine our competitive advantage or market position.
+Added: Additionally, sensitive information of the company or our customers could be leaked, disclosed, or revealed as a result of or in connection with our employees’, personnel’s, or vendors’ use of generative artificial intelligence (“AI”) technologies.
We are subject to rapidly changing and increasingly stringent U.S.
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In the United States, federal, state, and local governments have enacted numerous data privacy and security laws, including data breach notification laws, personal data privacy laws, consumer protection laws (e.g., Section 5 of the Federal Trade Commission Act), and other similar laws (e.g., wiretapping laws).
−Removed: For example, the California Consumer Privacy Act of 2018 (“CCPA”) requires businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights.
+Added: In the past few years, numerous U.S.
+Added: states—including California, Virginia, Colorado, Connecticut, and Utah—have enacted comprehensive data privacy and security laws that impose certain obligations on covered businesses, including providing specific disclosures in privacy notices and affording residents with certain rights concerning their personal data.
+Added: As applicable, such rights may include the right to access, correct, or delete certain personal data, and to opt-out of certain data processing activities, such as targeted advertising, profiling, and automated decision-making.
+Added: The exercise of these rights may impact our business and ability to provide our products and services.
+Added: Certain states also impose stricter requirements for processing certain personal data, including sensitive information, such as conducting data privacy impact assessments.
+Added: These state laws allow for statutory fines for noncompliance.
+Added: For example, the CCPA applies to personal information of consumers, business representatives and employees who are California residents, and requires covered businesses to provide specific disclosures in privacy notices and honor requests of California residents to exercise certain privacy rights related to their personal information.
The CCPA also created restrictions on “sales” of personal information that allow California residents to opt-out of certain sharing of their personal information and may restrict the use of cookies and similar technologies for advertising purposes.
−Removed: Our platform relies on such technologies for advertising purposes and could be adversely affected by the CCPA’s restrictions if users opt-out of certain information sharing on which our advertising relies, which would impair our ability to advertise.
−Removed: This could decrease the effectiveness of our marketing and adverting strategies and decrease our level of customer acquisition and/or retention, may cause us to find new avenues to market and advertise, and may cause us to increase our marketing and advertising expenditures.
−Removed: The CCPA provides for civil penalties of up to $7,500 per violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
−Removed: In addition, the California Privacy Rights Act of 2020 (“CPRA”), which became operative on January 1, 2023, expanded the CCPA’s requirements to apply to personal information of business representatives, established a new regulatory agency to implement and enforce the law, and restricts the use of certain categories of sensitive personal information that we handle, further restricting the use of cross-context behavioral advertising techniques on which our platform relies.
−Removed: Other states, such as Virginia, Colorado, Connecticut and Utah, have also passed comprehensive data privacy and security laws, and similar laws have been proposed in other states, as well as at the federal and local levels, reflecting a trend toward more stringent privacy legislation in the United States.
−Removed: The enactment of such laws
−Removed: could complicate compliance efforts, and may increase legal risk and compliance costs for us and the third parties upon whom we rely.
+Added: Our platform relies on such technologies for advertising purposes and could be adversely affected by the CCPA’s restrictions if users opt-
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+Added: out of certain information sharing on which our advertising relies, which would impair our ability to advertise.
+Added: This could decrease the effectiveness of our marketing and adverting strategies and decrease our level of customer acquisition and/or retention, may cause us to seek new avenues to market and advertise, and may cause us to increase our marketing and advertising expenditures.
+Added: The CCPA provides for civil penalties of up to $7,500 per intentional violation and allows private litigants affected by certain data breaches to recover significant statutory damages.
+Added: Similar laws have been proposed in several other states, as well as at the federal and local levels, and we expect more states to pass similar laws in the future, reflecting a trend toward more stringent privacy legislation in the United States.
+Added: The enactment of such laws could complicate compliance efforts, and may increase legal risk and compliance costs for us and the third parties upon whom we rely.
In addition to the risks we face under emerging privacy laws, the restrictions on text message communications imposed by the Telephone Consumer Protection Act (“TCPA”) have long been a source of potential liability for our business.
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If these policies, materials or statements are found to be deficient, lacking in transparency, deceptive, unfair, or misrepresentative of our practices, we may be subject to investigation, enforcement actions by regulators or other adverse consequences.
−Removed: Additionally, our business is reliant on revenue from behavioral, interest-based, or tailored advertising.
+Added: Additionally, our business is reliant on revenue from customers acquired through behavioral, interest-based, or tailored advertising.
Consumer resistance to the collection and sharing of the data used to deliver targeted advertising, increased visibility of consent or “do not track” mechanisms as a result of industry regulatory or legal developments, the adoption by consumers of browser settings or “ad-blocking” software, and the development and deployment of new technologies could impact our ability to collect data or engage in marketing and advertising, which could have an adverse effect on our business, financial condition, or results of operations.
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In addition, there is no guarantee that PCI Data Security Standard compliance will prevent illegal or improper use of our payment systems or the theft, loss or misuse of payment card data or transaction information.
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+Added: Our employees and personnel use generative AI technologies to perform their work, and the disclosure and use of personal information in generative AI technologies is subject to various data privacy and security laws and other obligations.
+Added: Governments have passed and are likely to pass additional laws regulating generative AI.
+Added: Our use of this technology could result in additional compliance costs, regulatory investigations and actions, and lawsuits.
+Added: If we are unable to use generative AI, it could make our business less efficient and result in competitive disadvantages.
Obligations related to data privacy and security are quickly changing, becoming increasingly stringent, and creating regulatory uncertainty.
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Preparing for and complying with these obligations requires us to devote significant resources.
−Removed: These obligations may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process
−Removed: personal information on our behalf.
+Added: These obligations may necessitate changes to our services, information technologies, systems, and practices and to those of any third parties that process personal information on our behalf.
Despite our efforts, we may not be successful in complying with the rapidly evolving data privacy and security requirements discussed above.
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government enforcement actions (e.g., investigations, fines, penalties, audits, inspections, and similar);
−Removed: litigation (including class-action claims);
+Added: litigation (including class claims);
additional reporting requirements and/or oversight;
−Removed: bans on processing personal information;
−Removed: and orders to destroy or not use personal information.
+Added: bans on processing sensitive information (including personal information);
+Added: orders to destroy or not use personal information;
+Added: indemnification obligations;
+Added: negative publicity;
+Added: reputational harm;
+Added: monetary fund diversions;
+Added: diversion of management attention;
+Added: interruptions in our operations (including availability of data);
+Added: and financial loss.
Such occurrences could have a material adverse effect on our reputation, business, or financial condition, including but not limited to:
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While we have filed applications to register trademarks in certain foreign jurisdictions, our trademarks may be subject to cancellation in such jurisdictions if we do not operate our business in such jurisdictions within a certain period of time specific to each jurisdiction.
−Removed: Due to the popularity of our brand, we have noticed a number of companies (particularly internationally) that have designed their restaurants, logos and names to be similar to ours, and we may not be successful in enforcing our trademarks against such companies.
−Removed: Our success is also dependent, in part, upon protecting our other intellectual property and proprietary information using a combination of copyright, trade secret, and other intellectual property laws, and confidentiality agreements with our employees and others.
+Added: Due to the popularity of our brand, we have noticed a number of companies (particularly internationally) that have designed their restaurants, logos, and names to be similar to ours, and we may lack the necessary trademark rights to stop this behavior, or may not be successful in enforcing such rights against such companies.
+Added: Our success is also dependent, in part, upon protecting our other intellectual property and proprietary information using a combination of copyright, trade secret, patent, and other intellectual property laws, and confidentiality agreements with our employees and others.
We maintain a policy requiring senior employees, as well as any employee or consultant who develops any material intellectual property for us, to enter into an agreement to protect our intellectual property rights and other proprietary information.
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In addition, we may fail to enter into confidentiality agreements with all parties who have access to our trade secrets or other proprietary information.
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While it is our policy to protect and defend vigorously our rights to our intellectual property, we cannot predict whether steps taken by us to protect and enforce our intellectual property rights will be adequate to prevent infringement, dilution, misappropriation, or other violation of these rights or the use by others of restaurant features based upon, or otherwise similar to, our restaurant concept.
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Our digital and delivery business, and expansion thereof, is uncertain and subject to risk.
−Removed: Digital innovation and growth remain a focus for us.
−Removed: We have focused on our digital strategy over the past few years, including the development and launch of our app;
−Removed: regular enhancements to our app;
−Removed: and use of third-party delivery partners, for both fulfilling delivery services for orders through our website or native smartphone application and through third-party delivery marketplaces.
+Added: Digital innovation and growth remain important to our business.
As the digital space around us continues to evolve, our technology needs to evolve concurrently to remain competitive with the industry.
−Removed: If we do not maintain digital systems that are competitive with the industry, our digital business may be adversely affected and could damage our sales.
+Added: If we do not maintain digital systems that are competitive with the industry, our digital business may be adversely affected
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+Added: and could damage our sales.
Certain competitors, including those with greater resources than we have, such as Chipotle, also have focused on a digital strategy and may be more successful in employing that strategy.
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We are also subject to risk if there is a shortage of delivery drivers in any of our markets for any period of time, which could result in a failure to meet our customers’ expectations and have a negative impact on our sales.
−Removed: We also partner with each of the national third-party delivery providers to provide food on their marketplaces.
+Added: We partner with each of the national third-party delivery providers to provide food on their marketplaces.
If any of these third-party delivery providers that we partner with experiences damage to their brand image, we may also see ramifications due to our partnership with them.
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We also rely on multiple third-party vendors to run our mobile ordering platforms, including our delivery fulfillment services, and any errors, bugs, vulnerabilities or service outages that impact their software could have an adverse impact on our platforms.
−Removed: For example, several times in fiscal years 2020 and 2021, our third-party delivery fulfillment partner for orders placed through our Native Delivery Channel experienced outages that required us to temporarily shut down our Native Delivery Channel either entirely or in certain geographic markets, which adversely impacted our revenue.
+Added: For example, several times in fiscal years
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+Added: 2020 and 2021, our third-party delivery fulfillment partner for orders placed through our Native Delivery Channel experienced outages that required us to temporarily shut down our Native Delivery Channel either entirely or in certain geographic markets, which adversely impacted our revenue.
Further, we have a limited ability to control the remediation of such errors, bugs or vulnerabilities in a third party’s software, and as such, we may not be able to remedy such errors, bugs or vulnerabilities in a timely manner, which could have an adverse effect on our business, financial condition, or results of operations.
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Any of these events could damage our reputation, significantly disrupt our operations and subject us to liability, which could adversely affect our business, financial condition, and results of operations.
−Removed: Third parties may claim that our business or operations infringe their intellectual property rights, and this may create liability for us or otherwise have an adverse effect on our business, financial condition, and results of operations.
−Removed: We may face claims by third parties that our or Spyce’s technology has infringed, diluted, misappropriated, or otherwise violated their intellectual property rights.
+Added: Third parties may claim that we infringe their intellectual property rights, and this may create liability for us or otherwise have an adverse effect on our business, financial condition, and results of operations.
+Added: We may face claims by third parties that one or more of our names, logos, designs, creative works, or technology, including our Infinite Kitchen technology, has infringed, diluted, misappropriated, or otherwise violated their intellectual property rights.
Any such litigation may be costly and could divert other resources from our business.
−Removed: If we are unable to successfully defend against such claims, we may be subject to injunctions that could require expensive changes to our business operations or prevent or delay us from using our trademarks or other applicable technology, and we may be liable for damages, which in turn could have an adverse effect on our business, financial condition, and results of operations.
+Added: If we are unable to successfully defend against such claims, we may be subject to injunctions that could require expensive changes to our business operations or prevent or delay us from using our names, logos, designs, creative works, or technology, and we may be liable for damages, which in turn could have an adverse effect on our business, financial condition, and results of operations.
+Added: Similarly a third party may allege that technology that we license infringes upon or misappropriates that third party’s intellectual property rights, and we may lack sufficient contractual rights from the licensor to fully indemnify us for any loses, costs, or expenses that we incur in relation to any such allegation.
+Added: We may also be subject to an injunction with respect to any such allegation, which could prevent us from using licensed technology that is critical to our business operations and may require expensive changes to those operations.
+Added: Accordingly, such third-party claims could have an adverse effect on our business, financial condition, and results of operations.
Risks Related to Ownership of Our Class A Common Stock
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• actual or anticipated fluctuations in our financial condition or results of operations;
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• variance in our financial performance from expectations of securities analysts;
• changes in our projected operating and financial results;
−Removed: • actual or anticipated effects of the COVID-19 pandemic on our business;
• announcements by us or our competitors of significant business developments, acquisitions, or new offerings;
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• changes in the anticipated future size and growth rate of our market.
−Removed: Broad market and industry fluctuations, as well as general economic, political, regulatory, and market conditions, have and may also continue to negatively impact the market price of our Class A common stock, particularly in light of uncertainties surrounding the COVID-19 pandemic and the related impacts as well as recent increased inflation and potential changes in interest rates.
+Added: Broad market and industry fluctuations, as well as general economic, political, regulatory, and market conditions, have and may also continue to negatively impact the market price of our Class A common stock, particularly in light of recent inflation and changes in interest rates.
The dual-class structure of our common stock has the effect of concentrating voting control with our founders, who have substantial control over us and will be able to influence corporate matters, including controlling the outcome of director elections.
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(ii) the last trading day of the fiscal year during which the 10th anniversary of the effectiveness of the registration statement filed in connection with our initial public offering occurs, or (iii) the date specified by a vote of the holders of a majority of the outstanding shares of Class B common stock;
−Removed: provided, however, that the final conversion date may be extended by the affirmative vote of the holders of the majority of the voting power of the then-outstanding shares of Class A common stock not held by a founder or an affiliate or permitted transferee of a founder and entitled to vote generally in the election of directors, voting together as a single class.
−Removed: We previously identified a material weakness in our internal control over financial reporting and may identify additional material weaknesses in the future or otherwise fail to maintain an effective system of internal controls, which may result in material misstatements of our consolidated financial statements or cause us to fail to meet our periodic reporting obligations.
−Removed: In recent periods, we have experienced rapid growth, and this growth has placed considerable strain on our IT and accounting systems, processes, and personnel.
−Removed: As a result, in connection with the audit of our consolidated financial statements as of and for the years ended December 29, 2019 and December 27, 2020, we and our independent registered public accounting firm identified a material weakness in our internal control over financial reporting.
−Removed: A material weakness is a deficiency, or a combination of deficiencies, in internal control over financial reporting such that there is a reasonable possibility that a material misstatement of our annual or
−Removed: interim financial statements will not be prevented or detected on a timely basis.
−Removed: We have concluded that this material weakness arose because we did not have the proper business processes, systems, personnel, and related internal controls in place.
−Removed: While we have remediated the material weakness as of the fiscal year ended December 25, 2022, we cannot be certain that we have identified all of our existing material weaknesses, or that we will not in the future have additional material weaknesses in our internal control over financial reporting.
−Removed: Our failure to implement and maintain effective internal control over financial reporting could result in errors in our consolidated financial statements that could result in a restatement of our consolidated financial statements, and could cause us to fail to meet our reporting obligations, any of which could diminish investor confidence in us and cause a decline in the price of our Class A common stock, and we could be subject to sanctions or investigations by the stock exchange on which our securities are listed, the SEC, or other regulatory authorities.
+Added: provided, however, that the final conversion date may be extended by the affirmative vote of the holders of the majority of the voting power of the then-outstanding shares of Class A common stock
+Added: Tab le o f Contents
+Added: not held by a founder or an affiliate or permitted transferee of a founder and entitled to vote generally in the election of directors, voting together as a single class.
We rely on data from internal tools to calculate certain of our performance metrics.
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We incur increased costs as a result of operating as a public company, and our management will be required to devote substantial time to compliance with our public company responsibilities and corporate governance practices.
−Removed: As a public company, we incur significant finance, legal, accounting, and other expenses, including director and officer liability insurance, which we expect to further increase now that we are no longer an “emerging growth company.” The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, NYSE listing requirements, and other applicable securities rules and regulations impose various requirements on public companies.
+Added: As a public company, we incur significant finance, legal, accounting, and other expenses, including director and officer liability insurance.
+Added: The Sarbanes-Oxley Act, the Dodd-Frank Wall Street Reform and Consumer Protection Act, NYSE listing requirements, and other applicable securities rules and regulations impose various requirements on public companies.
Our management and other personnel devote a substantial amount of time to compliance with these requirements.
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Effective internal control is necessary for us to produce reliable financial reports and is important to prevent fraud.
−Removed: Pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), for the first time since becoming a public company, we are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the fiscal year ending December 25, 2022.
+Added: Pursuant to Section 404 of the Sarbanes-Oxley Act (“Section 404”), we are required to furnish a report by management on, among other things, the effectiveness of our internal control over financial reporting for the
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+Added: fiscal year ending December 31, 2023.
This assessment must include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.
−Removed: In addition, our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting in this Annual Report on Form 10-K, our first annual report required to be filed with the SEC following the date we are no longer an emerging growth company, as well as in subsequent Annual Reports.
+Added: In addition, our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting in our Annual Reports on Form 10-K.
If we are unable to in any such Annual Report assert that our internal control over financial reporting is effective or if our independent registered public accounting firm is unable to express an opinion as to the effectiveness of our internal control over financial reporting, or expresses an adverse opinion, investors may lose confidence in the accuracy and completeness of our financial reports, we may face restricted access to the capital markets or other sources of funds and our stock price may be adversely affected.
−Removed: To prepare for compliance with Section 404, we have engaged in and will continue to engage in a costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404.
Our compliance with Section 404 requires that we incur substantial expenses and expend significant management efforts, including with respect to the implementation of a new enterprise resource planning system.
We have hired and may need to hire additional accounting and financial staff in the future with appropriate public company experience and technical accounting knowledge and compile the system and process documentation necessary to perform the evaluation needed to comply with Section 404.
−Removed: The dual-class structure of our common stock may adversely affect the trading market for our Class A common stock.
−Removed: Our dual-class structure may result in a lower or more volatile market price of our Class A common stock or in adverse publicity or other adverse consequences.
−Removed: For example, certain index providers have announced restrictions on including companies with dual class or multi-class share structures in certain of their indexes.
−Removed: In July 2017, S&P Dow Jones and FTSE Russell announced changes to their eligibility criteria for the inclusion of shares of public companies on certain indices, including the Russell 2000, the S&P 500, the S&P MidCap 400 and the S&P SmallCap 600, to exclude companies with multiple classes of shares of common stock from being added to these indices.
−Removed: Beginning in 2017, MSCI, a leading stock index provider, opened public consultations on their treatment of no-vote and multi-class structures and temporarily barred new multi-class listings from certain of its indices;
−Removed: however, in October 2018, MSCI announced its decision to include equity securities “with unequal voting structures” in its indices and to launch a new index that specifically includes voting rights in its eligibility criteria.
−Removed: As a result, our dual-class capital structure makes us ineligible for inclusion in any of these indices, and mutual funds, exchange-traded funds and other investment vehicles that attempt to passively track these indices will not be investing in our stock.
−Removed: These policies are still fairly new, and it remains unclear what effect, if any, they will have on the valuations of publicly traded companies excluded from the indices in the longer term, but it is possible that they may depress these valuations compared to those of other similar companies that are included.
−Removed: Furthermore, we cannot assure you that other stock indices will not take a similar approach to S&P Dow Jones or FTSE Russell in the future.
−Removed: Exclusion from indices could make our Class A common stock less attractive to investors and, as a result, the market price of our Class A common stock could be adversely affected.
Future sales of our Class A common stock in the public market could cause the market price of our common stock to decline.
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• provide that our directors may be removed only upon the vote of at least 66 2/3% of the voting power of our then-outstanding shares of capital stock;
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• provide that vacancies on our board of directors may be filled only by a majority of directors then in office, even though less than a quorum;
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In such instance, we would expect to vigorously assert the validity and enforceability of the exclusive forum provisions of our amended and restated certificate of incorporation.
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This may require significant additional costs associated with resolving such action in other jurisdictions and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.
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• negative publicity about the safety of our food, employment-related issues, litigation, or other issues involving our restaurants;
−Removed: • the impact of the COVID-19 pandemic and macroeconomic conditions, including their impact on customer behavior and discretionary spending;
−Removed: • fluctuations in supply costs, including as a result of inflation, particularly for our most significant ingredients, and our inability to offset the higher cost with price increases without adversely impacting customer spending;
−Removed: • labor availability and wages of our restaurant employees, including as a result of inflation;
+Added: • the impact of macroeconomic or geopolitical conditions, including their impact on customer behavior and discretionary spending;
+Added: • fluctuations in supply costs, including as a result of inflation, particularly for our most significant ingredients, and our inability to offset the higher cost with price increases without adversely impacting our sales;
+Added: • labor availability and wages of our restaurant employees, including as a result of inflation and changes to minimum wage, and our inability to offset the higher cost of labor with price increases without adversely impacting our sales;
• increases in marketing or promotional expenses;
−Removed: • the timing of new restaurant openings and related revenues and expenses, and the operating costs at newly opened restaurants;
+Added: • the timing of new restaurant openings and existing restaurant renovations and related revenues and expenses (including any delays in openings or renovations caused by delays in the manufacture or deployment of Infinite Kitchen units), and the operating costs at newly opened restaurants;
• the impact of inclement weather and natural disasters, such as winter storms, freezes, and droughts, which could decrease customer traffic and increase the costs of ingredients;
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• the amount and timing of stock-based compensation;
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• litigation, settlement costs and related legal expenses;
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Insurance availability, coverage terms, and pricing continue to vary with market conditions, particularly as a public company.
−Removed: Obtaining adequate insurance is particularly challenging for companies based in California with thousands of non-exempt employees, and retentions for certain of our insurance policies (including our employment practices liability insurance insurance) are quite high.
+Added: Obtaining adequate insurance is particularly challenging for companies based in California with thousands of non-exempt employees, and retentions for certain of our insurance policies (including our employment practices liability insurance) are quite high.
Additionally, in the future, our insurance premiums and retentions may increase, we may not be able to obtain similar levels of insurance on reasonable terms, or at all, and we may choose insurance policies that result in more risk for us.
−Removed: Any substantial
−Removed: inadequacy of, or inability to obtain, insurance coverage could have an adverse effect on our business, financial condition, and results of operations.
+Added: Any substantial inadequacy of, or inability to obtain, insurance coverage could have an adverse effect on our business, financial condition, and results of operations.
There are certain types of losses we may incur that cannot be insured against or that we believe are not economically reasonable to insure, including any wage and hour or other similar employment-based claims brought by current or former employees.
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Adverse developments in applicable tax laws could have a material and adverse effect on our business, financial condition, and results of operations.
−Removed: Our effective tax rate could also change materially as a result of various evolving factors, including changes in income tax law resulting from the most recent U.S.
+Added: Our effective tax rate could also change materially as a result of various evolving factors, including changes in income tax law resulting from U.S.
presidential and congressional elections or changes in the scope of our operations.
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While our existing operations have been implemented in a manner we believe is in compliance with current prevailing laws, one or more taxing jurisdictions could seek to impose incremental or new taxes on us.
−Removed: In addition, as a result of the most recent presidential and congressional elections in the United States, there could be significant changes in tax law and regulations that could result in additional federal income taxes being imposed on us.
+Added: In addition, as a result of presidential and congressional elections in the United States, there could be significant changes in tax law and regulations that could result in additional federal income taxes being imposed on us.
For example, the recently enacted Inflation Reduction Act includes provisions that will impact the U.S.
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Finally, changes in the scope of our operations, including expansion to new geographies, could increase the amount of taxes to which we are subject, and could increase our effective tax rate.
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We are subject to review and audit by U.S.
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Our issuance of additional capital stock in connection with financings, acquisitions, investments, our equity incentive plans, or otherwise will dilute other stockholders.
−Removed: We expect to issue additional capital stock in the future that will result in dilution to all other stockholders.
−Removed: We expect to grant equity awards to employees, directors and consultants under our equity incentive plans.
+Added: If is possible in the future that we may issue additional capital stock that will result in dilution to all other stockholders.
+Added: We have granted, and expect to continue to grant, equity awards to employees, directors and consultants under our equity incentive plans.
We may also raise capital through equity financings in the future.
−Removed: As part of our business strategy, we may acquire or make investments in companies and issue equity securities as consideration for any such acquisition or investment, including issuances in connection with milestone consideration.
+Added: As part of our business strategy, we may acquire or make investments in companies and issue equity securities as consideration for any such acquisition or investment, including issuances in connection with any acquisition-related earnout provision.
Any such issuances of additional capital stock may cause stockholders to experience significant dilution of their ownership interests and the per share value of our Class A common stock to decline.
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If one or more of these analysts cease coverage of us or fail to publish reports on us regularly, demand for our Class A common stock could decrease, which might cause our stock price to decline and could decrease the trading volume of our Class A common stock.
−Removed: UNRESOLVED STAFF COMMENTS
Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.