Sweetgreen, Inc. 10-K

ITEM 1. BUSINESS Our Mission To Build Healthier Communities by Connecting People to Real Food Overview Sweetgreen, Inc., a Delaware corporation (together with its subsidiaries, “Sweetgreen,” “we,”, “us,” or the “Company”) is a mission-driven, next generation restaurant and lifestyle brand that serves healthy food at scale. Our bold vision is to be as ubiquitous as traditional fast food, but with the transparency and quality that consumers increasingly expect. As of December 29, 2024 , we owned and operated 246 restaurants in 22 states and Washington, D.C. Our Food Ethos We believe the choices we make about what we eat, where it comes from and how it is prepared have a direct impact on our health, our communities, and the planet. This is our Food Ethos, and it is firmly rooted in every aspect of our business. At Sweetgreen, we focus on Real Food, which for us means: • Plant-forward • Celebrates seasonality • Made fresh in our restaurants • Prioritizes organic, regenerative, and local sourcing • Meets strict and humane animal welfare and seafood standards • Free of highly-processed preservatives, artificial flavors, and refined or hidden sugars • Mindful of the carbon impact of each ingredient to protect future generations This commitment to our Food Ethos keeps our food delicious, nutrient dense, and sustainable. At Sweetgreen, Real Food tastes better, makes you feel better, and drives the frequency that has defined our success. Our Menu Offering We have designed our menu to be delicious, customizable, and convenient to empower our customers to make healthier choices for both lunch and dinner. We are constantly seeking ways to enhance our menu, all while honoring our Food Ethos. Our Core Menu • Our core menu features 13 curated, signature items which are offered year-round in all of our locations, including our new steak plate. • In addition to our core menu items, our single most popular item is the “custom” salad or bowl, which can include millions of combinations from 40-plus ingredients as well as our made-from-scratch dressings. • We keep our menu fresh by curating a smaller seasonal and limited time offer menu throughout the year. We believe our seasonal menu rotation, which celebrates the strength of our regional supply 7 Table of Contents chain by highlighting fresh local ingredients, increases order frequency by introducing new flavor combinations for our customers to sample. • On our Owned Digital Channels, we offer exclusive menu items, including seasonal digital exclusives and curated “collections” relevant to each customer. Our Supply Chain We have built a differentiated, end-to-end supply chain that culminates in delicious, high-quality food for our customers. We currently have more than 140 active domestic food partners, such as farmer, bakers, and distributors. Consistent with our Food Ethos, we seek to prioritize ingredients that are certified organic, regenerative, or locally sourced, and meet high animal welfare and seafood standards. We build direct relationships with farmers and growers and we are proud to showcase them on the walls of every restaurant and spotlight them on our digital platform. Our national supply chain is organized into regional distribution networks. We seek to align retail proximity with cultivation, and to leverage existing relationships as we enter new markets in that region. Quality Control and Food Safety At Sweetgreen, we refer to food safety as our “license to operate,” and that starts with our food supply. All of our suppliers provide appropriate food safety certification and third-party audits as part of the onboarding process. After onboarding, we work closely with our suppliers to ensure they adhere to our product quality specifications. We also follow a Comprehensive Food Safety Plan (“CFSP”), which includes our Approved Supplier Program, Hazard Analysis and Critical Control Points Program, guidelines for restaurant design, construction and maintenance, new product commercialization processes, and crisis management. As part of our CFSP, we have a set of “sweet clean standards” in each of our restaurants, which are guides for operators to ensure our approach to food safety is consistent and scalable across our restaurant fleet. Food safety is an integral element of our field leadership bonus plan; our operators do not receive certain bonuses unless they meet our food safety thresholds for the relevant period. On top of our CFSP sits a system of verification, audits, and monitoring to ensure our food safety is not compromised. Our Real Estate We op ened 25 Net New Restaurants in fiscal year 2024. As we continue to expand, we are confident that our compelling restaurant-level economics will continue to work across geographies and market types. We utilize a rigorous, data-driven real estate selection process to identify new restaurant sites with both high anticipated foot traffic and proximity to workplaces and residences that support our multi-channel approach. We continue to test new restaurant design concepts to bring Sweetgreen into a wider variety of trade areas and markets, including but not limited to a mobile pickup lane for digital orders. We have thoughtfully designed our restaurants to both reflect the culture and feel of our local communities and to support our multiple digital channels. Our Technology Our Customer-Facing Digital Platform We have a five-channel model that is designed to make it easy for our customers to order Sweetgreen how they want, whenever they want. Pick-Up. Customers place their order through our mobile app or website and pick it up from their chosen Sweetgreen location at the time most convenient for them. Native Delivery. We launched our Native Delivery Channel in January 2020, and believe it offers a superior customer experience to our Marketplace Channel, generally with lower menu item pricing than our Marketplace Channel, greater delivery radii than our Marketplace Channel in many locations, enhanced 8 Table of Contents customization features, access to our seasonal menu items and ingredients, and access to exclusive promotions via Sweetgreen Rewards and Challenges. Outpost and Catering. Our Outpost and Catering Channel enables office workers or building residents to get their custom Sweetgreen order delive red directly to an outpost station at their location during a dedicated time window each day, typically with lower customer fees than our other delivery channels. As of the end of fiscal year 2024, we had 823 live Outpost locations. In addition, our Outpost and Catering Channel includes our catering offerings, which refer to sales to event and group customers made through our catering website for pickup at one of our restaurants or delivery to a customer specified address. Bulk orders of salads, warm bowls, sides, and drinks can be ordered for delivery together and are prepared at select locations. In-Store. In addition to a strategic focus on our Owned Digital Channels, our In-Store Channel is core to our platform and serves as a critical path to attract new customers via our iconic physical locations. Purchases made in our In-Store Channel via cash or credit card are referred to as “Non-Digital” transactions, and purchases made in our In-Store Channel via digital scan-to-pay, prior to its elimination in 2023, were included as part of our Owned Digital Channels. Marketplace. Our Marketplace Channel often serves as an effective means to reach new digital customers who have not used our native mobile app or website before. We then aim to convert Marketplace customers to our digital platform. For fiscal year 2024 , 30% of our revenue was from our Owned Digital Channels, as compared to 36% from our Owned Digital Channels in fiscal year 2023. When including orders placed on the Marketplace Channel, 56% of our fiscal year 2024 revenue was derived from digital channels, as compared to 59% of our revenue in fiscal year 2023. The convenience of our multi-channel approach, combined with our ability to offer personalized content and recommendations, results in a highly engaged cohort of habitual Sweetgreen customers. Not only are users of our Owned Digital Channels our most frequent customers, but the average order value (which is the dollar value of an order exclusive of taxes and any fees paid by the customer) for orders placed on our Owned Digital Channels is higher than non-digital orders placed through our In-Store Channel. Proprietary Technology Powers our Operations at Scale In addition to our customer-facing digital platform, we have also invested in technology to support our back of house operations, simplify the work of our team members, and enhance how we hire, train, and schedule team members. These investments include leveraging systems that manage inventory in our restaurants to ensure freshness, guide prep work, optimize our meal assembly process, and manage our team members’ output to enhance our order fulfillment times. In 2021, we acquired a kitchen automation technology company, Spyce Food Co. (“Spyce”), and have further developed and deployed Spyce’s kitchen automation technology, which we refer to as the Infinite Kitchen. We incorporate our Infinite Kitchen technology into new and existing restaurants based, in large part, upon our evaluation of the potential economic and other benefits for those restaurants. We deployed units of the Infinite Kitchen in two of our restaurants during fiscal year 2023 and ten of our restaurants during fiscal year 2024. Of the 10 restaurants that received the Infinite Kitchen technology in fiscal year 2024, three were retrofits and seven were new restaurant openings. We continue to learn from these deployments and are incorporating our findings into future deployments. In 2023, our Infinite Kitchen technology was named as one of Time’s Best Inventions, which recognizes 200 extraordinary inventions that changed the way we live, work, play, and think about what’s possible. Our Marketing Strategy Our brand has been designed to inspire consumers to live healthier. By connecting food and culture to amplify our mission, we use a carefully crafted combination of brand, retail, and digital marketing to build awareness, generate sales, and drive brand love. In each of 2023 and 2024, we were named one of Fast Company’s 9 Table of Contents Brands That Matter, which recognized companies and nonprofits that have undeniably impacted business and culture. Since inception, we have collaborated with some of the world’s best chefs, athletes, musicians, and thought leaders in our communities to help us amplify the power of healthy food. Combined with an expansive menu strategy spanning beyond salads into hearty entrée options and dayparts, our goal is to shift the paradigm of what’s possible when it comes to convenient food at scale and positively impact how the next generation connects to healthy eating. To drive customers from awareness to consideration to conversion, we have invested in robust customer relationship management capabilities and paid media strategies across search, social media, and search engine optimization, as well as implemented customized digital experiences through our app. Our investment in a sophisticated marketing technology stack enables us to better understand our customers—how they first discover Sweetgreen, what they order, and what makes them return. We also use our restaurants as the face of our brand to attract new customers and as a canvas to execute national brand campaigns, menu launches, and local initiatives. Our People Our Team and Culture Our approach to team and culture is consistent with one of our core values of “Win, Win, Win”. We believe that obsessing over the team member experience is a “win” for our team members, our customers, and our company. We benefit from the ability to attract and retain the best talent, and from having team members that are motivated to deliver an exceptional experience to our customers. We hire team members who are passionate about our purpose and strive to maintain a friendly, fun, and positive work environment. We pay competitive wages and believe we offer many best-in-class benefits relative to the industry, including medical, dental, and vision insurance for eligible employees and their spouses or domestic partners, paid time off, paid parental leave, and equity incentives for our Head Coaches. In each of 2023 and 2024, Built In included Sweetgreen in their “100 Best places to Work in Los Angeles,” and in 2024 Forbes recognized Sweetgreen as one of “America’s Best Employers for Women.” Our Restaurant Team Structure and the Pathway to Opportunity We believe we have designed a transparent and structured career learning path. By providing opportunities for advancement, professional development, and ultimately leadership, we have been able to promote high-performing talent, and by extension, scale our Sweetgreen culture. At Sweetgreen, we believe the best leaders come from within, so we deve lop a talent-rich pipeline by having a clear promotional track for team members to become a Head Coach (our title for a store manager) within as few as three years. During fiscal year 2024, 58% of open restaurant leadership roles were filled with promotions of existing employees. Employees As of December 29, 2024, we had a total of 6,407 employees, 334 of whom worked at our Sweetgreen Support Center and 6,073 of whom worked in our restaurants. Our Impact Our mission to build healthier communities by connecting people to real food extends to positively impacting the lives of our customers, team members, and citizens of the communities we serve. Below are select examples of the ways we give back to our local communities. • Donating Healthy Meals: During each new restaurant opening, we distribute fresh Sweetgreen meals to local charities such as food pantries and soup kitchens to help alleviate food insecurity in the community. For every meal purchase on opening day, we donate a meal to a local nonprofit impact partner to distribute to someone in need. In 2024, we donated over 68,000 meals through our new restaurant opening program. 10 Table of Contents • Volunteering as a Team: We empower our team members to volunteer with causes they are passionate about by offering up to 5 hours of paid volunteer time off for eligible employees annually. In 2024, our restaurant teams collectively volunteered over 6,500 hours to local events such as food distributions and community gardens. Competition We face significant competition from restaurants in the fast-casual dining and traditional fast-food segments of the restaurant industry. These segments are highly competitive with respect to, among other things, taste, price, food quality and presentation, service, location, and the ambience and condition of each restaurant. Our competition includes a variety of locally owned restaurants and national and regional chains offering dine-in, carry-out, delivery, and catering services. 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. 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 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. In particular, we 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. 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 and since the COVID-19 pandemic, and competition is expected to continue to increase. 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. Additionally, we face the risk that new or existing competitors will copy, and potentially improve upon, our business model, menu options, technology, presentation, or ambience, among other things. Trademarks and Other Intellectual Property We protect our intellectual property primarily through a combination of trademarks, domain names, copyrights, patents, and trade secrets. Since our inception, we have undertaken to strategically and proactively develop our trademark portfolio by registering our trademarks and service marks in the United States and various strategic foreign jurisdictions. Domestically, we registered our core marks (“Sweetgreen,” “SG,” and the Sweetgreen logo) and certain other marks, such as “SG Outpost,” “Sweetgreen Outpost,” and “SweetPass.” Internationally, we currently have registered our core Sweetgreen mark, along with selected other marks, in foreign jurisdictions including Argentina, Australia, Canada, China, the European Union, Hong Kong, Japan, Mexico, South Korea, and the United Kingdom. Most of our marks are registered in multiple international trademark classes, including for restaurant services and related goods and services. We are currently pursuing additional trademark and trade dress registrations in the United States and abroad and will continue to pursue additional trademark registrations to the extent we believe they would be beneficial and cost-effective . Additionally, in connection with our Infinite Kitchen technology, we have three issued patents and four patent applications pending in the United States, and one issued patent in the People’s Republic of China. We i ntend to pursue additional patent protection with respect to the Infinite Kitchen technology to the extent we believe it would be beneficial and cost-effective. We have obtained a registration of the Sweetgreen.com domain name as well. 11 Table of Contents We have procedures in place to monitor for potential infringement of our most important intellectual property, and it is our policy to take appropriate action to enforce our intellectual property, taking into account the strength of our claim, likelihood of success, cost, and overall business priorities. Government Regulation We are subject to various federal, state, and local regulations, including those relating to building and zoning requirements, public health and safety, and the preparation and sale of food. The development and operation of restaurants depends to a significant extent on the selection and acquisition of suitable sites, which are subject to zoning, land use, environmental, traffic, and other regulations and requirements. Our restaurants are also subject to state and local licensing and regulation by health, sanitation, food and occupational safety, and other agencies. We may experience material 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. 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 laws (such as fair work week laws, immigration laws, laws governing the employment of minors, various wage & hour laws, termination and discharge 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, the U.S. Equal Employment Opportunity Commission, the Department of Labor, or others alleging violations of federal and state laws regarding workplace and employment matters, discrimination and similar matters, and we are and have been a party to a number of such matters. These lawsuits and investigations require significant resources from our senior management and can result in material fines, penalties, and/or settlements, some or all of which may not be covered by insurance, as well as significant remediation efforts that may be costly and time consuming, and which we may not implement effectively. 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. We are currently a party to lawsuits in which it is alleged that we were not ADA compliant, and 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 restaurant locations. Seasonality Our revenue fluctuates as a result of seasonal factors and weather conditions. Historically, our revenue has been lower in the first and fourth fiscal quarters of the year due, in part, to the holiday season and the fact that fewer people eat out during periods of inclement weather (generally the winter months, though inclement weather conditions may occur in certain markets at any time of the year) than during periods of mild to warm weather (the spring, summer, and fall months). In addition, a core part of our menu, salads, has proven to be more popular among consumers in the warmer months. In recent years, as consumer behavior trends have changed, due in part to the emergence of hybrid or remote work environments, the seasonality in our business has been less predictable than in prior years although we have seen an increased and prolonged negative impact on our revenue around national holidays. Data Privacy and Security In the ordinary course of our business, we may process personal or other sensitive, proprietary, and confidential information. Accordingly, we are or may become subject to numerous data privacy and security obligations, including federal, state, local, and foreign laws, regulations, guidance, and industry standards related to data privacy and security. Such obligations may include, without limitation, the Federal Trade Commission Act, the Telephone Consumer Protection Act of 1991, the Children’s Online Privacy Protection Act of 1998, the Controlling the Assault of Non-Solicited Pornography And Marketing Act of 2003, the California Consumer 12 Table of Contents Privacy Act of 2018, as amended by the California Privacy Rights Act of 2020 (“CPRA”), (collectively, “CCPA”), consumer health data privacy laws such as Washington state’s My Health My Data Act, the Canadian Personal Information Protection and Electronic Documents Act, Canada’s Anti-Spam Legislation, the European Union’s General Data Protection Regulation 2016/679 (“EU GDPR”) and the EU GDPR as it forms part of United Kingdom (“UK”) law by virtue of section 3 of the European Union (Withdrawal) Act 2018 (“UK GDPR”) (collectively, “GDPR”), and the Payment Card Industry Data Security Standard (“PCI DSS”). Several states within the United States have enacted or proposed data privacy and security laws. For example, Virginia, Colorado, Connecticut, and Utah have passed comprehensive data privacy and security laws. Additionally, we are, or may become, subject to various U.S. federal and state consumer protection laws which require us to publish statements that accurately and fairly describe how we handle personal information and choices individuals may have about the way we handle their personal information. The CCPA and GDPR are examples of the increasingly stringent and evolving regulatory frameworks related to personal information processing that may increase our compliance obligations and exposure for any noncompliance. For example, the CCPA imposes obligations on covered businesses to provide specific disclosures related to a business’s collection, use, and disclosure of personal information and to respond to certain requests from California residents related to their personal information (for example, requests to know of the business’s personal information processing activities, to delete the individual’s personal data, and to opt out of certain personal information disclosures). Also, the CCPA provides for civil penalties and a private right of action for data breaches which may include an award of statutory damages. In addition, the CPRA expanded the CCPA by, among other things, giving California residents the ability to limit use of certain sensitive personal information, establishing restrictions on personal information retention, expanding the types of data breaches that are subject to the CCPA’s private right of action, and establishing the California Privacy Protection Agency to implement and enforce the CCPA. Foreign data privacy and security laws (including but not limited to the GDPR) impose significant and complex compliance obligations on entities that are subject to those laws. See the section titled “Risk Factors—Risks Related to Our Intellectual Property and Information Technology” for additional information about the laws and regulations to which we may become subject and about the risks to our business associated with such laws and regulations. Corporate Information We were founded in November 2006 and incorporated in October 2009 in Delaware. Our principal executive offices, which we refer to as our Sweetgreen Support Center, are located at 3102 36th Street, Los Angeles, CA 90018, and our telephone number is (323) 990-7040. Our website address is www.sweetgreen.com. Our Class A common stock is listed on the New York Stock Exchange under the symbol “SG”. Available Information Sweetgreen’s Annual Report on Form 10-K reports, along with all other reports and amendments filed with or furnished to the SEC, are publicly available free of charge on the Investor Relations section of our website at investor.sweetgreen.com or at www.sec.gov as soon as reasonably practicable after these materials are filed with or furnished to the SEC. We also use our website as a tool to disclose important information about the company and comply with our disclosure obligations under Regulation Fair Disclosure. Our corporate governance guidelines, code of business conduct and ethics and Board committee charters are also posted on the Investor Relations section of the Sweetgreen website. The information on our website (or any webpages referenced in this Annual Report on Form 10-K) is not part of this or any other report Sweetgreen files with, or furnishes to, the SEC. 13 Table of Contents