Sweetgreen, Inc. 10-K

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with the audited consolidated financial statements and related notes included elsewhere in this report. This discussion contains forward-looking statements based upon current plans, expectations, and beliefs that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of various factors, including those set forth in the sections titled “Risk Factors” and “Special Note Regarding Forward-Looking Statements” and in other parts of this report. Unless the context otherwise requires, all references in this section to “we,” “us,” “our,” the “Company,” or “Sweetgreen” refer to Sweetgreen, Inc. and its subsidiaries. Our fiscal year is a 52- or 53-week period that ends on the last Sunday of the calendar year. Fiscal year 2024 was a 52-week period that ended December 29, 2024, fiscal year 2023 was a 53-week period that ended December 31, 2023, and fiscal year 2022 was a 52-week period that ended December 25, 2022. In a 52-week fiscal year, each fiscal quarter includes 13 weeks of operations. In a 53-week fiscal year, the first, second, and third fiscal quarters each include 13 weeks of operations, and the fourth fiscal quarter includes 14 weeks of operations. Fiscal year 2024, 2023, and 2022 results for AUV and Same-Store Sales Change have been adjusted. See the subsections titled “—Key Performance Metrics” and “—Quarterly Results of Operations” for more information, including a description of the adjustments made to, and the unadjusted values for, AUV and Same-Store Sales Change for the periods presented. Overview We are 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. Factors Affecting Our Business Expanding Restaurant Footprint Opening new restaurants, including those with Infinite Kitchen technology, is an important driver of our revenue growth. In fiscal years 2024, 2023, and 2022, we had 25, 35, and 36 Net New Restaurant Openings, respectively, bringing our total count as of December 29, 2024 to 246 restaurants in 22 states and Washington, D.C. We are still in the very nascent stages of our journey, and one of our greatest immediate opportunities is to grow our footprint in both existing and new U.S. markets and, over time, internationally. Real Estate Selection We utilize a rigorous, data-driven real estate selection process to identify the location and timing of opening new restaurants, both in new and existing U.S. markets and in urban and suburban areas, with high anticipated foot or vehicle traffic and proximity to workplaces, residences and other restaurant and retail businesses that support our multi-channel approach, including our Native Delivery, Marketplace Delivery, and Outpost and Catering Channels. Macroeconomic Conditions, Inflation, and Supply Chain Constraints Consumer spending on food outside the home fluctuates with macroeconomic conditions. Consumers tend to allocate higher spending to food outside the home when macroeconomic conditions are stronger, and reduce spending on food outside the home during weaker economies. Our customers have in the past demonstrated a willingness to pay a premium for a craveable, convenient, and healthier alternative to traditional fast-food and 57 Table of Contents fast-casual offerings. However, as a premium offering in the fast-casual industry, we are exposed both to consumers trading the convenience of food away from home for the cost benefit of cooking, and to consumers selecting less expensive fast-casual alternatives during weaker economic periods. While we have historically been able to partially offset inflation and other increases in the costs of core operating resources, such as wage increases and increases in cost of goods sold, by gradually increasing menu prices or other customer fees, such as service fees and delivery fees, coupled with more efficient purchasing practices, productivity improvements, and greater economies of scale, there can be no assurance that we will be able to continue to do so in the current macroeconomic environment or regulatory environment or in the future. In particular, current and future macroeconomic conditions could cause additional menu price increases to negatively impact our Same Store Sales Growth. There can be no assurance that any 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. We continue to see variability in our customer traffic patterns, including as a result of fluctuations in return to office as a result of many workplaces adopting remote or hybrid models and we expect this variability to continue for the foreseeable future. I n fiscal year 2023, we experienced supply chain disruptions for our bowls and plates, which resulted in the use of alternative packaging solutions. Also, our bowls and plates are produced outside the United States, and may be subject to new or increased taxes, tariffs, or duties in connection with the importation of those items into the United States. Any such new or increased taxes, tariffs, or duties may significantly increase the price that we must pay for such items. During fiscal year 2024, we began offering steak as a new protein to our menu, which adds a new ingredient for our customer base. With the introduction of beef on our menu, we have experienced and could continue to experience an increase in commodity costs. 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. We have seen an increase and prolonged negative impact on our revenue around national holidays. Additionally, we have seen extreme weather conditions and natural disasters, such as the wild fires in Los Angeles, cause disruptions to our operations and impact to our first quarter 2025 results. Sales Channel Mix Our revenue is derived from sales of food and beverage to customers through our five sales channels: In-Store Channel, Pick-Up Channel, Native Delivery Channel, Marketplace Channel, and Outpost and Catering Channel. There have been historical fluctuations in the mix of sales between our various channels. Due to the fact that our Native Delivery, Outpost and Catering , and Marketplace Channels require the payment of third-party fees in order to fulfill deliveries, sales through these channels have historically negatively impacted our margins. Additionally, historically, orders on our Native Delivery, Outpost and Catering and Marketplace Channels have resulted in a higher rate of refunds and credits than our In-Store and Pick-Up Channels, which has a negative impact on revenue from these channels. We have also historically prioritized promotions and discounts on our Owned Digital Channels, which also reduces revenue from these channels. If we see a shift in sales through the Native Delivery, Outpost and Catering , and Marketplace channels, our margins may decrease. However, over time, we expect that our margins will improve on our Native Delivery, Outpost and Catering , and Marketplace Channels as we scale each of these channels. 58 Table of Contents Key Performance Metrics and Non-GAAP Financial Measures We track the following key performance metrics and non-GAAP financial measures to evaluate our performance, identify trends, formulate financial projections, and make strategic decisions. We believe that these key performance metrics, which include certain non-GAAP financial measures, provide useful information to investors and others in understanding and evaluating our results of operations in the same manner as our management team. These key performance metrics and non-GAAP financial measures are presented for supplemental informational purposes only, should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from similarly titled metrics or measures presented by other companies. Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 (1) December 31, 2023 (1) December 25, 2022 (1) Net New Restaurant Openings 25 35 36 Average Unit Volume (as adjusted) (2)(3) $ 2,924 $ 2,877 $ 2,905 Same-Store Sales Change (as adjusted) (%) (3)(4) 6% 4% 13% Total Digital Revenue Percentage 56% 59% 62% Owned Digital Revenue Percentage 30% 36% 41% (1) We operate on a 52/53 week fiscal year end that ends on the last Sunday of the calendar year. Fiscal years 2024 and 2022 each contained 52 weeks. Fiscal year 2023 was a 53-week year with the extra operating week (the “53rd week”) falling in our fourth fiscal quarter. (2) As a result of material, temporary closures of certain stores during the applicable periods, we excluded one restaurant from the Comparable Restaurant Base as of the end of fiscal year 2024, no restaurants as of the end of fiscal year 2023, and two restaurants as of the end of fiscal year 2022. Such adjustments did not result in a material change to AUV. (3) For fiscal year 2023, Average Unit Volume and Same-Store Sales Change were adjusted to exclude the 53rd week of operations. (4) Our results for the fiscal year ended December 31, 2024 have been adjusted to reflect the temporary closures of 8 restaurants, which were excluded from the calculation of Same-Store Sales change. Our results for the fiscal year ended December 31, 2023 have been adjusted to reflect the temporary closures of two restaurants, which were excluded from the calculation of Same-Store Sales change. Our results for the fiscal year ended December 25, 2022, have been adjusted to reflect the temporary closures of 6 restaurants. Such adjustments did not have a material impact on our Same-Store Sales Change for 2024, 2023, or 2022. Net New Restaurant Openings Net New Restaurant Openings reflect the number of new Sweetgreen restaurant openings during a given reporting period, net of any permanent Sweetgreen restaurant closu res during the same given period. Before we open new restaurants, we incur pre-opening costs, as further described below. During fiscal year 2025, we plan to integrate our Infinite Kitchen into approximately half of our new restaurants. Average Unit Volume AUV is defined as the average trailing revenue for the prior four fiscal quarters for all restaurants in the Comparable Restaurant Base. The measure of AUV allows us to assess changes in guest traffic and per transaction patterns at our restaurants. Fiscal year 2023 was a 53-week year, and in order to provide a measurement period that is consistent with comparable periods that span a 52-week year, rather than simply excluding the extra week, we applied an averaging methodology to the last period of fiscal 2023 to adjust for the extra week. Comparable Restaurant Base for any measurement period is defined as all restaurants that have operated for at least twelve full months as of the end of such measurement per iod, other than any restaurants that had a material, temporary closure during the relevant measurement period. We excluded one restaurant from the Comparable Restaurant Base as of the end of fiscal year 2024, no restaurants as of the end of fiscal year 2023, and two restaurants as of the end of fiscal year 2022. Such exclusions did not result in a material change to AUV. Same-Store Sales Change Same-Store Sales Change reflects the percentage change in year-over-year revenue for the relevant fiscal period for all restaurants that have operated for at least 13 full fiscal months as of the end of such fiscal period excluding the 53rd week in any 53-week fiscal year; provided, that for any restaurant that has had a temporary closure (which historically has been defined as a closure of at least five days during which the restaurant would have otherwise been open) during any prior or current fiscal month, such fiscal month, as well as the 59 Table of Contents corresponding fiscal month for the prior or current fiscal year, as applicable, will be excluded when calculating Same-Store Sales Change for that restaurant. Fiscal year 2023 was a 53-week year, which resulted in a misalignment in our comparable weeks in fiscal year 2024. To adjust for this misalignment, in calculating Same-Store Sales Change for each fiscal quarter and the full fiscal year 2024, we shifted each week within fiscal year 2023 forward by one week to better align with the 2024 calendar year, specifically to match the timing of holidays and achieve a more accurate comparable Same-Store Sales Change to the prior period. During fiscal year 2024, we excluded eight restaurants from our Same-Store Sales Change, du ring fiscal year 2023, we excluded two rest aurants from our Same-Store Sales Change, and during fiscal year 2022, we excluded six restaurants from our Same-Store Sales Change. These adjustments d id not result in a material change to Same-Store Sales Change for 2024, 2023, or 2022. Total Digital Revenue Percentage and Owned Digital Revenue Percentage Our Total Digital Revenue Percentage is the percentage of our revenue attributed to purchases made through our Total Digital Channels. Our Owned Digital Revenue Percentage is the percentage of our revenue attributed to purchases made through our Owned Digital Channels. In recent years, we have experienced a reduction in our Owned Digital Revenue Percentage and our Total Digital Revenue percentage, which we believe is due to the continuing recovery of our In-Store Channel and growth in third party marketplace. Non-GAAP Financial Measures In addition to our consolidated financial statements, which are presented in accordance with GAAP, we present certain non-GAAP financial measures, including Restaurant-Level Profit, Restaurant-Level Profit Margin, Adjusted EBITDA, and Adjusted EBITDA Margin. We believe these measures are useful to investors and others in evaluating our performance because these measures: • facilitate operating performance comparisons from period to period by isolating the effects of some items that vary from period to period without any correlation to core operating performance or that vary widely among similar companies. These potential differences may be caused by variations in capital structures (affecting interest expense), tax positions (such as the impact on periods or companies of changes in effective tax rates or NOL), and the age and book depreciation of facilities and equipment (affecting relative depreciation expense); • are widely used by analysts, investors, and competitors to measure a company’s operating performance; are used by our management and board of directors for various purposes, including as measures of performance and as a basis for strategic planning and forecasting; and • are used internally for a number of benchmarks, including to compare our performance to that of our competitors . Restaurant-Level Profit, Restaurant-Level Profit Margin, Adjusted EBITDA, and Adjusted EBITDA Margin have limitations as analytical tools, and you should not consider them in isolation or as substitutes for analysis of our results as reported under GAAP. In particular, Restaurant-Level Profit and Adjusted EBITDA should not be viewed as substitutes for, or superior to, loss from operations or net loss prepared in accordance with GAAP as a measure of profitability. Some of these limitations are: • although depreciation and amortization are non-cash charges, the assets being depreciated and amortized may have to be replaced in the future, and Restaurant-Level Profit and Adjusted EBITDA do not reflect all cash capital expenditure requirements for such replacements or for new capital expenditure requirements; • Restaurant-Level Profit and Adjusted EBITDA do not reflect changes in, or cash requirements for, our working capital needs; • Restaurant-Level Profit and Adjusted EBITDA do not reflect the impact of the recording or release of valuation allowances or tax payments that may represent a reduction in cash available to us; • Restaurant-Level Profit and Adjusted EBITDA do not consider the potentially dilutive impact of stock-based compensation; 60 Table of Contents • Restaurant-Level Profit is not indicative of overall results of the Company and does not accrue directly to the benefit of stockholders, as corporate-level expenses are excluded; • Adjusted EBITDA does not take into account any income or costs that management determines are not indicative of ongoing operating performance, such as stock-based compensation; loss on disposal of property and equipment; other (income) expense; Spyce acquisition costs; enterprise resource planning system (“ERP”) implementation and related costs; legal settlements; and, certain other expenses as described in more detail below; and • other companies, including those in our industry, may calculate Restaurant-Level Profit and Adjusted EBITDA differently, which reduces their usefulness as comparative measures. Because of these limitations, you should consider Restaurant-Level Profit, Restaurant-Level Profit Margin, Adjusted EBITDA, and Adjusted EBITDA Margin alongside other financial performance measures, loss from operations, net loss, and our other GAAP results. Restaurant-Level Profit and Restaurant-Level Profit Margin We define Restaurant-Level Profit as loss from operations adjusted to exclude general and administrative expense, depreciation and amortization, pre-opening costs, loss on disposal of property and equipment, and, in certain periods, impairment and closure costs and restructuring charges. Restaurant-Level Profit Margin is Restaurant-Level Profit as a percentage of revenue. As it excludes general and administrative expense, which is primarily attributable to our corporate headquarters, which we refer to as our Sweetgreen Support Center, we evaluate Restaurant-Level Profit and Restaurant-Level Profit Margin as a measure of profitability of our restaurants. The following table sets forth a reconciliation of our loss from operations to Restaurant-Level Profit, as well as the calculation of loss from operations margin and Restaurant-Level Profit Margin for each of the periods indicated : Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 (1) December 31, 2023 (1) December 25, 2022 (1) Loss from operations $ (95,704) $ (122,344) $ (193,337) Add back: General and administrative 149,942 146,762 187,367 Depreciation and amortization 67,346 59,491 46,471 Pre-opening costs 6,616 9,263 11,523 Impairment and closure costs 2,218 624 2,542 Loss on disposal of property and equipment (2) 255 687 278 Restructuring charges (3) 2,276 7,437 14,442 Restaurant-Level Profit $ 132,949 $ 101,920 $ 69,286 Loss from operations margin (14) % (21) % (41) % Restaurant-Level Profit Margin 20 % 17 % 15 % (1) We operate on a 52/53 week fiscal year end that ends on the last Sunday of the calendar year. Fiscal years 2024 and 2022 each contained 52 weeks. Fiscal year 2023 was a 53-week year with the extra operating week (the “53rd week”) falling in our fourth fiscal quarter. (2) Loss on disposal of property and equipment includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment. (3) Restructuring charges are expenses that are paid in connection with reorganization of our operations. These costs primarily include lease and related costs associated with our vacated former Sweetgreen Support Center, including the impairment and amortization of the operating lease asset, expenses from workforce reductions affecting approximately 5% of employees at our Sweetgreen Support Center, and contract termination costs, related to streamlining our future new restaurant openings. Adjusted EBITDA and Adjusted EBITDA Margin We define Adjusted EBITDA as net loss adjusted to exclude income tax (benefit) expense, interest income, interest expense, depreciation and amortization, stock-based compensation expense, loss on disposal of 61 Table of Contents property and equipment, other (income) expense, Spyce acquisition costs, our enterprise resource planning system (“ERP”) implementation and related costs, legal settlements, and certain other expenses during the period that management determines are not indicative of ongoing operating performance and, in certain periods, impairment and closure costs, restructuring charges, and employer portion of founder performance stock unit payroll taxes. Adjusted EBITDA Margin is Adjusted EBITDA as a percentage of revenue. The following table sets forth a reconciliation of our net loss to Adjusted EBITDA, as well as the calculation of net loss margin and Adjusted EBITDA Margin for each of the periods indicated: Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 (1) December 31, 2023 (1) December 25, 2022 (1) Net loss $ (90,373) $ (113,384) $ (190,441) Non-GAAP adjustments: Income tax (benefit) expense (1,301) 379 1,345 Interest income (10,942) (12,942) (5,143) Interest expense 256 128 83 Depreciation and amortization 67,346 59,491 46,471 Stock-based compensation (2) 39,024 49,532 78,736 Loss on disposal of property and equipment (3) 255 687 278 Impairment and closure costs (4) 2,218 624 2,542 Other expense (5) 6,656 3,475 819 Spyce acquisition costs (6) — 472 646 Restructuring charges (7) 2,276 7,437 14,442 ERP implementation and related costs (8) 914 881 288 Legal settlements (9) 1,326 425 — Employer portion of the founder performance stock unit payroll taxes (10) 1,053 — — Adjusted EBITDA $ 18,708 $ (2,795) $ (49,934) Net loss margin (13)% (19)% (41)% Adjusted EBITDA Margin 3% —% (11)% (1) We operate on a 52/53 week fiscal year end that ends on the last Sunday of the calendar year. Fiscal years 2024 and 2022 each contained 52 weeks. Fiscal year 2023 was a 53-week year with the extra operating week (the “53rd week”) falling in our fourth fiscal quarter. (2) Includes non-cash, stock-based compensation. (3) Loss on disposal of property and equipment includes the loss on disposal of assets related to retirements and replacement or write-off of leasehold improvements or equipment. (4) Includes costs related to impairment of long-lived and operating lease assets and store closures. (5) Other expense includes the change in fair value of the contingent consideration issued as part of the Spyce acquisition. For additional information, see Notes 1 and 3 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. (6) Spyce acquisition costs includes one-time costs we incurred in order to acquire Spyce including severance payments, retention bonuses, and valuation and legal expenses. (7) Restructuring charges are expenses that are paid in connection with the reorganization of our operations. These costs primarily include lease and related non-cash expenses associated with our vacated former Sweetgreen Support Center, including the impairment and amortization of the operating lease asset. See Note 1 to our consolidated financial statements included elsewhere in this Annual Report on Form 10-K. (8) Represents the amortization costs associated with the implementation of our cloud computing arrangements in relation to our ERP system. (9) Expenses recorded for accruals related to the settlements of legal matters. (10) Includes the employer portion of payroll taxes related to the vesting of 600,000 performance stock units released to each founder during the fiscal year ended December 29, 2024. 62 Table of Contents Components of Results of Operations Revenue We recognize food and beverage revenue, net of discounts and incentives, when payment is tendered at the point of sale as the performance obligation has been satisfied, through our three disaggregated revenue channels: Owned Digital Channels, In-Store-Channel (Non-Digital component), and Marketplace Channel. Provisions for discounts are provided for in the same period the related sales are recorded. Sales taxes and other taxes collected from customers and remitted to governmental authorities are presented on a net basis, and as such, are excluded from revenue. We expect revenue to increase as we focus on opening additional restaurants, diversify and expand our menu, make investments in marketing to attract new customers and increase order frequency from our existing customers, as well as any increases in the price of our menu items. Gift Cards . We also sell gift cards that do not have an expiration date. Upon sale, gift cards are recorded as unearned revenue and included within gift card liability in the accompanying audited consolidated balance sheets. The revenue from gift cards is recognized when redeemed by customers. Because we do not track addresses of gift card purchasers, the relevant jurisdiction related to the requirement for escheatment, the legal obligation to remit unclaimed assets to the state, is our state of incorporation, which is Delaware. The state of Delaware requires escheatment after five years from issuance. We do not recognize breakage income because of our requirements to escheat unredeemed gift card balances. Delivery. The majority of our restaurant locations offer a delivery option. Delivery services are fulfilled by third-party service providers whether delivery is ordered through our Native Delivery Channel or Marketplace Channel. With respect to Native Delivery Channel sales, we control the delivery services and recognize revenue, including delivery revenue, when the delivery partner transfers food or beverage to the customer. For these sales, we receive payment directly from the customer at the time of sale. With respect to Marketplace Channel sales, we recognize revenue, excluding delivery fees collected by the delivery partner as we do not control the delivery service, when control of the food or beverage is delivered to the end customer. We receive payment from the delivery partner subsequent to the transfer of food and the payment terms are short-term in nature. For all delivery sales, we are considered the principal and recognize the revenue on a gross basis. For a more detailed discussion of our third-party delivery fees and our expectations regarding our margins, see the section titled “—Sales Channel Mix” above. Restaurant Operating Costs, Exclusive of Depreciation and Amortization Food, Beverage, and Packaging Food, beverage, and packaging costs include the direct costs associated with food, beverage, and packaging of our menu items. We anticipate food, beverage, and packaging costs on an absolute dollar basis will increase for the foreseeable future to the extent we experience additional customer orders, as we open additional restaurants, and as a result our revenue grows. Food, beverage, and packaging costs as a percentage of revenue may vary, as these costs are impacted by menu mix and fluctuations in commodity costs, inflation, and availability, as well as geographic scale and proximity. We will continue to innovate in key areas, including menu, which could lead to increases in commodity costs as we add items such as beef to our menu. Labor and Related Ex penses Labor and related expenses include salaries, bonuses, benefits, payroll taxes, workers compensation expenses, and other expenses related to our restaurant employees. As with other variable expense items, we expect labor costs to grow as our revenue grows. Other factors that influence labor costs include each jurisdiction’s minimum wage and payroll tax legislation, inflation, the strength of the labor market for hourly employees, benefit costs, health care costs, and the size and location of our restaurants. Occupancy and Related Expenses Occupancy and related expenses consist of restaurant-level occupancy expenses (including rent, common area maintenance (“CAM”) expenses, and real estate taxes), and exclude occupancy expenses associated with unopened restaurants, which are recorded separately in pre-opening costs. We anticipate occupancy and 63 Table of Contents related expenses on an absolute dollar basis will increase for the foreseeable future to the extent we continue to open new restaurants and revenue grows. Occupancy and related expenses as a percentage of revenue are impacted by geographic location, type of restaurant build, and amount of revenue. Other Restaurant Operating Costs Other restaurant operating costs include other operating expenses incidental to operating our restaurants, such as repairs and maintenance, utilities, certain local taxes, third-party delivery fees, non-perishable supplies, restaurant-level marketing, credit card fees, and property insurance. We expect that other restaurant operating costs will increase on an absolute dollar basis for the foreseeable future to the extent we continue to open new restaurants and our revenue grows. Other restaurant operating costs as a percentage of revenue are expected to increase in line with growth in our Native Delivery, Outpost and Catering , and Marketplace Channels, as these channels require us to pay third-party delivery fees. However, as revenue increases, we expect that other restaurant operating costs, such as repairs and maintenance and property insurance, as a percentage of revenue will decline. Operating Expenses General and Administrative General and administrative expenses consist primarily of operations, technology, finance, legal, human resources, administrative personnel, and other personnel costs that support restaurant development and operations, as well as stock-based compensation expense and brand-related marketing. As a percentage of revenue, we expect our general and administrative expenses to vary from period to period and to decrease over time. Depreciation and Amortization Depreciation and amortization include the depreciation of fixed assets, including leasehold improvements and equipment, amortization of external costs, certain internal costs directly associated with developing computer software applications for internal use, and developed technology acquired as part of our Spyce acquisition. We expect that depreciation and amortization expenses will increase on an absolute dollar basis as we continue to build new restaurants and make investments in our digital platform. Pre-Opening Costs Pre-opening costs primarily consist of rent, wages, travel for training and restaurant opening teams, food, marketing, and other restaurant costs that we incur prior to the opening or during the major renovation of a restaurant. These expenses will increase in proportion to the increase of our new restaurant openings and major renovations. These costs are expensed as incurred. Pre-opening costs depend on the number of new restaurants and major restaurant renovations we open during each period or are planning to open during future periods. As a result, while we expect that pre-opening costs on an absolute dollar basis will fluctuate from period to period, we expect pre-opening costs to begin to increase in fiscal year 2025 in connection with the reacceleration of new restaurant growth as described above. Impairment and Closure Costs Impairment includes impairment charges related to our long-lived assets, which include property and equipment and operating lease assets. Closure costs include lease and related costs associated with closed restaurants and our vacated former Sweetgreen Support Center, including the amortization of the operating lease asset, and expenses associated with CAM and real estate taxes for previously impaired stores. Loss on Disposal of Property and Equipment Loss on disposal of property and equipment includes the net book value of assets that have been retired and consists primarily of furniture, equipment, and fixtures that were replaced in the normal course of business. 64 Table of Contents Restructuring Charges Restructuring charges are expenses that are paid in connection with the reorganization of our operations. These costs primarily include operating lease asset impairment costs related to our vacated former Sweetgreen Support Center, as well as the amortization of the underlying operating lease asset and related real estate and CAM charge s, severance and related benefits from workforce reductions at our Sweetgreen Support Center, and costs related to abandoning certain potential future restaurant sites, which are a result of our efforts to streamline our future new restaurant openings, and other related expenses. Interest Income and Interest Expense Interest income consists of interest earned on our cash and cash equivalents. Interest expense includes mainly amortization of deferred financing costs from our debt origination and commitment fees. Other Expense Other expense consists primarily of changes in the fair value of our contingent consideration liability in connection with the Spyce acquisition. We will continue to remeasure the liability associated with our contingent consideration liability until the underlying service conditions are met, or the performance period expires. Income Tax (Benefit) Expense Income tax (benefit) expense consists of federal and state tax expense on our operating activity, and changes to our deferred tax asset and deferred tax liability. For additional information, see Note 11 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. 65 Table of Contents Results of Operations Comparison of Fiscal Year 2024 and Fiscal Year 2023 The following table summarizes our results of operations for fiscal year 2024 and fiscal year 2023: Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Dollar Change Percentage Change Revenue $ 676,826 $ 584,041 $ 92,785 16 % Restaurant operating costs (exclusive of depreciation and amortization presented separately below): Food, beverage, and packaging 185,367 161,725 23,642 15 % Labor and related expenses 188,867 171,306 17,561 10 % Occupancy and related expenses 59,536 54,281 5,255 10 % Other restaurant operating costs 110,107 94,809 15,298 16 % Total cost of restaurant operations 543,877 482,121 61,756 13 % Operating expenses: General and administrative 149,942 146,762 3,180 2 % Depreciation and amortization 67,346 59,491 7,855 13 % Pre-opening costs 6,616 9,263 (2,647) (29 %) Impairment and closure costs 2,218 624 1,594 255 % Loss on disposal of property and equipment 255 687 (432) (63 %) Restructuring charges 2,276 7,437 (5,161) (69 %) Total operating expenses 228,653 224,264 4,389 2 % Loss from operations (95,704) (122,344) 26,640 (22 %) Interest income (10,942) (12,942) 2,000 (15 %) Interest expense 256 128 128 100 % Other expense 6,656 3,475 3,181 92 % Loss from operations before income taxes (91,674) (113,005) 21,331 (19 %) Income tax (benefit) expense (1,301) 379 (1,680) (443 %) Net loss $ (90,373) $ (113,384) $ 23,011 (20 %) Revenue Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Revenue $ 676,826 $ 584,041 16 % Average Unit Volume $ 2,924 $ 2,877 2 % Same-Store Sales Change 6% 4% 2 % The increase in revenue in fiscal year 2024 was primarily due to $64.5 million of incremental revenue associated with 60 Net New Restaurant Openings during fiscal years 2024 and 2023. The increase in revenue was also impacted by an increase in Comparable Restaurant Base revenue of $34.8 million, resulting in a positive Same-Store Sales Change of 6%, consisting of a 4% benefit from menu price increases and a 2% increase due to traffic and favorable product mix. The remaining $0.4 million of the increase was due to additional fiscal year-over-year comparable restaurant sales growth, which would have been reflected in our Same-Store Sales Change had we not adjusted for the misalignment in our comparable weeks resulting from fiscal year 2023 being a 53-week year, as described above. These increases were partially offset by $6.4 million of additional revenue recognized in fiscal year 2023 resulting from the 53rd week. 66 Table of Contents Restaurant Operating Costs Food, Beverage, and Packaging Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Food, beverage, and packaging $ 185,367 $ 161,725 15 % As a percentage of total revenue 27% 28% (1 %) The increase in food, beverage, and packaging costs for fiscal year 2024 was primarily due to a $24.6 million increase in food and beverage costs, primarily due to the 60 Net New Restaurant Openings during fiscal years 2024 and 2023, and higher protein cost. These increases were partially offset by a $1.4 million decrease in packaging costs, which were higher in the prior-year period due to a packaging supply chain disruption. As a percentage of revenue, the slight decrease in food, beverage, and packaging costs for fiscal year 2024 was primarily due to an increase in revenue proportional to the increase in food, beverage and packaging costs, partially offset by a small decrease in the cost of packaging due to the supply chain disruptions experienced in the prior year. Labor and Related Expenses Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Labor and related expenses $ 188,867 $ 171,306 10 % As a percentage of total revenue 28% 29% (1 %) The increase in labor and related expenses for fiscal year 2024 was primarily due to the 60 Net New Restaurant Openings during fiscal years 2023 and 2024, as well as an increase in staffing expenses, primarily due to an increase in prevailing wage rates in many of our markets. Most notable, as of April 1, 2024, California fast food wages increased as a result of AB 1228. Additionally, the increase in labor and related expenses is attributed to the $1.8 million benefit related to refundable employee retention tax credits (“ERC”) received in fiscal year 2023, issued as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) as well as an improvement in labor optimization. See Note 11 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details on the ERC. As a percentage of revenue, the decrease in labor and related expenses for fiscal year 2024 was primarily due to higher revenue and improvement in labor optimization, partially offset by wage rate increases as discussed above. This decrease was also partially offset by the $1.8 million benefit related to a refundable ERC issued as part of the CARES Act, as discussed above. Occupancy and Related Expenses Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Occupancy and related expenses $ 59,536 $ 54,281 10 % As a percentage of total revenue 9 % 9 % — % The increase in occupancy and related expenses for fiscal year 2024 was primarily due to the 60 Net New Restaurant Openings during fiscal years 2023 and 2024, partially offset by reduced occupancy rates across recently opened stores. 67 Table of Contents As a percentage of revenue , occupancy and related expenses for fiscal year 2024 was slightly below the prior year primarily due to higher revenue in the current year as well as reduced occupancy rates, as discussed above. Other Restaurant Operating Costs Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Other restaurant operating costs $ 110,107 $ 94,809 16 % As a percentage of total revenue 16 % 16 % — % The increase in other restaurant operating costs for fiscal year 2024 was primarily due to the 60 Net New Restaurant Openings during fiscal years 2023 and 2024. This includes increases in delivery fees due to higher transaction volume, credit card and online processing fees related to the increases in revenue, and increases in utilities and repair and maintenance expenses to support the existing stores and Net New Restaurant Openings described above. As a percentage of revenue, other restaurant operating costs during fiscal year 2024 remained consistent with the prior year, primarily due to higher revenue. Operating Expenses General and Administrative Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change General and administrative $ 149,942 $ 146,762 2 % As a percentage of total revenue 22 % 25 % (3 %) The increase in general and administrative expenses for fiscal year 2024 was primarily due to a $5.1 million benefit received during fiscal year 2023 from the ERC. General and administrative expense was also impacted by an increase in our investment in marketing and advertising, payroll taxes related to Founder PSUs released during the current year as discussed above, legal settlements, and an increase in spend across the Sweetgreen Support Center to support our restaurant growth. These increases were partially offset by a decrease in stock-based compensation expense primarily related to the decrease in expense associated with restricted stock units and performance-based restricted stock units issued prior to our IPO. As a percentage of revenue, general and administrative expenses for fiscal year 2024 decreased from fiscal year 2023, primarily due to the fluctuations noted above, as well as comparatively higher revenue in the current period. Depreciation and Amortization Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Depreciation and amortization $ 67,346 $ 59,491 13 % As a percentage of total revenue 10 % 10 % — % The increase in depreciation and amortization for fiscal year 2024 was primarily due to the 60 Net New Restaurant Openings during fiscal years 2023 and 2024, as well as the amortization of developed technology that was placed into service during the first half of fiscal year 2023. 68 Table of Contents As a percentage of revenue, depreciation and amortization for fiscal year 2024 was flat compared to fiscal year 2023, primarily due to comparatively higher revenue in fiscal year 2024, offset by the increases noted above. Pre-Opening Costs Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Pre-opening costs $ 6,616 $ 9,263 (29 %) As a percentage of total revenue 1 % 2 % (1 %) The decrease in pre-opening costs for fiscal year 2024 was primarily due to 25 gross new restaurant openings in 2024 compared to 38 gross restaurant openings in 2023. As a percentage of revenue, pre-opening costs decreased in fiscal year 2024 compared to fiscal year 2023 due to the variances noted above as well as comparatively higher revenue in the current year. Impairment and Closure Costs Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Impairment and closure costs $ 2,218 $ 624 255 % As a percentage of total revenue — % — % — % During fiscal year 2024 we recognized non-cash impairment charges and closure costs of $2.2 million, primarily related to the impairment of one restaurant’s property and equipment and the related operating lease asset. During fiscal year 2023 we recorded closure costs of $0.6 million related to lease and related costs associated with previously closed stores, including the amortization of operating lease assets, and expenses associated with CAM and real estate taxes. Loss on Disposal of Property and Equipment Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Loss on disposal of property and equipment $ 255 $ 687 (63 %) As a percentage of total revenue — % — % — % The decrease in loss on disposal of property and equipment was due to the timing of furniture, equipment, and fixture replacements at multiple restaurants, in addition to a fleet-wide replacement of kitchen equipment with more cost efficient items in fiscal year 2023 as compared to fiscal year 2024. Restructuring charges Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Restructuring charges $ 2,276 $ 7,437 (69 %) As a percentage of total revenue — % 1 % (1 %) 69 Table of Contents During fiscal year 2022, we implemented the Plan to manage operating expenses at our Sweetgreen Support Center, including the reduction of our real estate footprint by vacating the premises of the existing Sweetgreen Support Center and moving to a smaller office space adjacent to the existing location, severance and related benefits from workforce reductions affecting approximately 5% of employees at the Sweetgreen Support Center, abandoning certain potential future restaurant sites in an effort to streamline our future new restaurant openings, and other related expenses. During fiscal year 2024, stemming from the Plan, we recorded restructuring charges of $2.3 million primarily related to the amortization of the underlying operating lease asset and related real estate and CAM charges for our vacated former Sweetgreen Support Center. During fiscal year 2023, stemming from the Plan, we recorded restructuring charges of $7.4 million primarily related to operating lease asset impairment costs from our vacated former Sweetgreen Support Center as well as the amortization of the underlying operating lease asset and related real estate and CAM charges. Interest Income and Interest Expense Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Interest income $ (10,942) $ (12,942) (15 %) Interest expense 256 128 100 % Total income expense (10,686) (12,814) (17 %) As a percentage of total revenue (2) % (2) % — % The decrease in interest income, net, was primarily due to a lower cash balance in our money market accounts during fiscal year 2024 as compared to fiscal year 2023. Other Expense Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Other expense $ 6,656 $ 3,475 92 % As a percentage of total revenue 1 % 1 % — % The change in other expense in fiscal year 2024 was primarily due to a change in the fair value of our contingent consideration compared to the prior year, which was issued as part of the Spyce acquisition in the third quarter of fiscal year 2021. Income Tax (Benefit) Expense Fiscal Year Ended (dollar amounts in thousands) December 29, 2024 December 31, 2023 Percentage Change Income tax (benefit) expense $ (1,301) $ 379 (443 %) As a percentage of total revenue — % — % — % Our effective tax rate for the fiscal years ended 2024 and 2023 was 1.4% and (0.3%), re spectively, primarily due to the full valuation allowance on our net deferred tax assets. 70 Table of Contents Comparison of Fiscal Year 2023 and Fiscal Year 2022 The following table summarizes our results of operations for fiscal year 2023 and fiscal year 2022: Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Dollar Change Percentage Change Revenue $ 584,041 $ 470,105 $ 113,936 24 % Restaurant operating costs (exclusive of depreciation and amortization presented separately below): Food, beverage, and packaging 161,725 130,136 31,589 24 % Labor and related expenses 171,306 147,474 23,832 16 % Occupancy and related expenses 54,281 45,238 9,043 20 % Other restaurant operating costs 94,809 77,971 16,838 22 % Total cost of restaurant operations 482,121 400,819 81,302 20 % Operating expenses: General and administrative 146,762 187,367 (40,605) (22 %) Depreciation and amortization 59,491 46,471 13,020 28 % Pre-opening costs 9,263 11,523 (2,260) (20 %) Impairment and closure costs 624 2,542 (1,918) (75 %) Loss on disposal of property and equipment 687 278 409 147 % Restructuring charges 7,437 14,442 (7,005) (49 %) Total operating expenses 224,264 262,623 (38,359) (15 %) Loss from operations (122,344) (193,337) 70,993 (37 %) Interest income (12,942) (5,143) (7,799) 152 % Interest expense 128 83 45 54 % Other expense 3,475 819 2,656 324 % Loss from operations before income taxes (113,005) (189,096) 76,091 (40 %) Income tax provision 379 1,345 (966) (72 %) Net loss $ (113,384) $ (190,441) $ 77,057 (40 %) Revenue Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Revenue $ 584,041 $ 470,105 24 % Average Unit Volume $ 2,877 $ 2,905 (1 %) Same-Store Sales Change 4 % 13 % (9 %) The increase in revenue in fiscal year 2023 was primarily due to $92.2 million of incremental revenue associated with 71 Net New Restaurant Openings during fiscal years 2023 and 2022. The increase in revenue was also impacted by an increase in Comparable Restaurant Base revenue of $21.3 million, resulting in a positive Same-Store Sales Change of 4%, consisting of a 4% benefit from menu price increases as traffic/product mix remained flat. In addition, we had an additional week of revenue in fiscal year 2023. The increase in revenue was partially offset by the negative impact of restaurant closures in fiscal year 2023, as well as an increase in discounts associated with the launch of our Sweetpass+ loyalty program. 71 Table of Contents Restaurant Operating Costs Food, Beverage, and Packaging Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Food, beverage, and packaging $ 161,725 $ 130,136 24 % As a percentage of total revenue 28 % 28 % — % The increase in food, beverage, and packaging costs for fiscal year 2023 was primarily due to a $26.6 million increase in food and beverage costs and a $5.0 million increase in packaging cost. This was primarily due to the 71 Net New Restaurant Openings during fiscal years 2023 and 2022 as well as the use of higher-cost proteins. In addition, during fiscal year 2023 , we experienced supply chain disruptions for our bowls and plates, which resulted in the use of alternative packaging solutions with higher costs of materials. As a percentage of revenue, food, beverage, and packaging costs for fiscal year 2023 remained consistent with the prior year primarily as a result of the increase in costs of packaging, up streaming initiatives, and a larger mix of higher cost proteins, offset by menu pricing increases. Labor and Related Expenses Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Labor and related expenses $ 171,306 $ 147,474 16 % As a percentage of total revenue 29 % 31 % (2 %) The increase in labor and related expenses for fiscal year 2023 was primarily due to the 71 Net New Restaurant Openings during fiscal years 2022 and 2023. T he increase was also due to an increase in staffing expenses across all of our locations, primarily due to an increase in prevailing wage rates in many of our markets as a result of continued wage rate inflation in the industry. These increases were partially offset by a $1.8 million benefit related to refundable employee retention tax credits (“ERC”) issued as part of the Coronavirus Aid, Relief and Economic Security Act (the “CARES Act”) as well as an improvement in labor optimization. See Note 11 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details on the ERC. As a percentage of revenue, the decrease in labor and related expenses for fiscal year 2023 was primarily due to higher revenue, improvement in labor optimization and the $1.8 million ERC benefit as discussed above. Occupancy and Related Expenses Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Occupancy and related expenses $ 54,281 $ 45,238 20 % As a percentage of total revenue 9 % 10 % (1 %) The increase in occupancy and related expenses for fiscal year 2023 was primarily due to the 71 Net New Restaurant Openings during fiscal years 2023 and 2022. As a percentage of revenue, the decrease in occupancy and related expenses for fiscal year 2023 was primarily due to an increase in locations in areas with lower occupancy cost as well as higher revenue. 72 Table of Contents Other Restaurant Operating Costs Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Other restaurant operating costs $ 94,809 $ 77,971 22 % As a percentage of total revenue 16 % 17 % (1 %) The increase in other restaurant operating costs for fiscal year 2023 was primarily due to the 71 Net New Restaurant Openings during fiscal years 2023 and 2022. This includes increases in utilities and repair and maintenance expenses, delivery fees due to higher transaction volume, credit card and online processing fees related to the increases in revenue, and kitchen, cleaning and related supplies to support the Net New Restaurant Openings described above. As a percentage of revenue, the decrease in other restaurant operating costs during fiscal year 2023 was primarily due to higher revenue. Operating Expenses General and Administrative Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change General and administrative $ 146,762 $ 187,367 (22 %) As a percentage of total revenue 25 % 40 % (15 %) The decrease in general and administrative expenses for fiscal year 2023 was primarily due to a $29.2 million decrease in stock-based compensation expense, a $5.2 million decrease in management salaries and benefits, including bonus, the benefit of $5.1 million of ERC, and a $1.6 million decrease in liability insurance. Additionally, we had decreases in research and prototyping costs, rent and related costs, travel-related expenses, and office systems. These decreases were partially offset by an increase in consulting fees, non-income taxes, and expense related to the amortization of costs associated with the implementation of our cloud computing arrangements in relation to our new ERP system. As a percentage of revenue, general and administrative expenses for fiscal year 2023 decreased from fiscal year 2022, primarily due to the fluctuations noted above, as well as comparatively higher revenue in the current period. Depreciation and Amortization Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Depreciation and amortization $ 59,491 $ 46,471 28 % As a percentage of total revenue 10 % 10 % — % The increase in depreciation and amortization for fiscal year 2023 was primarily due to the 71 Net New Restaurant Openings during fiscal years 2023 and 2022. As a percentage of revenue, depreciation and amortization for fiscal year 2023 was flat compared to fiscal year 2022, primarily due to comparatively higher revenue in fiscal year 2023, offset by the increases noted above. 73 Table of Contents Pre-Opening Costs Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Pre-opening costs $ 9,263 $ 11,523 (20 %) As a percentage of total revenue 2 % 2 % — % The decrease in pre-opening costs for fiscal year 2023 was primarily due to improved cost efficiencies across 38 new restaurant openings in 2023 compared to 39 new restaurant openings in 2022. As a percentage of revenue, pre-opening costs were relatively flat in fiscal year 2023 compared to fiscal year 2022. Impairment and Closure Costs Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Impairment of long-lived assets $ 624 $ 2,542 (75 %) As a percentage of total revenue — % 1 % (1 %) During fiscal year 2023, we recognized non-cash impairment charges of $0.6 million related to lease and related costs associated with previously closed stores, including the amortization of operating lease asset, and expenses associated with CAM and real estate taxes. During fiscal year 2022, we recognized non-cash impairment charges of $2.0 million related to the property and equipment of three of our restaurants and non-cash impairment charges of $0.4 million related to the operating lease assets of three of our restaurants, as well as $0.1 million of closure costs related to one store previously operated by Spyce. Loss on Disposal of Property and Equipment Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Loss on disposal of property and equipment $ 687 $ 278 147 % As a percentage of total revenue — % — % — % The increase in loss on disposal of property and equipment was due to the timing of furniture, equipment and fixture replacements at multiple restaurants, in addition to a fleet-wide replacement of kitchen equipment with more cost efficient items in fiscal year 2023 as compared to fiscal year 2022. Restructuring charges Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Restructuring charges $ 7,437 $ 14,442 (49 %) As a percentage of total revenue 1 % 3 % (2 %) 74 Table of Contents During fiscal year 2022, we implemented the Plan to manage operating expenses at our Sweetgreen Support Center, and incurred total pre-tax restructuring and related charges of approximately $14.4 million. This included a $13.0 million non-cash restructuring expense, due to a reduction of our real estate footprint by vacating the premises of the existing Sweetgreen Support Center and moving to a smaller office space adjacent to the existing location, of which $6.8 million related to impairment of the long-lived assets, $5.8 million and $0.4 million related to impairment of our operating lease asset and closure costs, respectively, associated with the Sweetgreen Support Center, $0.6 million of severance and related benefits from workforce reductions affecting approximately 5% of employees at the Sweetgreen Support Center, $0.6 million of costs related to abandoning certain potential future restaurant sites in an effort to streamline our future new restaurant openings, and $0.2 million of other related expenses. During fiscal year 2023, stemming from the Plan, we recorded restructuring charges of $7.4 million primarily related to operating lease asset impairment costs from our vacated former Sweetgreen Support Center as well as the amortization of the underlying operating lease asset and related real estate and CAM charges. Interest Income and Interest Expense Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Interest income $ (12,942) $ (5,143) 152 % Interest expense $ 128 $ 83 54 % Total income expense (12,814) (5,060) 153 % As a percentage of total revenue (2) % (1) % (1 %) The increase in interest income, net was primarily due to higher interest rates on our money market accounts during fiscal year 2023. Other Expense Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Other expense $ 3,475 $ 819 324 % As a percentage of total revenue 1 % — % 1 % The change in other expense in fiscal year 2023 was primarily due to a change in the fair value of our contingent consideration compared to the prior year, which was issued as part of the Spyce acquisition in the third quarter of fiscal year 2021. Income Tax Expense Fiscal Year Ended (dollar amounts in thousands) December 31, 2023 December 25, 2022 Percentage Change Income tax expense $ 379 $ 1,345 (72 %) As a percentage of total revenue — % — % — % Our effective tax rate for the fiscal years ended 2023 and 2022 was (0.3%) and (0.7%), respectively, primarily due to the full valuation allowance on our net deferred tax assets 75 Table of Contents Liquidity and Capital Resources Sources and Material Cash Requirements To date, we have funded our operations through proceeds received from previous common stock and preferred stock issuances, our ability to obtain lending commitments and through cash flow from operations. Additionally, in November 2021, we completed our IPO, from which we received net proceeds of $384.7 million from sales of our shares of Class A common stock, after deducting underwriting discounts and commissions and offering expenses. As of December 29, 2024 and December 31, 2023, we had $214.8 million and $257.2 million in cash and cash equivalents, respectively. Based on our current operating plan, we believe our existing cash and cash equivalents, will be sufficient to fund our operating lease obligations, capital expenditures, and working capital needs for at least the next 12 months. We believe we will meet longer-term expected future cash requirements and obligations through a combination of cash flows from operating activities and available cash balances. If we are unable to generate positive operating cash flows, additional debt and equity financings may be necessary to sustain future operations, and there can be no assurance that such financing will be available to us on commercially reasonable terms, or at all. Our primary liquidity and capital requirements are for new restaurant development, including related to deployment of our Infinite Kitchen, initiatives to improve the customer experience in our restaurants, research and development costs, marketing-related costs, working capital and general corporate needs. During the fiscal year ended December 29, 2024, we made a cash payment of approximately $3.9 million related to the Spyce milestone payment, which was included within contingent consideration in our consolidated balance sheets for the fiscal year ended December 31, 2023. See Note 3 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K for further details. We have not required significant working capital because customers generally pay using cash or credit and debit cards and, as a result, our operations do not require significant receivables. Additionally, our operations do not require significant inventories due, in part, to our use of numerous fresh ingredients. Additionally, we are able to sell most of our inventory items before payment is due to the supplier of such items. The following table presents our material cash requirements for future periods: (in thousands) Total 2025 2026 2027 2028 2029 Thereafter Operating leases (1) $ 427,655 61,431 $ 61,647 $ 58,124 $ 52,188 $ 50,261 $ 144,004 (1) See Note 8 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Prior Credit Facility During fiscal year 2024, we were party to a First Amended and Restated Revolving Credit, Delayed Draw Term Loan and Security Agreement (as amended, the “Credit Facility”) with EagleBank. We did not renew the Credit Facility in 2024 and it expired pursuant to its terms on December 13, 2024. Cash Flows The following table summarizes our cash flows for the periods indicated: Fiscal Year Ended (in thousands) December 29, 2024 December 31, 2023 December 25, 2022 Net cash provided by (used in) operating activities 43,390 26,480 (43,169) Net cash used in investing activities (92,211) (95,665) (102,023) Net cash (used in) provided by financing activities 8,895 (5,199) 4,632 Net increase (decrease) in cash and cash equivalents and restricted cash $ (39,926) $ (74,384) $ (140,560) 76 Table of Contents Operating Activities For fiscal year 2024, cash provided by (used in) operating activities increased $16.9 million compared to fiscal year 2023, primarily due to a $20.9 million reduction in net loss after excluding non-cash items and a $4.0 million favorable working capital fluctuation, which is primarily related to the timing of payroll and other payments in the ordinary course of business, offset by the $3.4 million receipt of ERC in fiscal year 2023. For fiscal year 2023 , cash provided by (used in) operating activities increased $69.6 million compared to fiscal year 2022, primarily due to a $54.1 million reduction in loss after excluding non-cash items, a $15.6 million favorable working capital fluctuation, which is primarily related to the timing of payroll and other payments in the ordinary course of business, and a $3.4 million receipt of our ERC. Investing Activities For fiscal year 2024, cash used in investing activities was $92.2 million, a decrease of $3.5 million compared to fiscal year 2023. Investing activities in fiscal year 2024 consisted primarily of purchases of property and equipment of $84.5 million related to 25 gross new restaurant openings (excluding tenant improvement allowances), restaurants in process, renovations, and prepayments associated with the deployment of our Infinite Kitchen units and other restaurant-related equipment. In addition we had cash outflow for fiscal year 2024 of $7.7 million related to purchase of intangible assets. For fiscal year 2023, cash used in investing activities was $95.7 million, a decrease of $6.4 million compared to fiscal year 2022. Investing activities in fiscal year 2023 consisted primarily of purchases of property and equipment of $89.7 million related to 38 gross new restaurant openings (excluding tenant improvement allowances), restaurants in process, renovations, and prepayments associated with restaurant-related equipment. In addition, we had a cash outflow for fiscal year 2023 of $6.1 million related to the purchase of intangible assets. For fiscal year 2022, cash used in investing activities was $102.0 million. Investing activities in fiscal year 2022 consisted primarily of purchases of property and equipment of $96.9 million related to 39 gross new restaurant openings (excluding tenant improvement allowances), restaurants in process, renovations, and prepayments associated with restaurant-related equipment. In addition, we had a cash outflow for fiscal year 2022 of $5.4 million related to purchase of intangibles assets. Financing Activities For fiscal year 2024, cash (used in) provided by financing activities increased $14.1 million compared to fiscal year 2023, primarily due to the in crease in proceeds received from stock option exercises of $7.4 million and a $6.6 million decrease in Spyce milestone payments . For fiscal year 2023, cash (used in) provided by financing activities increased $9.8 million compared to fiscal year 2022, primarily due to the $10.4 million Spyce milestone true-up payment, offset by an in crease in proceeds received from stock option exercises of $0.6 million. Critical Accounting Estimates The preparation of financial statements in conformity with GAAP requires us to make certain estimates and assumptions. These estimates and assumptions affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the balance sheet date, as well as reported amounts of revenue and expenses during the reporting period. Our most significant estimates and judgments involve difficult, subjective, or complex judgements made by management. Actual results may differ from these estimates. To the extent that there are differences between our estimates and actual results, our future financial statement presentation, financial condition, results of operations, and cash flows will be affected. We believe that the accounting policies described below involve a greater degree of judgment and complexity. Accordingly, these are the policies we believe are the most critical to aid in fully understanding and evaluating 77 Table of Contents our financial condition and results of operations. For further information, see Note 1 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. Leases We determine if a contract contains a lease at inception. Our material operating leases consist of restaurant locations and office space. Our leases generally have remaining terms of one to ten years and most include options to extend the leases for additional five-year periods. Generally, the lease term is the minimum of the noncancelable period of the lease or the lease term inclusive of reasonably certain renewal periods up to a term of 20 years. If the estimate of our reasonably certain lease term were changed, our rent expense could differ materially. Operating lease assets and liabilities are recognized at time of lease inception. Operating lease liabilities represent the present value of lease payments not yet paid. We made the policy election to combine lease and non-lease components, and we also consider fixed common area maintenance (“CAM”) part of our fixed future lease payments. Fixed CAM is also included in our operating lease liability. Operating lease assets represent our right to use an underlying asset and are based upon the operating lease liabilities adjusted for prepayments, initial direct costs, lease incentives, and impairment of operating lease assets. To determine the present value of lease payments not yet paid, we estimate incremental borrowing rates corresponding to the reasonably certain lease term. As we have no outstanding debt, we estimate this rate based on prevailing financial market conditions, comparable company and credit analysis, and management judgment. If the estimate of our incremental borrowing rate were changed, our operating lease assets and liabilities could differ materially. Impairment and Closure Costs Long-lived assets are reviewed for recoverability at the lowest level in which there are identifiable cash flows (asset group). The asset group is at the store-level for restaurant assets and the corporate-level for corporate assets. The carrying amount of a store asset group includes stores’ property and equipment, primarily leasehold improvements and operating lease assets. Long-lived assets, including property and equipment, operating lease assets, and internally developed software, are reviewed by management for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. When events or circumstances indicate that impairment may be present, we evaluate the probability that future undiscounted net cash flows received will be less than the carrying amount of the asset group. If projected future undiscounted cash flows are less than the carrying value of an asset group, then such assets are written down to their fair values. We use a discounted cash flows model to measure the fair value of an asset group. An impairment charge will be recognized in the amount by which the carrying amount of the store asset group exceeds its fair value. A number of significant assumptions and estimates are involved in the application of the model to forecast operating cash flows, which are largely unobservable inputs and, accordingly, are classified as Level 3 inputs within the fair value hierarchy. Assumptions used in these forecasts are consistent with internal planning, and include revenue growth rates, gross margins, and operating expense in relation to the current economic environment and our incremental borrowing rate, future expectations, competitive factors in its various markets, inflation, revenue trends, market rents for the operating lease and other relevant economic factors that may impact the store under evaluation. Additionally, for corporate-level corporate assets for operating lease assets, assumptions used include monthly market rent, annual rent increases, cash flow period, free rent period, estimated tenant improvements and discount rate. Any material changes in the sum of our undiscounted cash flow estimates resulting from different assumptions used as of December 29, 2024 for those store asset groups included in our evaluation could result in a material change in the long-lived asset impairment charge for fiscal year 2024. If actual performance does not achieve the projections, or if the assumptions used change in the future, we may be required to recognize impairment charges in future periods, and such charges could be material. Our projections are estimates, which could vary significantly, either favorably or unfavorably, from actual results if future economic conditions, consumer demand and competitive environments differ from our expectations. At this time, we do not believe that there is a reasonable likelihood that there will be a material change in the future estimates or assumptions that we use to calculation our impairment charge. We recorded non-cash impairment charges of $1.7 million during fiscal year December 29, 2024 associated with’ one location, of which $1.3 million related to certain property and equipment and $0.4 million related to the 78 Table of Contents operating use asset . We recorded non-cash impairment charges of $4.3 million during the fiscal year ended December 31, 2023, wherein the entire $4.3 million balance was related to the operating lease asset for our former Sweetgreen Support Center previously vacated during fiscal year 2022, and was recorded under restructuring charges within the consolidated statement of operations. Contingent Consideration Due to certain conversion features, the contingent consideration issued as part of the Spyce acquisition is considered a liability in accordance with ASC 480. The liability associated with the contingent consideration is initially recorded at fair value upon issuance date and is subsequently re-measured to fair value at each reporting date. For additional information, see Note 3 to our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K. The initial fair value of the liability for the contingent consideration was $16.4 million and was included as part of the purchase price for the Spyce acquisition. The contingent consideration as of December 29, 2024 and December 31, 2023 wa s $15.0 million a nd $8.4 million, respectively. Additionally, for the fiscal year ended December 31, 2023, we recorded the current portion of the contingent consideration of $6.0 million within other current liabilities in the consolidated balance sheet within this Annual Report on Form 10-K. Changes in fair value of the contingent consideration are recognized within other expense, net in the accompanying consolidated statement of operations. Recent Accounting Pronouncements See Note 1 to our audited consolidated financial statements elsewhere in this Annual Report on Form 10-K for recently adopted accounting pronouncements and recently issued accounting pronouncements not yet adopted as of the date of this report. ITEM 7A. QUALITATIVE AND QUANTITATIVE DISCLOSURES ABOUT MARKET RISK We have operations solely within the United States, and we are exposed to market risks in the ordinary course of our business. The primary risks we face are commodity price risks, interest rate risk, effects of inflation, and macroeconomic risks. Commodity Price Risks We are exposed to commodity price risks. Many of the ingredients we use to prepare our food, as well as our packaging materials and utilities to run our restaurants, are ingredients or commodities that are affected by the price of other commodities, exchange rates, inflation, foreign demand, weather, seasonality, production, availability and other factors outside our control. We work closely with our suppliers and use a mix of forward pricing protocols under which we agree with our supplier on fixed prices for deliveries at some time in the future, fixed pricing protocols under which we agree on a fixed price with our supplier for the duration of that protocol, formula pricing protocols under which the prices we pay are based on a specified formula related to the prices of the goods, such as spot prices, and range forward protocols under which we agree on a price range for the duration of that protocol. Generally, our pricing agreements with suppliers range from up 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. Increases in ingredient prices could adversely affect our results if we choose for competitive or other reasons not to increase menu prices at the same rate at which ingredient costs increase, or if menu price increases result in customer resistance. We also could experience shortages of key ingredients if our suppliers need to close or restrict operations due to unforeseen events. Due to the recent pace of inflation and other global supply chain risks, including extreme weather conditions, suppliers and distributors have, and could continue to, attempt to renegotiate our existing contracts to increase prices, as well as assess certain fuel surcharges. These changes could have a negative impact on our 79 Table of Contents commodity prices. For example, in the fourth quarter of fiscal year 2024, as a result of extreme weather conditions, we experienced supply chain disruptions for tomatoes and cucumbers, which resulted in higher prices for those products or resulted in temporarily discontinuing those products in certain geographic markets. 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. We continue to assess the current environment, work with our suppliers and distributors and create certain contingency plans to mitigate any negative impact. Changing Interest Rates We are exposed to interest rate risk through fluctuations of interest rates on our investments through our cash in our money market accounts. Changes in interest rates affect the interest income we earn, and therefore impact our cash flows and results of operations. As of December 29, 2024 and December 31, 2023, we ha d $214.8 million and $257.2 million of cash and cash equivalents, respectively, consisting of bank accounts and money market funds, and $2.6 million and $0.1 million, respectively, o f restricted cash relating to certificates of deposit that are collateral for letters of credit to our lease agreements and cash from the Spyce acquisition. Interest-earning instruments carry a degree of interest rate risk. We do not enter into investments for trading or speculative purposes and have not used any derivative financial instruments to manage our interest rate risk exposure. Due to the short-term nature of our investments, we have not been exposed to, nor do we anticipate being exposed to, material risks due to changes in interest rates. A hypothetical 10% change in interest rates would not have had a material impact on our results of operations for fiscal years 2024 and 2023. Effects of Inflation We have a substantial number of hourly employees who are paid wage rates at or based on the applicable federal, state, or local minimum wage, and increases in the minimum wage, and other upward pressure on wage rates, including inflation will increase our labor costs. While we have been able to partially offset inflation and other changes in the costs of core operating resources by gradually increasing menu prices, coupled with more efficient purchasing practices, productivity improvements and greater economies of scale, there can be no assurance that we will be able to continue to do so in the future, particularly if inflation continues to increase at its recent pace. From time to time, competitive conditions could limit our menu pricing flexibility. In addition, macroeconomic conditions could make additional menu price increases imprudent. There can be no assurance that future cost increases can be offset by increased menu prices or that increased menu prices will be fully absorbed by our customers without any resulting change to their visit frequencies or purchasing patterns. In addition, there can be no assurance that we will generate positive Same Store Sales Change in an amount sufficient to offset inflationary or other cost pressures. Macroeconomic Risks Current macroeconomic conditions, such as inflation and higher interest rates, increase the risk of an economic downturn. An economic downturn could increase unemployment and lower consumer confidence. Macroeconomic conditions also negatively impact consumer discretionary spending and could negatively impact our Restaurant Level Profit. 80 Table of Contents