Item 7. Management’s Discussion and Analysis
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 2025 was a 52-week period that ended December 28, 2025, fiscal year 2024 was a 52-week period that ended December 29, 2024, and fiscal year 2023 was a 53-week period that ended December 31, 2023. 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.
A discussion regarding our financial condition and results of operations for the year ended December 28, 2025, compared to the year ended December 29, 2024, is presented below. A discussion regarding our financial condition and results of operations for the year ended December 29, 2024, compared to the year ended December 31, 2023, can be found in Item 7. “Management’s Discussion and Analysis of Financial Condition and Results of Operations” in our Annual Report on Form 10-K for the year ended December 29, 2024, filed with the SEC on February 27, 2025.
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 28, 2025, we owned and operated 281 restaurants in 24 states and Washington, D.C.
Opening new restaurants, including those with Infinite Kitchen technology, is an important driver of our revenue growth. In fiscal years 2025, 2024, and 2023, we had 35, 25, and 35 Net New Restaurant Openings. One of our strategies is to grow our footprint in both existing and new U.S. markets and, over time, internationally.
As of the end of fiscal year 2025, we utilized the Infinite Kitchen, a kitchen automation technology in 30 of our 281 restaurants. We incorporate the 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 18 of our new restaurants during fiscal year 2025 and 10 of our restaurants during fiscal year 2024. We continue to learn from these deployments and are incorporating our findings into future deployments.
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. We have been impacted by a decrease in consumer spending during fiscal year 2 025, which we expect to continue at least in the near term. As we focus on discipline with respect to costs and allocation of capital in connection with the Sweet Growth Transformation Plan, we will be opening fewer restaurants in the near term. In fiscal year 2026, we expect approximately 15 Net New Restaurant Openings, with about half featuring Infinite Kitchen units.
We have historically been able to partially offset rising costs - including inflation, tariffs, wage increases and increases in cost of goods sold - through gradual menu price increases, customer service and delivery fees, and operational efficiencies . There can be no assurance that we will be able to continue this practice in the current or future macroeconomic or regulatory environment. We also continue to see variability in our customer traffic patterns, including as a result of many workplaces adopting remote or hybrid models, which has shifted sales away from our In-Store Channel. Our Native Delivery, Outpost and Catering, and Marketplace Channels carry
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higher costs due to third-party fees, elevated refund rates, and promotional activity, and a continued shift in sales mix toward these channels could pressure margins. However, we expect margins on these channels to improve over time as we achieve greater scale.
For fiscal year 2025, tariffs had minimal net impact on our average new unit development cost due to mitigation efforts including advance purchasing, strategic sourcing, and favorable trade policy changes. We expect to continue to be able to mitigate most of these costs in future periods.
For Infinite Kitchen units, the impact of tariffs in fiscal year 2025 was mitigated, in part, by our prepurchase of certain key materials. Tariffs increased the cost of Infinite Kitchen units by approximately 5% in fiscal year 2025. Going forward, we expect the cost of Infinite Kitchen units to modestly increase when taking into account the expected continuing impact of tariffs and additional amounts due to Wonder pursuant to our supply agreement with Wonder described below.
Management remains committed to mitigating the impact of tariff costs across our supply chain, restaurant build-outs and equipment through ongoing sourcing and cost-optimization strategies that we and our suppliers have implemented. Any future changes to the U.S. government’s trade policies may impact these estimates.
Recent Developments
On December 29, 2025, subsequent to fiscal year 2025 year end, we sold Spyce and certain assets relating to the Infinite Kitchen and other related kitchen automation technology and agreed to provide certain transition services to Wonder (such transaction, the “Spyce Sale”). At the time of the sale, we entered into a supply agreement and a license agreement in which Wonder has agreed to sell Infinite Kitchen units to us on a long-term basis and provide certain services related to the Infinite Kitchen units, including commissioning, support and maintenance.
Sales Channel Mix
Our revenue is derived from sales of food and beverage to customers through our five sales channels. We own and operate all of these channels other than our Marketplace Channel, which is operated by various third-party delivery marketplaces.
1. In-Store Channel. Sales to customers who make in-store purchases in our restaurants. Purchases made via cash or credit card are referred to as 'Non-Digital' transactions. Purchases made via digital scan-to-pay or via digital scan-to-earn and scan-to-redeem associated with our SG Rewards loyalty program are included as part of our Owned Digital Channels (defined below) .
2. Marketplace Channel. Sales to customers for delivery or pick-up made through third-party delivery marketplaces.
3. Native Delivery Channel. Sales to customers for delivery made through the Sweetgreen website or mobile app.
4. Outpost and Catering Channel. Sales to customers for delivery made through the Sweetgreen website or mobile app to our Outposts, which are our designated offsite drop-off points at offices, residential buildings, and hospitals. In addition, our Outpost and Catering Channel includes our catering offerings, which refer to sales to customers made through our catering website for pickup at one of our restaurants or delivery to a customer-specified address.
5. Pick-Up Channel. Sales to customers made for pick-up at one of our restaurants through the Sweetgreen website or mobile app.
Key Performance Metrics
We track the following key performance metrics to evaluate our performance, identify trends, formulate financial projections, and make strategic decisions. We believe that these key performance metrics 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 are presented for supplemental
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informational purposes only, should not be considered a substitute for financial information presented in accordance with accounting principles generally accepted in the United States of America (“ GAAP”), and may be different from similarly titled metrics or measures presented by other companies.
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 (1)
December 29, 2024 (1)
December 31, 2023 (1)
Net New Restaurant Openings
35 25 35
Average Unit Volume (as adjusted) (2)(3)
$ 2,677 $ 2,924 $ 2,877
Same-Store Sales Change (as adjusted) (%) (3)(4)
(7.9%) 6.2% 4.4%
Total Digital Revenue Percentage
61.8% 56.4% 58.6%
Owned Digital Revenue Percentage
34.6% 30.4% 36.4%
(1) We operate on a 52/53 week fiscal year end that ends on the last Sunday of the calendar year. Fiscal years 2025 and 2024 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 three restaurants from the Comparable Restaurant Base as of the end of fiscal year 2025 and one restaurant as of the end of fiscal year 2024. Such adjustments did not result in a material change to AUV. No restaurants were excluded as of the end of fiscal year 2023.
(3) For fiscal year 2023, Average Unit Volume and Same-Store Sales Change were adjusted to exclude the 53rd week of operations for comparative purposes. See below under “Average Unit Volume” and “Same-Store Sales Change” additional details.
(4) Our results for the fiscal year ended December 28, 2025 have been adjusted to reflect the temporary closures of 15 restaurants and permanent closures of three restaurants, which were excluded from the calculation of Same-Store Sales change. Our results for the fiscal year ended December 29, 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. Such adjustments did not have a material impact on our Same-Store Sales Change for 2025, 2024, or 2023.
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.
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.
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. A restaurant is considered to have had a material, temporary closure if it had no operations for a consecutive period of at least 30 days. We excluded three restaurants from the Comparable Restaurant Base as of the end of fiscal year 2025, and one restaurant as of the end of fiscal year 2024. Such exclusions did not result in a material change to AUV. No restaurants were excluded from the Comparable Restaurant Base as of the end of fiscal year 2023.
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 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-
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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 2025, we excluded 18 restaurants from our Same-Store-Sales Change, including 15 temporary closures and three permanent closures. During fiscal year 2024, we excluded eight restaurants from our Same-Store Sales Change, and du ring fiscal year 2023, we excluded two rest aurants from our Same-Store Sales Change. These adjustments d id not result in a material change to Same-Store Sales Change for 2025, 2024, or 2023.
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 all channels except Non-Digital transactions made through our In-Store Channel. Our Owned Digital Revenue Percentage is the percentage of our revenue attributed to purchases made through our Owned Digital Channels, which include our Pick-Up Channel, Native Delivery Channel, Outpost and Catering Channel (excluding catering orders placed through third-party platforms), and purchases made in our In-Store Channel via digital scan-to-pay, or digital scan-to-earn and scan-to-redeem associated with our SG Rewards loyalty program. With the introduction of our new loyalty program in the second quarter of fiscal year 2025, we have experienced and anticipate continuing to see an increase in Owned Digital sales, which is realized in our Owned Digital Revenue Percentage and our Total Digital Revenue Percentage.
Results of Operations
Comparison of Fiscal Year 2025 and Fiscal Year 2024
The following table summarizes our results of operations for fiscal year 2025 and fiscal year 2024:
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Dollar
Change Percentage
Change
Revenue
$ 679,474 $ 676,826 $ 2,648 0.4 %
Restaurant operating costs (exclusive of depreciation and amortization presented separately below):
Food, beverage, and packaging
193,678 185,367 8,311 4.5 %
Labor and related expenses
196,571 188,867 7,704 4.1 %
Occupancy and related expenses
65,417 59,536 5,881 9.9 %
Other restaurant operating costs
120,277 110,107 10,170 9.2 %
Total cost of restaurant operations
575,943 543,877 32,066 5.9 %
Operating expenses:
General and administrative
143,401 149,942 (6,541) (4.4 %)
Depreciation and amortization
71,537 67,346 4,191 6.2 %
Pre-opening costs
10,785 6,616 4,169 63.0 %
Impairment and closure costs
12,065 2,218 9,847 444.0 %
Loss on disposal of property and equipment
1,431 255 1,176 461.2 %
Restructuring charges 3,630 2,276 1,354 59.5 %
Total operating expenses
242,849 228,653 14,196 6.2 %
Loss from operations
(139,318) (95,704) (43,614) 45.6 %
Interest income
(6,548) (10,942) 4,394 (40.2 %)
Interest expense
19 256 (237) (92.6 %)
Other expense
1,230 6,656 (5,426) (81.5 %)
Loss from operations before income taxes
(134,019) (91,674) (42,345) 46.2 %
Income tax expense (benefit)
46 (1,301) 1,347 (103.5 %)
Net loss
$ (134,065) $ (90,373) $ (43,692) 48.3 %
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Revenue
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Revenue
$ 679,474 $ 676,826 0.4 %
Average Unit Volume
$ 2,677 $ 2,924 (8.4 %)
Same-Store Sales Change
(7.9%) 6.2% (14.1 %)
Revenue increased in fiscal year 2025 compared to fiscal year 2024, primarily due to $58.2 million of incremental revenue associated with 60 Net New Restaurant Openings during fiscal years 2025 and 2024. This was partially offset by a decrease in Comparable Restaurant Base revenue of $53.0 million, resulting in a negative Same-Store Sales Change of 7.9%, primarily reflecting a 10.4% decrease in traffic, partially offset by a 2.5% benefit from menu price increases. Traffic softness reflected a more selective consumer environment and the transition from our former Sweetpass+ program to SG Rewards. While the loyalty transition created near-term headwinds, it positions us to drive more sustainable engagement over time.
In 2026, we anticipate full-year Same-Store Sales Change between (4.0)% to (2.0)%.
Restaurant Operating Costs
Food, Beverage, and Packaging
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Food, beverage, and packaging
$ 193,678 $ 185,367 4.5 %
As a percentage of total revenue
28.5% 27.4% 1.1 %
As a percentage of revenue, food, beverage, and packaging costs in fiscal year 2025 increased compared to fiscal year 2024, primarily driven by higher protein costs resulting from higher overall ingredient usage and waste, including increased chicken and tofu portions, higher ingredient and packaging costs related to recently imposed tariffs and duties, as well as a one time write-off of discontinued materials. These increases were partially offset by menu price increases.
For fiscal year 2025, we realized a tariff and duty impact from our food, beverage, and packaging supply chain of approximately 27 basis points. As tariff costs are absorbed into our supplier pricing, the impact may not be separately identifiable in future periods, and may vary based on tariff policy changes.
Labor and Related Expenses
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Labor and related expenses
$ 196,571 $ 188,867 4.1 %
As a percentage of total revenue
28.9% 27.9% 1.0 %
As a percentage of revenue, labor and related expenses for fiscal year 2025 increased compared to fiscal year 2024, primarily due to deleverage from lower sales volume as well as wage inflation, partially offset by menu price increases.
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Occupancy and Related Expenses
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Occupancy and related expenses
$ 65,417 $ 59,536 9.9 %
As a percentage of total revenue
9.6 % 8.8 % 0.8 %
As a percentage of revenue, occupancy and related expenses for fiscal year 2025 increased compared to fiscal year 2024, primarily driven by deleverage associated with the change in sales volume.
Other Restaurant Operating Costs
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Other restaurant operating costs
$ 120,277 $ 110,107 9.2 %
As a percentage of total revenue
17.7 % 16.3 % 1.4 %
As a percentage of revenue, other restaurant operating costs during fiscal year 2025 increased compared to fiscal year 2024, primarily due to lower sales volume, as well as increases in restaurant-level advertising spend, catering fees, and repairs and maintenance for existing stores.
Operating Expenses
General and Administrative
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
General and administrative
$ 143,401 $ 149,942 (4.4 %)
As a percentage of total revenue
21.1 % 22.2 % (1.0 %)
General and administrative expenses on a dollar basis decreased in fiscal year 2025 compared to fiscal year 2024, primarily due to a $4.6 million decrease in bonus expense due to performance, as well as a $2.5 million decrease in stock-based compensation expense, primarily related to the decrease in expenses associated with restricted stock units and performance-based restricted stock units issued prior to our IPO. These decreases were partially offset by an increase in other expenses across the Sweetgreen Support Center to support our restaurant growth.
As a percentage of revenue, general and administrative expenses for fiscal year 2025 decreased compared to fiscal year 2024, primarily due to the net effect of the fluctuations noted above.
Depreciation and Amortization
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Depreciation and amortization
$ 71,537 $ 67,346 6.2 %
As a percentage of total revenue
10.5 % 10.0 % 0.6 %
As a percentage of revenue, depreciation and amortization for fiscal year 2025 increased compared to fiscal year 2024, primarily related to the increase in the total depreciable base, driven by our acceleration of new restaurant growth in fiscal year 2025 as well as the change in sales volume.
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Pre-Opening Costs
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Pre-opening costs
$ 10,785 $ 6,616 63.0 %
As a percentage of total revenue
1.6 % 1.0 % 0.6 %
As a percentage of revenue, pre-opening costs for fiscal year 2025 increased compared to fiscal year 2024 due to the acceleration of net new restaurant growth as well as the change in sales volume.
Impairment and Closure Costs
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Impairment and closure costs
$ 12,065 $ 2,218 444.0 %
As a percentage of total revenue
1.8 % 0.3 % 1.4 %
Impairment and closure costs on a dollar basis increased during fiscal year 2025 compared to fiscal year 2024, primarily due to non-cash impairment charges related to property and equipment and the related operating lease assets of twelve of our restaurants compared to one restaurant in the prior year, as well as closure costs associated with three stores that were impaired and closed during fiscal year 2025.
Loss on Disposal of Property and Equipment
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Loss on disposal of property and equipment
$ 1,431 $ 255 461.2 %
As a percentage of total revenue
0.2 % — % 0.2 %
Loss on disposal of property and equipment increased in fiscal year 2025 compared to fiscal year 2024, primarily attributable to the disposal of specialized kitchen equipment.
Restructuring charges
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Restructuring charges
$ 3,630 $ 2,276 59.5 %
As a percentage of total revenue
0.5 % 0.3 % 0.2 %
Restructuring charges for both fiscal years 2025 and 2024 are primarily related to our former Sweetgreen Support Center, which we vacated in fiscal year 2022, including continued amortization of the operating lease asset and related real estate and common area maintenance (“ CAM”) charges. Additionally, during fiscal year 2025, we experienced additional restructuring costs including severance and related benefits associated with a reduction in force at our Sweetgreen Support Center and costs associated with vacating our former New York office space. We continue to evaluate our organizational structure and may implement additional changes to lower our administrative headcount in future periods.
Interest Income and Interest Expense
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Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Interest income
$ (6,548) $ (10,942) (40.2 %)
Interest expense
19 256 (92.6 %)
Total interest income, net
$ (6,529) $ (10,686) (38.9 %)
As a percentage of total revenue
(1.0) % (1.6) % 0.6 %
Interest income, net decreased in fiscal year 2025 compared to fiscal year 2024, primarily due to a lower cash balance and lower interest rate in our money market accounts during fiscal year 2025 as compared to fiscal year 2024.
Other Expense
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Other expense
$ 1,230 $ 6,656 (81.5 %)
As a percentage of total revenue
0.2 % 1.0 % (0.8 %)
Other expense decreased in fiscal year 2025 compared to fiscal year 2024, 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. This decrease was partially offset by legal, advisory, and other transaction costs expensed as incurred in fiscal year 2025 in connection with the Spyce Sale completed subsequent to year end.
Income Tax Expense (Benefit)
Fiscal Year Ended
(dollar amounts in thousands) December 28, 2025 December 29, 2024 Percentage
Change
Income tax expense (benefit) $ 46 $ (1,301) (103.5 %)
Effective income tax rate
— % 1.4 % (1.4 %)
Our effective income tax rates for the fiscal years ended 2025 and 2024 were —% and 1.4%, respectively, primarily due to the full valuation allowance on our net deferred tax assets.
Seasonality and Quarterly Financial Data
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 inclement weather (generally the winter months, though inclement weather conditions may occur in certain markets at any time of the year). In addition, a core part of our menu, salads, has proven to be more popular among consumers in the warmer months . In recent years, the prevalence of hybrid and remote work arrangements have made seasonality in our business less predictable, and we have experienced negative revenue impacts around national holidays. Additionally, we have seen extreme weather conditions and natural disasters cause disruptions to our operations from time to time, including the wildfires in Los Angeles, which impacted our fiscal year 2025 results.
Our results are also influenced by a variety of other factors, including the amount and timing of non-cash stock-based compensation expense, litigation, settlement and other legal costs, impairment charges and other non-operating items, and the timing of marketing or promotional activities. Quarterly performance may also be
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affected by the number and timing of Net New Restaurant Openings and any restaurant closures during the period.
New restaurants typically operate at higher costs in the periods immediately following opening due to pre-opening expenses, training costs, and initial operating inefficiencies. As a result, our operating results for any particular quarter are not necessarily indicative of results to be expected for any other quarter or for a full fiscal year.
Liquidity and Capital Resources
Sources and Material Cash Requirements
To date, we have funded our operations through proceeds received from common stock and preferred stock issuances and debt incurrences, and through cash flow from operations. As of December 28, 2025 and December 29, 2024, we had $89.2 million and $214.8 million in cash and cash equivalents, respectively. Subsequent to the fiscal year ended December 28, 2025, we completed the sale of Spyce to Wonder, consisting of $100 million in cash and shares of Series C Preferred Stock of Wonder with an implied value of $86.4 million. 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 funding the current operations in our restaurants and Sweetgreen Support Center, new restaurant development, including the deployment of Infinite Kitchen technology, initiatives to improve the customer experience in our restaurants, and general corporate needs. During the fiscal year ended December 28, 2025, we made a cash payment of approximately $2.3 million related to the second Spyce milestone payment. In connection with the aforementioned sale of Spyce to Wonder, and pursuant to the terms of the contingent consideration liability, the conditions for the third milestone payment were satisfied upon closing the sale, resulting in the acceleration of the final payment. The remaining $7.0 million was paid out in January 2026 and is included within other current liabilities within the consolidated balance sheets as of December 28, 2025. See Notes 3 and 16 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 result in 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 2026 2027 2028 2029 2030 Thereafter
Operating leases (1)
$ 459,829 $ 63,503 $ 68,070 $ 62,745 $ 61,179 $ 55,319 $ 149,013
(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. As of December 28, 2025 and December 29, 2024, we had no outstanding debt obligations.
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Cash Flows
The following table summarizes our cash flows for the periods indicated:
Fiscal Year Ended
(in thousands) December 28, 2025 December 29, 2024 December 31, 2023
Net cash (used in) provided by operating activities
$ (12,696) $ 43,390 $ 26,480
Net cash used in investing activities
(114,251) (92,211) (95,665)
Net cash provided by (used in) financing activities
2,861 8,895 (5,199)
Net decrease in cash and cash equivalents and restricted cash
$ (124,086) $ (39,926) $ (74,384)
Operating Activities
For fiscal year 2025, cash used in operating activities increased $56.1 million compared to fiscal year 2024. The increase was primarily due to the $20.4 million impact of unfavorable working capital fluctuations, driven by the timing of rent expense, payroll, and other payments in the ordinary course of business, as well as a $2.3 million Spyce milestone payment. The remaining change was related to a $33.4 million decrease in income after excluding non-cash items .
For fiscal year 2024 , cash provided by 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 Employee Retention Credit in fiscal year 2023.
Investing Activities
For fiscal year 2025, cash used in investing activities was $114.3 million, an increase of $22.0 million compared to fiscal year 2024. Investing activities in fiscal year 2025 consisted primarily of purchases of property and equipment of $106.5 million related to 39 gross new restaurant openings (excluding tenant improvement allowances), restaurants in process, renovations, and prepayments associated with the deployment of Infinite Kitchen units and other restaurant-related equipment. In addition, we had cash outflow for fiscal year 2025 of $7.8 million related to purchases of intangible assets.
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 Infinite Kitchen units and restaurant-related equipment. In addition, we had cash outflow for fiscal year 2024 of $7.7 million related to purchases of intangible assets.
Financing Activities
For fiscal year 2025, cash provided by financing activities decreased $6.0 million compared to fiscal year 2024, primarily due to the $9.6 million de crease in proceeds received from stock option exercises, partially offset by the $3.9 million Spyce milestone payment made in 2024 .
For fiscal year 2024, cash provided by financing activities increased $14.1 million compared to fiscal year 2023, primarily due to the $7.4 million in crease in proceeds received from stock option exercises, and a $6.6 million decrease in Spyce milestone payments .
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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 judgments 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 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 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, the discount 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.
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Any material changes in the sum of our undiscounted cash flow estimates resulting from different assumptions used as of December 28, 2025 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 2025. 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 calculate our impairment charge.
We recorded non-cash impairment charges of $11.3 million during fiscal year December 28, 2025 associated with twelve store locations, of which $9.7 million related to certain property and equipment and $1.6 million related to operating lease assets. We recorded non-cash impairment charges of $1.7 million during the fiscal year ended December 29, 2024 associated with one location, of which $1.3 million related to certain property and equipment and $0.4 million related to operating lease assets.
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, trade tariffs, 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, f oreign 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 renegotiated, 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 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.
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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 28, 2025 and December 29, 2024, we ha d $89.2 million and $214.8 million of cash and cash equivalents, respectively, consisting of bank accounts and money market funds, and $4.2 million and $2.6 million, respectively, o f restricted cash relating to certificates of deposit that are collateral for letters of credit to our lease agreements. 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 2025 and 2024.
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 have negatively impacted our Restaurant Level Profit and results of operations in recent periods.
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