Robotic production lines will eliminate the need for front or back-end production lines, thereby significantly reducing labor costs.
        Sweetgreen is preparing to launch two restaurants equipped with the Infinite Kitchen automated production line. Since its 2021 acquisition of Spyce, a two-unit fast-everyday concept equipped with a robotic system, the company has been working to determine when and where to use the tool, which uses conveyor belts to precisely dispense portions of ingredients.
        The first store with automated production lines will open Wednesday in Naperville, Illinois. A second Infinity Kitchen is expected to open later this year. This will be an upgrade to an existing restaurant that will help the company understand how to better integrate the system into existing sites in the future.
        “We believe this new automation-driven concept can create efficiencies that will allow us to grow faster and achieve higher profits,” CEO Jonathan Nyman said during the company’s first-quarter earnings call. “While we are still testing and learning, we expect Infinite Kitchen to become increasingly integrated into our pipeline.”
        The robotic production line will prepare 100% of orders, eliminating the need for front and back-end production lines. About half of the variable workforce at Sweetgreen restaurants is in production or assembly, meaning the system will free up staff to focus on serving customers.
        Infinite Kitchen is expected to provide significant capacity growth, which Neman said has been a “focus” for Sweetgreen over the past six months. Improvements in staffing and workforce, improved training materials and a new leadership structure that eliminates middle managers have increased the speed of service. New formats, including the first curbside stores launched last year, have also seen an increase in throughput.
        “As our staffing levels and working conditions improve, we are really focused on increasing the limits on our digital production lines,” Nieman said. “We were able to increase capacity by 20 percent across the entire fleet, which meant 20 percent more people we were serving.”
       The company is also working to increase speed of service on the front lines as the world reopens and more customers return to restaurants.
        “There’s been tremendous growth on the front line, and we’re also very focused on increasing capacity on the front line,” Nieman said. “Those customers who start their careers in our restaurants typically enter our digital ecosystem and become very valuable customers for us.”
        To that end, the company recently launched Sweetpass, its first loyalty program in two years. Members gain access to curated rewards and challenges, as well as the opportunity to earn new menu items and limited-edition merchandise. The two-tier plan also includes Sweetpass+, a $10 monthly subscription that rewards loyal users with $3 off Sweetgreen’s daily orders, priority customer support, shipping benefits, early access to merchandise and other exclusive features.
        “Our launch went very well and received a great response,” Niemann said. “We believe this program has the potential to increase profits not only through a capped base membership fee, but also by gradually expanding our customer base.”
       He said Sweetgreen has shown strong interest in both a free and paid version, both of which allow for extensive customization and customized benefits.
        “The way we built it gave us a lot of personalization,” he said. “We can spend money very effectively on marketing and advertising and how to actually increase guest frequency without having to resort to one-size-fits-all measures.”
        Digital sales accounted for 61% of Sweetgreen’s revenue in the first quarter, with about two-thirds of sales coming from the brand’s direct channels. Accelerating digital adoption delivered a strong quarter, with Sweetgreen posting strong revenues and cutting its losses. The results give Neman confidence in the company’s ability to become profitable for the first time by 2024.
        First-quarter sales rose 22% to $125.1 million, and same-store sales increased 5%. Comparative growth included a 2% increase in transaction volumes and benefited from a 3% increase in menu prices implemented in January. The company’s AUV revenue increased to $2.9 million from $2.8 million in the first quarter of 2022.
        Restaurant-level margins remained relatively stable at 14%, down from 13% a year ago. Adjusted EBITDA loss for the quarter was $6.7 million, down from $17 million in the first quarter of 2022. Excluding the impact of the CARES Act employee tax withholding credit, restaurant level margins would have been 12% and an adjusted EBITDA loss of $13.6 million.
        Food, beverage and packaging costs accounted for 28% of revenue for the quarter and were 200 basis points higher than in 2022. The increase is due to packaging disruptions the company faced earlier in the year. Labor and related expenses accounted for 31% of revenue, down 200 basis points from the same period last year.
        Sweetgreen’s general and administrative expenses for the quarter were $34.98 million, down $15.3 million from the prior year, due to a $7.9 million decrease in share-based compensation expense, a decrease of 5. $1 million in benefits related to the Employee Retention Tax Credit and executive salaries and benefits. .
       Lower costs, coupled with higher restaurant profits, helped Sweetgreen cut its losses to $33.7 million from $49.7 million a year ago.
        In addition to streamlining its leadership structure, the company announced earlier this year that it was taking cost management measures, cutting support center expenses from $108 million in 2022 to $98 million in 2023. Neman expects support center expenses as a percentage of revenue to grow 16-17% for the full year, up from 30% in 2019.
        “There is no doubt that continuing to improve the operational efficiency of our support center is a top priority for our management team,” he said. “We will only continue to develop the support center if further investment produces a tangible return on capital.”
        Sweetgreen has also taken a more disciplined approach to expanding its presence, opening new stores less quickly and emphasizing “quality over quantity” when entering new markets. The company plans to open 30-35 new stores this year, up from 39 stores opened in 2022. In the first quarter, the company opened 12 restaurants and closed three, ending the quarter with a total of 195 stores. CFO Mitch Rebeck said all of the closed stores have adjacent stores that provide “a better experience for customers and team members,” allowing Sweetgreen to benefit by shifting sales from one store to another.
        In addition to cutting costs and taking a more cautious approach to growth, Sweetgreen views its loyalty program as a catalyst for increasing sales and achieving profitability. Another catalyst is offering a broader menu.
        A brief legal dispute with Chipotle Mexican Grill hasn’t dampened Nieman’s optimism about the brand’s latest menu. Just days after the company released the Chipotle Chicken Burrito Bowl, billed as the first bowl without any vegetables, Chipotle filed a lawsuit accusing the salad chain of copyright infringement. Fast-casual competitors quickly struck a deal, and Sweetgreen changed the product’s name to Chicken + Chipotle Pepper Bowl.
       Even with a post-launch rebrand, the burrito bowl still outperformed and exceeded customer acquisition goals, becoming one of Sweetgreen’s top five best-performing products.
        Niemann said the company has a “robust menu plan” that includes testing healthier grains and proteins and partnering with influential chefs. Advanced attachments are another area of ​​focus. The brand recently released hummus as a side dish for focaccia bread. The company has also expanded its beverage offerings with new healthy soda options and added a new chocolate dessert to its dessert menu.
        “While this is just the beginning, we are already seeing an increase in premiums of almost 25% in the first three weeks of launch,” Neman said. “We believe margin opportunities will create another significant opportunity for Sweetgreen in the coming years.”
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