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Pounding The Table A podcast by Avi Mash, Joey Solitro and Anthony Ohayon about The Stock Market, The Art of Options Trading. Each week we take a look at the news and interpret the impact on the financial markets. Support this podcast: https://anchor.fm/poundingthetable/support
📍 Ladies and gentlemen, welcome back to Pounding the Table. Today we are joined by Jonathan Niemann, one of the co founders of Sweetgreen. If you guys are unfamiliar with Sweetgreen, it's definitely the coolest salad place and beyond now, which we'll get into in just a bit here.
, but really excited to have you on the show. We'll be talking about the origin as well as where you guys are going to be heading. So welcome to Pounding the Table, Jonathan. Awesome. Thank you for having me. Pleasure to be here. For those that don't know, , , I remember you guys did some stuff with Kendrick Lamar and, uh, it was beats don't kill my, or beats don't kale my vibe, , I believe was the initial one.
And I was like, damn, , this is really cool and really trendy. And it's more. then just salads, right? Because there's a lot of them that are popping up. And I think you guys have done a phenomenal job in like lifestyle and really creating kind of a community, if you will, around it. , for those that don't know, though, it's always helpful to kind of go back to your origin story and, you know, how did you start this?
I was looking it up, high school hustlers. You guys went to, , Georgetown, I believe. Getting into Froyo and then talk about like the sweet green festival that really kind of launched the brand if you could sure so so maybe just going all the way back, you know, we started the company about 16 years ago.
We were students at Georgetown really looking to solve a problem in our own life couldn't find a place to eat that was healthy but also delicious and accessible. And so it started off is, let's just build one for ourselves it'll be fun to, be a fun school project. And we were, , to your point, we're always entrepreneurs at heart.
, myself, my two co founders, our parents were , immigrants to this country and entrepreneurs. And so we always saw that hustle and wanted to be entrepreneurs ourselves. So senior year, , we began , opening the first restaurant and as people always do, was it meant to be just one or was it always the vision to be this?
And I'd say right at the beginning, it was, let's just open one. But as soon as we started writing the business plan, We realized that the opportunity was so much bigger than just one restaurant. We realized that there was a large problem to solve around the health of, you know, the health of this people that live in this country and how important food was.
In terms of people's health and our approach was always, how do you make it cool? How do you build a lifestyle brand and connect that to a mission driven brand? So , our mission from day one has been building healthier communities by connecting people to real food, but in order to focus on health, we didn't want to sell health, we wanted to sell a lifestyle.
And so over the years, there's, we've done a lot of things in order to integrate ourselves more with culture and make the brand more less about just a restaurant or a salad shop. But more about a movement and this, , cultural relevancy that can really build, what we want to build, which is like a global iconic brand.
One of the things I used to always, wonder is, You know, the competition that, the biggest food brands in our space, thinking about like Coca Cola, McDonald's, Coca Cola sells happiness. How are we going to tell you to eat your vegetable when Coca Cola is selling sugar in a bottle and calling it happiness?
And so we can't play that same game. We have to play, you kind of have to play their game. Right, making it cool and sexy and fun and part of a lifestyle. And so your question on the festival when we open our second restaurant, it was in Washington is also in D. C. It was in DuPont Circle and the second restaurant was really struggling at first.
, we trying to figure out ways to drive traffic and drive trial and. One of the things we loved was music. Music is like universal language and such a part of culture. And so we started playing music outside the store, start turned into a little bit of a block party, the block party, we started growing and growing.
The next thing you knew, you know, the block party was a thousand people, and it was in the parking lot right behind the restaurant. And then we had this opportunity to take it, make it a little bit bigger than that, and we met, uh, the promoter who ran all the festivals in D. C. and the concerts in D. C., and started talking, and he offered up his venue, which was this huge venue, iconic venue called Merriweather Post Pavilion.
And... We looked at it. He's like, listen, all the infrastructure is built. I know it sounds like a crazy thing going from a few hundred people or a thousand people to 20 plus thousand people, but we did the math, we started, running the numbers were like, Actually, like we don't have to sell, , with the right talent and the, you know, we could actually pull this off.
And so all of a sudden, , we took a bet on this festival, you know, the strokes were booked to play that first year in 2011 , and it took off. And I think it was one of. Many moves we've done that, or, you know, over the years to kind of push ourselves and innovate outside of just being a core restaurant , and making sure that we are innovating, and positioning ourselves as this lifestyle brand, as well as a delicious, healthy, nutritious restaurant.
I have a quick, funny story on, , I tried to do a concert back in the day and I went to Indiana university. And at the time I was talking to this guy down in Austin, Texas, and . This is around the same. I probably 2009. , as J Cole was just starting to come up big Sean and I, it was going to be 10, 000.
That was it for 10, 000. So I still have the emails looking back of how funny that would have been to, to book both of those guys for 10, 000. So Kendrick was already big though. I mean, he had already gotten some, so that's pretty cool that you guys were able to leverage that. Would you say that was kind of the,
the holy shit moment where you're like, okay, this is actually going to be something bigger than just this one location,, uh, by the time we, we started suite life, we had five or five or six locations in the area by the time, you know, Kendrick played in 2003, Kendrick played the festival twice, actually paid and he played in, , I think he played in 2013 and then played again in 15 or 16.
, by the time, the second time he was a headliner, the first time he, he played out, like, Pretty early in the day, which is crazy. I think, , looking at what he probably costs now versus , what we paid him, then it's pretty crazy to see what happened, but 2013 was a very big year for us.
, you mentioned the nomad restaurant. , that was our 20th store. It was our first restaurant in New York city. And it was a big moment for us because it is really our entry outside of DC into New York, really, big moment for us. And with that, we really. Also took the festival to a bigger level that year.
And it was, it definitely was a, , kind of an inflection point for the brand going from a local brand to one that all of a sudden had more of a national presence. so we kind of mentioned earlier about Froyo, could you kind of talk about how you guys got into that and what was the thought process and then how you guys transitioned that to the digital ordering?
Yeah. So when we started the business, you know, sweet green, part of the reason it was called sugar, and it was actually, it was. it was salad wraps and frozen yogurt. And so the business has evolved a ton since when we started. , but Froyo was a huge part of it. And when we first started, it was a huge part of, , the business.
It was a huge occasion driver. It's a huge part of our product mix. And we actually kept it all the way until around 2013, but in 2013, um, and it was really a , 2010, we started to see the opportunity around the digital transformation of the business. We really saw it. How online ordering , could just be transformative for the business model.
Cause if you think about what we were, , what the business was before is you really had a single channel. You had to wait in line, go through the front line and sweet green has this, like many restaurants, we have a unique challenge, which is a lot of demand in a very short period of time.
And so how do you go faster on that front line? Well, you can try to go as fast as you can, or you could build redundancy or secondary make lines and use technology to serve more people. And so as that started to take off, it was also the same time that yogurt had kind of become, this frozen yogurt craze had become a little bit more commoditized, , if you could think back to like the Pink Dairy days.
So we made a decision at that point to prioritize the online ordering in the restaurant. Versus the frozen yogurt. Interestingly, now, now digital is obviously a huge part of our business about , 60 percent of our orders are digital. We leave the industry in that with most of it being on our own channels, but as we look to now expand more into the suburbs, it's funny that, what's old is new again.
And in frozen yogurt, we actually think is a pretty big opportunity for us at some point. , to bring back. So it's something we piloted again, and it's now that the, you've seen the commodification of yogurt actually go away. You don't see those places everywhere. And I think there is an opportunity for us to lean into kind of other day parts and occasions with something like frozen yogurt at some point percent of , your entire revenue is 30% of froyo at one point.
And then like you guys just decided for Yeah, for the first store. Yeah. , that's insane. For the first store. By the time we got rid of it, it was probably closer to, it was like high single digits. Yeah. which, high margin, high single digits.
So I do think there's definitely an opportunity. I don't regret the decision at the time because it allowed us to unlock so much of the digital business and a lot of to really focus on that. But now I do think that there's a real opportunity here for us. You think that, , pro is kind of like your McRib to bring it back to the McDonald's analogy?
Yeah, I mean, I think as we think about where Sweetgreen's going, you know, you talked about, you called it a, you know, salad place. We've never viewed it as a salad restaurant. You know, and if you look at, you know, what we just launched with protein plates, I think it's our biggest foray outside of salads, really pushing into owning this idea of really well sourced, delicious, craveable, real food, and that doesn't mean it has to be a salad.
So I love the tagline for this recent campaign is you don't have to be a salad person to be a sweet green person. And that's the whole idea is how do we create a place that can meet the whole family's needs, you know, not just a narrow customer segment, but really broad and our customer segments brought in our gate parts were very, very strong at lunch.
We actually have a stronger dinner than most people realize about a 35 percent of our business happens at dinner, but we think there's an opportunity to really balance that, especially. In the move towards suburbs that we've made, have heavy growth in the suburbs. And as you think about delivery and delivery is now a big part of the business and a huge growth driver for us, delivery is really more of a dinner occasion.
And so all to say, we think focusing more on these different occasions with us right now, the big focus being protein plates and really leaning into hot food that still meets the ethos, but just. happens not to be a salad, um, is, is going to be a huge opportunity. And I think another inflection for the company.
Real quick. And then we'll get off of , the, the boring questions around the food, but in, in terms of, , how you guys have changed, right. When it was just the, the three of you, launching that first restaurant, maybe you guys were doing the taste testing, you know, we're sitting with a chef and saying, Hey, I like this one.
, how does that work now? Just as a QSR, I don't know if you guys would classify yourselves in that, in that space. Right. But , do you guys do like, I don't know, it's not surveys, but you guys have like massive taste testings. I'm just curious how restaurants are starting to pick their new menu items and what that process looks like.
Absolutely. So when we started, there was no chef, Nick, or my, my, one of my co founders, Nicholas was the chef. , he made our first, you know, he made the original menu, and I remember it was actually, we made all the menu items and tasted them with classmates in our dorm room. So, it was a lot of gut feeling, just what we thought was good, and our philosophy in terms of food has always been start with the best ingredients, because that's really what drives everything.
And I think we were lucky that we were the customer we, you know, that we were trying to target at first and , we were foodies and it was just put something out great and hope people like it today. It's definitely, , we're much more strategic as we think about menu innovation. So there's a, there's a, there's a pretty long innovation cycle that we're constantly working on as it relates to food.
It does start always with insights. So , , we do a lot of insights, understanding consumer preferences and taste, what are the gaps in, in the business where opportunities to drive new occasions or expand our customer. And we look at both, how do we, how do we reinforce our core? You know, with other great salads that people like, but how do we also build on that with new categories, new ingredients and things that can either drive basket size, , or drive or drive greater frequency.
We then, , we have a great, , an awesome chef and culinary team. We actually brought on a new chef recently. , his name is Chad brows or it comes with an awesome experience started his career 10 years at Daniel Balud worked at Chipotle for a long time, and then most recently Burger King.
So he brings this. What I call an art and science mindset. He's got both the art in terms of the taste and the quality of food, but also the science, the engineering of how do you take that food and then serve it at scale. , , we then work in our lab, actually come up with the, come up with the items.
We do a lot of internal tastings with our teams and then bring in customers. , we then oftentimes actually go on the road to different markets. , so for example, with our, with plate, we went to about six different markets around the country to taste them with consumers, get feedback, continue to iterate.
We then typically put it in our lab. So we put it in, we have one store, uh, that's a test store. It's in Culver City. And if you go to that store anytime, you'll see that we're always trying new things. There, we're trying to understand both. How do consumers react to things, but what are the, what's the operations around those things?
Because you're typically cooking things differently, you're doing all kinds of different things. And so, you know, we bring it there. If it passes that, we will then move it into a market test. So we will, uh, we will take a whole market, , and put that menu in and start to understand how it does in the market.
And then it'll move to a full fleet rollout. So at any given moment, we have a number of things where we have in our innovation pipeline, because we're looking to continue to innovate the menu. So what we've talked about recently is we've launched plates, but next year we have plans to introduce, , one or two new signature proteins.
Think things like regenerative steak or crispy chicken, things like another. Base maybe like a pro more of a protein led base, like a, or like a, , a carbless space, like a cauliflower rice type of concept. , how do we bring in different, , sauces to bring in, , different flavor profiles.
And so we'll constantly be testing, these things and, and. And then we'll, , you'll start to see at least two new things, , coming out of us coming out every year. it's really exciting. , could you talk about like the SweetPass, SweetPass Plus, , and what like, the objectives are with that and how you guys can kind of drive consumers to eat, maybe later in the day or at different times?
Absolutely. So sweet pass is our loyalty program, and there's two tiers to the program. We have the free tier, which anyone can sign up for. You just join, you enroll, and it gives you access to all kinds of rewards and challenges. So it's an AI driven program, which uses your current So You know, , what we know about you, your current behaviors to drive, , different sort of challenges and rewards and different, like enhanced promotions to drive that incremental visit.
, we know a lot about consumers and consumer journeys, how do we. How do we give you that right incentive at the right time to just keep you engaged? SweetPass Plus is the paid tier. It's our membership program where for 10 a month, you get 3 off every day. I think what's interesting about Sweetgreen and our opportunity around this is what we hear from people so often is, you know, Sweetgreen is, the way people use it is different than most restaurants, which is most restaurants, you know, you kind of go, , they're, you have very infrequent customers, right?
They're, they're treats. You don't eat a burger every single day. The beauty of sweet green is our core customers. You can eat it. You can really eat it every single day. Our frequency is kind of, is really best in class in the industry. So playing on the health aspect, the frequency and the convenience, we saw an opportunity to give people a membership program that just incentivizes that, that more frequent purchase.
So we launched sweet pass, , earlier this year, kind of midway through the year , as a pilot program. Just about a month or two ago, we added the in store ability to use it in store. At first, it was a digital only program. We've been investing in acquisition of members on both tiers of the program.
And as I mentioned on the earnings call recently, now making certain tweaks and optimizations. Can make it more effective, very intentionally. It was more of an investment period for us and driving the membership base. And we see a big opportunity and kind of leveraging that base now to drive that incremental purchase.
So we see loyalty as a big growth driver for us as we look forward. , I think it'll be one, one, one of the big growth, , comp drivers for us in the next couple of years.
, Hey Jonathan. So I used to work at Lionsgate for a year and a half and, , obviously don't anymore, but we always had clients come in during, in the office for like these green light sessions, like actors, like producers, directors. And our go to was always street greens.
Cause we had a delivery service, , it's healthy, clean. I live in West Hollywood. I see the downtown LA skyline right behind you. They're all health conscious people. So we always had it consistently. Like you said, do you think this is why the digital penetration is so high for sweet greens compared to other comps?
I think it's nearly two folds against your other comps. Is it because like You're strategizing with these specific enterprises and businesses that like you gotta get a deal to come to the office so you can have a convenience and, or is it just because like you said, like the past is so efficient and everyone loves seeing you healthy and feeling good.
And of course when you're working in the middle of like a nine to five, like you don't want to have a food coma in the afternoon and sweet greens is like the antidote for a food coma. Yeah, I think there's a few things. So , we saw the opportunity in digital really early on. So we started the business in 2007, it was, , ironically, just right after we opened our first store, the iPhone came out just about a month, a month or two after.
So I always think about like how that was like a really critical marker in the world changing in a dramatic way and everybody having this computer in their pocket. So early on, we saw the opportunity around digital. We started off with, , digital loyalty and digital payment, but quickly saw this opportunity around digital ordering again in like 2008, 2009.
We were working on this. People thought we were crazy. Like, who wants to order food online? That's , that sounds stupid. We're like, no, like, of course, , people are gonna have a remote control in their pocket. If they can have food instantly, be a pickup and then we.
Understood early , is again, one of the core principles of Sweetgreen is taking the first principles approach on, on the experiences that we designed. So many restaurants that started with online ordering viewed it as an afterthought. They're like, okay, we'll just, we'll, we'll add an app, but we're not going to change the restaurant.
We'll just figure it out. And you saw, you've seen some of these restaurants that have tablets everywhere and like, they try to make it on their main production line. And so it's just a terrible experience. We took a step back and we said, okay, if you ever want to build a digital native, like first restaurant brand, how would you design the entire, the end to end experience that meant designing the store differently, it meant building.
Digital make line starting in like 2010, we started building digital make line. We were the first restaurant to build those shelves, which are now, you know, you see everywhere where you have those like pickup shelves. It actually happened by accident. We used to put the orders, uh, funny story. We used to put the orders behind the counter.
So you put the orders behind the counter. People would order online. They'd have to go to the cashier and ask for their order. It wasn't at first, it was like, , less than 10 percent of sales. And it was fine. We had one store that it started to really take off and they didn't have enough space behind the counter.
So they just started putting the orders out on a table next to the, next to. Uh, the cashier and people would just come and they would grab their food and we're like, That's actually great. We don't have to like, it's so much more seamless. Who wants to talk to someone? So we started building these shelves.
And again, if you've seen the restaurant today, they're , very intentional about this omni channel experience. So many of our stores have a totally separate area pickup area for delivery drivers. They even have like. A bench and a hangout area and a water station for the delivery drivers. So we get the delivery volume kind of out of the way of the customer experience.
Um, we really built a lot of the back of house technology to enable the order, the load balancing of orders and, and the accuracy and speed of orders. And just got really focused on how do we enable. That digital business. Um, the other things that we did to really enable it, one, we did invest in digital.
So we were, we invested in a native app early, not just on iOS, but on Android and web. Um, and I think the experience itself was valuable to your point, loyalty, being a part of it. And then I think the last thing which you kind of touched on is people will really won't download your app. Because it just because it's a great app.
People download your app if they love your brand. And if , they have to love your brand and it has to be something that you use frequently. If you're going to go to a restaurant once a year or twice a year, you're probably not going to download their app. But if it's something you're going to do every week or every day, it's worth having that app and you're seeing it today.
Every restaurant has an app today, but like how many restaurant apps are you going to put on your phone? You're going to put the one that you really, you know, super frequent to. And I think being a first mover, building a, you know, a first principles approach to. To the design and then having a brand and experience that has , that real loyalty have been the drivers of us doing that beyond that.
We do a lot of things on our digital experiences that, that incentivize. So things like exclusives that we only do on our app or early releases and things like that, again, to, to give you more reasons to become a digital customer, because what we know is if we can get you from an in store customer to a digital customer, you become more frequent.
And so there's a, there's a digital flywheel that we are, you know, that we're building upon here of, of moving you from analog to digital, and then, you know, from digital pickup to, to delivery and just, it just kind of, it gets that flywheel really moving. Yeah. I mean, you kind of nailed it. Uh, one last comment before Joey hops in, but, uh, I used to go to California chicken cafe all the time.
Street greens totally took my loyalty from them. And I think it's because of that, like the app presence, like digital, like I feel like I'm 30 years old. So I'm like a barely millennial, but like street green makes me feel more Gen Z where like California chicken cafe made me feel like a boomer almost, uh, innovating.
So, um, I definitely agree with everything you just said. Yeah, I'll, say on digital presence. So the first store I came across was the one you mentioned, Nomad, your 20th store. And my office was like three over and my hotel was right between that Nomad hotel. And I remember just looking in the store and you see like the wall of salad, wall of greens.
It was like, okay, this has got to be a healthy spot. I waited in the line that wrapped around the corner. Once I got back to my office and loved it, I immediately downloaded the app, saved my order, and I picked up three because now it's like, okay, I know what I like. I don't have to wait in this line. And it says, you know, pick up at the West wall.
I was like, okay, let's figure out where this is. And yeah, there it is right when I walk in. So each day I just hit reorder my three bowls, pick them up and go. Because it's more about convenience just because of the popularity of the store. Like everybody was just wrapping around. So once you experience it, then it's like, okay.
Now let's make this easier and quicker, so then anytime I'd fly up there for work, place on my sweet green order, essentially lived off of it. And, uh, I'm gonna go on to the next one. But speaking of like, this transition of lifestyle, people focusing on health, now we've got the rise of all these weight loss drugs.
Now, there's a lot of brands that could say, you know, this could hurt them in the long term because people, you know, essentially everybody's going to be fit, have six packs, eat less. Um, you know, we're going to
be talking about every, I have to make fun of it just because you see like the demise of all these stocks, like, , all bad things that happen to Americans are going to go away because of these. However, I see certain brands like sweet green where. This could be beneficial because as people shed this weight, then it moves them towards healthier choices and you're gonna, , if you're eating less, you still don't want to be eating junk food, you're going to want to also, almost make more changes to continue your journey towards a healthier lifestyle.
Do you see, , the rise of weight loss drugs in any way affecting your business model or does it kind of play into your favor? It's really interesting. It's something I've been watching and studying very closely for the past couple of years and it's amazing to see, , how fast they've taken off.
It is pretty remarkable to see, , everything that I've read. There's a lot of reports. You probably have read a lot, , of, , analysts coming out with different reports on this. it's really interesting looking at like the GLP one index of companies that are beneficiaries versus not.
You know, the spread trade that has just been so massive, the massive spread trade opportunity that some people have taken, taken advantage of everything that I've heard about, , the Ozempic is that when you're on them, you do crave healthier food, you want to eat fresher things. , and so if that is true, clearly, I think we'd be a beneficiary, , everything, I've read is that we should be a beneficiary of it.
It's hard to say how big of an impact that will actually, that will actually be. The way I think about it is more just take a step back on the broader trends around eating. You know, we're, we've been on a multi decade move, America realizing that we need to eat healthier food and that food is a really important part of our life.
And I think each generation. Is each generation is realizing that more and more. I remember like when I was in college, it was like, I think it was super sized me came out and that was a huge wake up call for people. And then it was like Michael Paul and food Inc. And there's been these like big moments of people realizing the importance of food, um, to their health and to their life and thinking about health care, not just sick care.
And in a lot of ways, you know, I don't, you know, I've always viewed sweet green as a, you know, a brand first and a restaurant company, but sometimes, you know, but in some ways I think about it as a Trojan horse for a healthcare company. And I think if you take out the long view is, you know, over 90 percent of people want to eat healthier.
We make it hard for them today. You know, today we eat healthier, but it's not, it's more expensive. It's not as convenient. It doesn't taste good. And it's not so cool. And the way Sweetgreen will win is winning on all of those dimensions, not just saying eat this because it's healthy to eat it like the healthy should be the last thing eat this because it's delicious and it's great value and it's convenient.
Oh, and it happens to be healthy. You know, one of the frameworks that I, that I use when I think, , when I think about the food experience. , and it's a simplistic framework, but I think it really, you know, it really, it really sticks for me is I called, I talk about the four stages of food. So the four stages are, how do you feel before you eat the food?
Hopefully excited, craving. How do you feel while you're eating it? Hopefully it's delicious, satiating. How do you feel after you eat it? Hopefully energized and not sluggish. And how do you feel 20, 30, 40 years later? Hopefully alive and healthy. And I think when you think about the food system today and the brands that are out there You have brands that have either been very good at stage one and two Modern QSR, right?
Like they're good. You see that Taco Bell ad and you like, wow, that, cheesy gordita crunch, it looks delicious. You eat it. It kind of has all those things that get you excited, but right after you don't feel so good and you eat that every day, many years later, you're not going to feel good.
The flip side is you have like the health food companies that , not really well marketed. You're not really that excited eating it. You don't really enjoy eating. It kind of tastes bland, but you feel good about yourself after and you're healthy many years later. How can we optimize across all of these?
Can you actually win on all four stages where you're excited, it tastes good, you feel energized, and you're alive after? That's the ki you know, that's the killer life cycle around, around food that we're really trying to solve for. If you guys want to sponsor me, I could do like a super downsize me and just eat sweet green every day and see how much weight loss I could, I could do.
I think that'd be kind of, let's do it. Let's do it. And for us, it's not, you know, it's never been about weight. I just want to say it's never, it's never about weight. It's just about real food. It's less, it's about not processed food. It's not about calories. It's not about all that stuff. You know, , we, you know, food can, can have different, you know, can be indulgent, it can be healthy, but like, and we believe sweet green should fit those different things, but for us, it's all about real food.
And it's interesting to your point. We do have a lot of people that, you know, employees. That work at Sweetgreen and it totally changes their life because they were never exposed to this sort of food and you see them that you get, you know, you start to get accustomed to that feeling and that's what we hear from people like once you get used to eating a certain way, you feel sick when you eat a different way.
Our goal is just to make it easier and more fun to be healthy.
Well, yeah, it's one of those funny things. So, you can go to sweet green. It's, very hard to eat unhealthy. So I'm, big on tracking macros, big into fitness and everything. And so, you know, when I'm ordering, I'm always checking nutritional menu and I'm, tracking my macros.
But I've, played with the app and even tried to make like as unhealthy a meal as I possibly could. And it really came down to just loading as much, you know, sauces as I possibly could onto it. And, normal people aren't trying to make a salad into soup with sauce. So I found it very funny.
And I mean, Brussels sprout season, I even said in our chat, Brussels sprout season at sweet green is life just because it's incredible. But , it's one of the places where. You know chipotle you can think you're eating healthy, but you know kind of go a little bit too crazy with some of the options But it's sweet green.
It's very hard to eat unhealthy. So yeah, Avi, you're downsized me version. It would be easy. You wouldn't even really have to track. It's just, you know, eat that for your meals , and you'll see if it's real food made fresh, it's really hard to eat unhealthy. That's absolutely right. And I think what you brought up around the macros and the tracking is really interesting.
, even just this morning, there was an article out in Bloomberg, , on the new Apple watch and some of the health integrations they're building. We've always believed that personalized nutrition is a really interesting vertical for us, given what you said, you know, you can make a sweet green, you can make millions of combinations where we can tailor the food, both the taste and the nutrition to anyone's lifestyle.
And over time, as people start quantifying their health more, right, whether it's continuous glucose monitors and other ways of actually tracking how the food they're eating impacts them, some people just are really curious. Some people are going to learn more as these things are happening. You know, better integrate into our life.
I think sweet green is perfectly positioned for that world. Imagine where you have, , all your data, imagine track through your apple watch and you connect your sweet green, , you connect it to your sweet green app and it begins to recommend, you know, more of a personalized menu to you based off of you, your taste, your lifestyle, et cetera, and your lifestyle goals.
Not just tastes good to you, but makes you feel good and it helps you achieve your goals. So over time, , we have this concept we call like the Spotify of food. It's like imagine your discover weekly and we're already testing some of these components right now Where your menu is different than someone else's menu based off of all of these things , so I just have to ask, you know, this is The most important thing that I really want to ask is like, why Spice?
Why the Infinite Kitchen? , this is a massive pivot that you guys are doing. Like, what was the thought process? You know, what do you kind of see from this and what's the goals? I'm curious, just to piggyback on that real quick before you answer, because I know Chipotle, I don't know, I think you guys were even first, , in this automation, right?
And my first thinking is , okay, there's going to be, there needs to be like less employees. Right. And, and not even that, I think your answer would probably be more aligned with like, you'll be able to put, , the product out much faster. Right. So you mentioned lunchtime is obviously a huge for your dinnertime.
There's kind of these sporadic periods where you get this huge rush. So the, like the lines will ultimately end up being shorter. I'd love to hear just, you know, you don't need to get into numbers specifically, but, , curious, about the profit margins and how that's going to change, from a, an investor perspective, of course.
Sure. So, you know, we've always viewed technology as an accelerant to the business. , it's not never been a. You know, it's always the food first, the experience first, but how can technology, similar to like what we did with the app and the, you know, the digital ordering, how can we use technology to accelerate the business?
And there's always this construct that I had in my mind of, you know, as businesses get bigger, there's some businesses as they get bigger and their products get better. Like, I think about the most recent iPhone versus the first iPhone, right? Each time, each version gets bigger. I think about most food companies as they get bigger, they typically get worse.
Gail kills the product. And what happens is as they scale There's a lot of sacrifices restaurants have to make around where they source or how they prepare the food in order to create the right consistency to make it easy to do in thousands of locations , with the team members that we have, as well as maintain the profit margins that are necessary.
And so we always saw, you know, if you think about the rest of sweet green experience from a team member perspective, the operation you have prep, there's two really two components that we do in the restaurant, or I'd say maybe three. Preparation of the food, we get all this food, great, well sourced food, uh, brought into the restaurants fresh every single day, every restaurant gets a delivery every day.
We are making the food from scratch in those restaurants, and so much of that is very critical to the actual tasting quality of the food, the supply chain and the prep. The next piece is the assembly. It's just like the making of orders. Um, And that's where, honestly, there's, we actually have, while we're very good at it in our restaurants today, in terms of speed, you know, speed, throughput, consistency, and, both time and accuracy, that's where a lot of the challenges come in, because given the speed we're going, , it's very hard for humans to maintain that consistency.
And then the third component is hospitality and service. And again, in restaurants, when you're There's such complexity and this cognitive load of focusing on so many things, sometimes the service goes by the wayside. And so the idea from, you know, from very, from, you know, years ago, five or six years, like, probably six years ago, we're like, wait, why couldn't we automate this assembly?
Kind of just makes sense. You just take a step back. Why couldn't it be automated? And so we began the process similar, you know, at a similar time We started seeing some more innovation in different industries around automation and we had met these guys at MIT Michael Fareed and his and his partners and we're like, wow, they're doing something really cool And when you talk to them, we met them when they were still in college They came to one of our and they came to one of our openings in Boston We shared a mutual investor in Daniel Balud And they had kind of their idea was like, we're going to take sweet green and make it automated.
That was like kind of their business plan, same mission, same idea, but we're going to automate it. And so We actually went down the path of trying to do it ourselves. At first we started, we, you know, we hired a head of automation. We began a process of like, Hey, can we actually build some of this stuff ourselves and realized it was, it's actually really, really hard to do.
And like many technologies, you can get to like the 80 or 90 percent point pretty easily on dispensing. So , if every item , you were putting in an assembly was like sunflower seeds or almonds, very easy problem to solve, okay? All like very, , like unique pieces, you know, you like discrete sizes, the way they fall out.
But now tell me, can you dispense goat cheese? Can you dispense lettuce with different viscosities, different viscosity dressings? Can you make it so that you can keep things temped properly, clean properly. There's so like the edge cases on getting this right are insane. , and the spice team, we were so impressed by the work they had done and they had opened two restaurants, really the only company that ever opened two fully operating automated restaurant.
So about two years ago, , after a number of talks, we decided to join forces. We acquired the company really, you know, acquired the technology and the team. And began the process of. customizing that technology for Sweetgreen. So taking what they had, which was very close to Sweetgreen, but now making it like really adapt to the Sweetgreen model and getting it ready to be adapted for scale.
So getting the cost of the machines down and then all of the edge cases, like I said, around setup, cleaning, et cetera. And so earlier this year, we opened our first restaurant featuring the infinite kitchen. Uh, we, we, we chose, we chose, uh, Location in Chicago and Naperville suburb of Chicago to test this out.
We've been very pleasantly surprised. By not surprised, just pleased with the results, kind of doing what we expected to do and the goals with automation for us, um, going back to what I already said is how can we use this technology to help protect our food ethos as we scale? That was like the big picture thing is how do we make, like, how do we use this to make sure the consistency stays and we don't have to cut corners on some of the real, the things that people really value.
By having this technology that can, that can drive consistency, drive speed and drive margins, and then give our team members more space and time to do the things that. They love and our customers love, which is service and hospitality. So the machines, , do pretty much all the assembly. They, we like to say it starts and ends with human hands.
So all the prep done by hand load machines, and then taken off and finished by humans, and then handed, handed directly to the customer. , the machines can do about 500 bowls per hour. So incredibly fast. So huge throughput opportunity, perfectly consistent, perfectly accurate. , and I think we'll give us some, you know, some margin, , leverage when you have a world where, , labor is getting harder to find in the industry, more expensive.
And so what we can do is we can upskill jobs. We can, over time, create more jobs by opening more restaurants. But need fewer people per restaurant. So very excited about, uh, the pilot. We're going to open another one in about a month here in Los Angeles in Huntington Beach in the LA area. And we've guided to about seven to nine new openings next year and a couple retrofit.
Still say this is a pilot really trying to learn, but we think over time automation will play a huge role in our, in the sweet green experience. And I think, you know, you've seen other, other competitors also take note. I think you're going to start to see a lot more automation in the industry. , quick question on that.
And of course they don't take, , sick days, right? The machines don't take those sick days. But, um, in terms of you guys full on acquired, , Spice from my understanding. So is this something you guys will look to potentially license out and become more of a technology company or you guys want to keep that exclusive to Sweetgreen, do you think?
I think it's definitely an opportunity for us. , it's not something that we're actively working on today, but we definitely, we do believe this technology is extensible and has a wide use cases beyond. Our business, there's so many different use cases for it. And I think more and more people are going to want it.
We do have, I think the best technology that is doing this today. So over time, , I do think that is a possibility that we've always viewed as a possibility, , to share that in certain way and monetize outside of, outside of just for ourselves. I was just going to say, like, I live 25 minutes away from the Naperville location, so I kind of have it as a little treat where I get to see the infinite kitchen.
And I just got to say, , it's absolutely incredible. I mean, I've never seen a restaurant. Anything like that before, you know, you walk in and there's basically no employees that you can really see them through the main glass and there's prepping stuff, but I mean, it's packed all the time and I like, I was there yesterday and I got to see , even the older people, they're easily able to go in there, go to the iPads or.
Whatever technology you use for it. , and then they can figure it out very quickly. , and the one thing that I love is that , it's not like ugly is I think the best word, like you walk in there and it's very vibrant. , you see all the colors and , I feel like it's kind of cool compared to what Chipotle is trying to come out with, where it's kind of just a utility tool, like this is like the restaurant, you know, I, I just want to say like, it's absolutely incredible to see.
I mentioned this concept of first principles earlier. I think the key for us, again with this, and I think, again, the differentiator of how we're viewing it in some of the competition.
Is that first principles approach? I think we're lucky in that our footprint is relatively small to the potential. So when we're looking at technology like this, we're not, you know, looking at, oh, we need a technology that fits into our existing operation. That's why these people are like trying to figure out these like robotic arms, which we just, I just don't think are going to work.
But the reason they have to do that is they have to make it work in their existing footprint. For us, we're like, okay, , forget what we have for a second. If you had this technology and you designed around it, similar to the story I explained around, if you designed around mobile ordering, what would you do and what would you do differently?
One of those things for us, which is a hard thing to get across at first, was that maybe mean don't have this front line. That was like the big thing we were testing with this store. It's the first sweet green where you walk in and you're not walking that assembly line, which is like the classic fast casual experience.
And we would joke internally, it's kind of like, it was like, the Black, you guys remember the Blackberry? You know, it was like the Blackberry, everyone thought you needed the keys. Until they're like, you know what? Do you actually need it? Can you make it a touchscreen? You're taking something away that people love, but can you add back to things that people love even more?
And I think for us, it was... How can we make this the iPhone? How can you make it something that we're willing to disrupt what we have, but totally take a first principles approach around it being our single engine of production, not just our online ordering. And , what can that do to the overall experience?
So that, that again, bringing that first principles approach, I think is really, really, really important. , I'm looking at the time here. I want to make sure we, uh, kind of wrap up here on the recent earnings. So it's pretty exciting. 24 percent year on year revenue growth, , restaurant level margins around 19%.
But the, the thing that I like saw was your article saying you guys envision about a thousand stores in the, in the future, right? Current restaurant count, I believe is 220. , you guys have the exciting, , spice , and all of the technology you guys are bringing into this to help expand that, like you mentioned.
So how do you guys get to a thousand? Is that going to be through like franchisees or is this something you guys are going to continue to own?
So we very intentionally early on decided to build a company owned, , take the company on strategy. The reasons we did were , we knew that we were going to innovate and change, and that's very hard to do in a franchise model. Right. Think about the Infinite Kitchen as an example. Imagine if we like then had this amazing technology and we went and instead of installing it, we had to convince franchisees to do it.
yOu don't own your stores, you become a licensing company. There are instances where I think licensing may make sense. Alternative places like, all right, you want to get into some airports or, you know, you can consider some international opportunities. But for us, given the superior unit economics we have, the strong balance sheet that we do have, , And the innovation and change and quality control.
We want to ensure it's always been about owning the end to end experience. And so, we do see an opportunity. I, you know, I think 1000 milestone. I think over time we see the opportunity for many more than that. You know, our closest comp I think is Chipotle and you look at Chipotle at, 3500 units today.
, the relative price of Chipotle has gotten a lot closer and as we expand the menu to become broader and attack that attach, uh, hit those broader consumer segments. , coupled with the superior technology and experience we have, we see an opportunity to create, you know, kind of one, a once in a generation restaurant company.
And if you think about the restaurant world, it only happens once every like 20 years, it happens like once every 20 years, like in terms of company owned brand. That are able to scale and hit terminal velocity. We're clearly not there yet. , we're , pushing there to like, get that flywheel going, but we do have an opportunity to do it.
The brand is there. We have the capabilities and the model and the unit economics. We have the cash to do it. And it's really an execution game for us here. Love it. Well, thank you so much for coming on, Jonathan. I'm super excited about your guys future. , I'm a huge fan. I live in New York and I have three to five blocks away.
And so I typically go at least once a week. And honestly, with the protein plates that has moved up, so I'm starting to go there quite a bit more, but, , really appreciate you coming on behind the table. Awesome guys. Thank you for having me. It's fun talking. It's fun talking to you all. I appreciate all the love and support, and I hope we can meet in person soon.
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