Sweetgreen finished 2023 on a better foot than it started and, while the chain still hasn’t reached profitability, it’s getting closer, according to its fourth-quarter and full-year earnings call on Thursday.
Los Angeles-based fast-casual Sweetgreen’s future appears to be in its Infinite Kitchens. The robot-run models were created with Spyce, the automation restaurant company Sweetgreen purchased in 2021, which passes bowls down a conveyer belt rather than having humans stand at each station.
The first Infinite Kitchen opened in May outside of Chicago and saw 26% restaurant-level margins over its first few weeks. Now that it’s been over six months, there’s more information on how these robot-run models are performing.
Sweetgreen announced on the earnings call for fiscal year 2023 that Infinite Kitchens saw a 10% increase in average checks and a 7% margin improvement.
The improvement at the two Infinite Kitchens is believed to be from the kiosks, according to CEO and co-founder Jonathan Neman, as well as the reduction in labor costs.
The Infinite Kitchen can handle 500 bowls per hour, according to Sweetgreen. However, at the two current units, there isn’t a demand for that volume, since they’re in the suburbs. This year, several new Infinite Kitchen openings will be in urban markets where throughput is expected to be higher.
Of the chain’s expected 23 to 27 new units in 2024, seven of them will have an Infinite Kitchen. Three to four “large urban” restaurants will also be converted to Infinite Kitchens in 2024, taking them offline for “some period of time.”
“Based on what we know today, we expect the Infinite Kitchen to cost between $450,000 and $550,000 and generate at least seven points of margin improvement as well as deliver significant second-order benefits,” Mitch Reback, chief financial officer for Sweetgreen, said on the earnings call.
“We do expect [the cost] to come down as we continue to scale it as well as engineer some of the costs down,” Neman said later in the call.
Despite the costs, Sweetgreen seems to believe its future is in Infinite Kitchens.
“We’ve seen such benefits in terms of lower turnover, more consistent customer experience, and in many places much higher throughput,” Neman said of the Infinite Kitchens.
The pipeline, which was slowed in 2023 to accommodate the buildout of Infinite Kitchens, will pick up in 2024 and the company plans to eventually return to 15% unit growth each year.
The fast-casual chain reported a same-store sales increase of 6% for the quarter that ended Dec. 31 and 4% for fiscal year 2023. Revenue was up 29% for the quarter and 24% for the year. AUVs remained consistent year-over-year at $2.9 million and the company opened one new store in Q4 and 35 net in 2023.
New store openings will be led by the brand’s new chief operating officer, Rossann Williams, who joined the company in early February. Williams, who joined the chain after spending 18 years at Starbucks as the EVP and president of North America, is tasked with the reacceleration of that pipeline as well as driving transaction growth.
Tipping, introduced at Sweetgreen last year, has resulted in a $2 hourly wage increase for frontline workers, Neman said.
The brand is also continuing to invest heavily in culinary as it moves forward.
“We see menu and culinary innovation as a key lever to expand customer reach, positively impact seasonality and drive traffic,” said Neman.
Protein Plates, launched in October, were meant to introduce Sweetgreen’s customers to the idea of having dinner at the chain. They launched with the slogan “You don't have to be a salad person to be a Sweetgreen person.”
In the first 60 days, Neman said the chain saw its dinner daypart grow, and that sales exceeded expectations. The test performed well in the Southeast especially.
That was followed by the introduction of a new protein, Caramelized Garlic Steak, which may be rolled out nationally later this year depending on the Boston test.
The chain credits some of the new menu innovations for its approximately 1% traffic increase for the fourth quarter.
Sweetpass, the chain’s loyalty app that was introduced last year alongside a paid model, has yet to pay off for Sweetgreen.
“I think what we’ve done is we built a lot of good technology capabilities to enable a great loyalty program, [but] we have not yet seen the benefit of that program,” said Neman.
