What the heck is going on with Sweetgreen?

In Might, Sweetgreen opened a long-awaited location in Naperville, Illinois, about 30 miles outdoors of Chicago. Like a lot of Sweetgreen’s 220 places, it’s vivid, with neon signage and smiling staff. In contrast to any of them, nonetheless, it’s staffed by a salad-making robotic, which Sweetgreen calls its Infinite Kitchen. 

The robotic dispenses salad elements by capturing good parts from tubes into bowls. The corporate spent years growing the tech. It took two years, for instance, to determine easy methods to automate the crumbling of goat cheese atop a salad. 

With Sweetgreen’s third-quarter earnings report out this week, which exhibits that the corporate continues to lose cash however not as a lot because it did a yr in the past, each CEO Jonathan Neman and analysts see this one retailer within the south suburbs of Chicago as the way forward for the chain.

When Neman talks about the way forward for the salad chain, he’s bullish on automation as a option to “enhance throughput” on the eating places. That’s: a method for Sweetgreen’s employees and its machines to pump out as many salads as doable. Firm executives say that the robotic can produce as much as 500 salads per hour. In its first month of operation, the Naperville retailer carried out higher than a typical outlet. Its 26% sales margin was “considerably” increased than some other Sweetgreen location in its first month, which excites Wall Road.

However rethinking the salad enterprise is proving to be a sluggish, if promising, endeavor. 

“A variety of different firms are attempting to determine easy methods to add automation to their expertise and usually are not keen to start out over,” Neman told a Wall Street Journal reporter lately. “I’m keen to blow the entire thing up.”

COVID-19 hit Sweetgreen significantly exhausting

Most of its shops have been positioned in city places, patronized by close by workplace employees on the lookout for lunchtime salads. In 2020, same-store gross sales on the eating places have been down 26%. Whereas its fortunes have improved barely, Sweetgreen has operated at a big loss since its preliminary public providing virtually precisely two years in the past. IPO shares have been priced at $28. They closed Friday below $10. That’s a greater than 80% decline.

“Off the again of COVID, we needed to spend extra time stabilizing our firm than constructing it,” Neman mentioned this week. 

However he had one other message to guarantee traders: “We’re again on the offensive,” he mentioned, promising that the chain’s funding on delivering contemporary meals quick will finally repay. 

Analysts on the decision needed to speak extra concerning the robots. Particularly, they questioned, when will extra of them present up? 

Each fast-food CEO desires of automation

Initially, Neman predicted that each one new Sweetgreen places can be automated in 5 years. Now he says that subsequent yr the corporate will open between seven and 9 places with robots, and it’ll retrofit two to 4 current places. In whole, the chain goals to open 28 new places in 2024.

“The rationale for the slight slowdown is to raised combine the Infinite Kitchen expertise into the pipeline,” Neman mentioned, seemingly hedging the slower-than-expected rollout. 

Sweetgreen’s Infinite Kitchen arrived because of the chain’s $50 million purchase of Spyce in August 2021, a Boston-based robotic restaurant startup that counted chefs Thomas Keller and Daniel Boulud amongst its early backers. However the salad chain has been serious about robotics for for much longer. I bear in mind interviewing the chain’s then-head of automation throughout a panel at a 2019 restaurant expertise convention; I additionally bear in mind this particular person giving precisely zero particulars concerning the chain’s plans to deploy any sort of salad bot. 

4 years later, we have now extra particulars however few operational robots.

The tech-powered restaurant firm thesis stays unproven

Sweetgreen is amongst a handful of contemporary restaurant chains which have most well-liked to speak about their enterprise in tech phrases, explaining how they function and scale like a tech firm that serves meals, slightly than a restaurant firm that makes use of expertise. It’s helped them clarify away the monetary losses. Like a tech firm that’s traditionally chased scale above revenue, Sweetgreen will apply its huge and costly concepts to optimize salad manufacturing.

“Their revenue drawback is, and has been, that their above-restaurant spend is scaled to the restaurant model they want to turn into, slightly than to the restaurant model they’re,” Meredith Sandland, CEO of restaurant software program firm Empower Supply and a former Taco Bell govt, instructed me. “Some traders are keen to tolerate these losses in pursuit of the long run. For some traders, that isn’t a great match.”

Regardless of its efforts to maneuver quick, Sweetgreen has discovered that salad doesn’t scale like software program. As a lot as it’d wish to be a tech firm with room to experiment and iterate, it must make selections like a restaurant. 

Sweetgreen steps as much as the plate

Earlier this month, Sweetgreen launched three new menu objects, one salmon dish and two several types of rooster with sides, dubbed protein plates. They’re meant to draw extra night enterprise; solely a few third of Sweetgreen’s present clients go to for dinner. “We’re constructing out the plate class to attraction to extra clients, significantly at dinnertime,” Neman mentioned. 

The plates include a brand new tagline: “You don’t must be a salad particular person to be a Sweetgreen particular person.” 

Sweetgreen is, in fact, synonymous with fancy salads, and it’s hoping to optimize their manufacturing with out shedding its high-end repute. Over the previous three months, Neman mentioned Sweetgreen moved preparation of its 5 hottest dressings out of the eating places to make them extra constant. Neman characterised the transfer as a yearslong choice “that was accomplished with a lot thought and care.”

“This transfer has allowed our crew members to shift their focus away from prepping a few of our most intensive recipes and as a substitute deal with hospitality and throughput,” he added, invoking restaurant executives’ favourite angle on new tech: It frees up human staff to supply higher service. (In fact, serving extra clients and finishing extra orders in the identical timeframe runs counter to being freed as much as present higher service, and throughput got here up six occasions on the earnings name versus 4 references to hospitality.) 

The Chipotle impact

All of this discuss of optimization and throughput and robots has turn into par for the course from restaurant chains on the rise. Quick-casual pioneer Chipotle has additionally turned to automation to assist beef up its backside line. 

However Chipotle, with hundreds of shops to Sweetgreen’s 220, has the posh of constructing in non-public. It runs a check kitchen close to its Orange County, California, headquarters the place it rigorously checks new menu objects and rising expertise. The method can take years. Simply ask Chippy, a tortilla-chip-making bot that landed in just one Chipotle location final yr. Chipotle tweaked the bot to churn out barely imperfect tortilla chips, higher simulating the human expertise. If it performs nicely at its check location, the robotic would possibly present up in additional of them. 

Chipotle can also be testing a robotic from Hyphen, an organization it invested in final yr. The bot works below the counter to pump out burrito bowls whereas human staff fold burritos and make children meals above. Curt Garner, Chipotle’s chief buyer and expertise officer, says that not like Sweetgreen’s robotic, which is the centerpiece of its shops, robots in Chipotle places will work within the kitchen, away from clients. 

One other issue very a lot in Chipotle’s favor? Its inventory is up greater than 300% up to now 5 years.

Later this yr, Sweetgreen will lastly open its second Infinite Kitchen idea, giving extra clients their very own style of robotic salad. In whole, Sweetgreen will open 38 new shops this yr, practically half in new markets like Tampa, Florida, and Milwaukee. 

However the robotic will employees a retailer in a location primed for the spectacle: Huntington Seashore, California—a brief drive from Chipotle HQ.