6 ms·

The Economics of a Sweetgreen Salad

44 points by jseliger 2y ago

0xffff2 2y ago
If you found the title bewildering (I sure did), it might help to know that "Sweetgreen" is apparently a restaurant that sells salads.
- JumpCrisscross 2y ago
  > might help to know that "Sweetgreen" is apparently a restaurant that sells salads The first five words are "shares in salad seller Sweetgreen."
  - akira2501 2y ago
    None of which appear in the HN title.
jerlam 2y ago
I went on a Sweetgreen phase earlier this year, and I'm so surprised that they can't seem to make any money. Most of their business appears to be delivery via apps, so they have minimal front-end staff. Their food wasn't uniquely great, just fresh and overpriced. There was always a line. They have low amounts of seating, so lower real estate costs than somewhere like Chipotle.
- darth_avocado 2y ago
  > Their food wasn't uniquely great, just fresh and overpriced. Sweetgreen originally was chef designed salads. They had fresh unique salads, a little pricey, but still accessible to the masses. Their popularity was because their salads tasted great. Unfortunately they pivoted to a business model of maximum profitability, which meant removing a lot of salads that took longer to prep for and streamlined the ingredients. In the process, they kept the mediocre stuff that tasted okay and removed unique and tastier stuff. You get the sweet greens version of cobb and Caesar, meanwhile their Mediterranean and Mexican salads were gone. They pivoted so hard that they no longer meet their original selling point.
  - jdminhbg 2y ago
    > Unfortunately they pivoted to a business model of maximum profitability Based on the article, they still haven't manage to pivot to any profitability.
    - zeroonetwothree 2y ago
      I suppose the maximum profitability could still be negative
  - infecto 2y ago
    The company is still unprofitable so perhaps the thing you enjoyed cannot be had at a price consumers are willing to pay.
    - darth_avocado 2y ago
      Unfortunately, there are many sweetgreen rip offs in my city that offer the original sweetgreen experience at the same price point. Which makes me think, either sweetgreen isn't managed well or the other places are also losing money (which doesn't make much business sense).
      - infecto 2y ago
        Hard to say what the apples to apples comparison is. The biggest difference most likely with those copy cat clones is the food supply chain. Not sure how much it has changed but one of sweetgreen's challenges has been working closer to the farm which can be more costly and harder to scale across geographies. The clones may just be getting everything from sysco. I don't follow sweetgreen very well and it could very well be mismanaged but I suspect those clones you see are apple to oranges in comparison.
        darth_avocado 2y ago
        Maybe. I would like them to do a market research on what % of their customers would pay $17 for a Caesar salad for their lettuce to come from a local farm and what % would prefer to pay $17 for a tasty salad curated by a chef, but with not all ingredients sourced locally. And once they have that info, I'd like them to decide which one of the two they are from a mission perspective. Nothing wrong with being either, as long as the expectations are set.
- annoyingnoob 2y ago
  I tried Sweetgreen a couple of times. The food was okay but overpriced, probably would go back but for the staff. The staff was just not nice at all, for no reason, twice. If you don't appreciate your customers then you won't stay in business, a simple smile isn't a lot to ask, just be nice that's it. If you are going to put a frowning, seemingly annoyed, human at the front then maybe just go with self-checkout.
  - whimsicalism 2y ago
    thank god i don't have to work a customer facing job, customers sound insufferable
    - annoyingnoob 2y ago
      Insufferable because I smiled, said hello, spent money with you, and expected a smile in return? When a kiosk is more friendly than your employee maybe the customer is not the problem.
  - deleted 2y ago
    [deleted]
  - jerlam 2y ago
    Their normal "customer" is an annoyed, impatient Doordash driver. I glanced at their delivery kitchen and it had 3x the staff of the front. I wouldn't be surprised if their front of house was really the back of house employees who don't want to be talking to in-person customers.
  - parpfish 2y ago
    Low level employees have no reason to be appreciative of the customers. Don’t take it personally. If you want them to be appreciative of customers, you need to give them an incentive structure that makes them treat customers as something other than a hurdle to overcome. And just saying “if there were no customers, you wouldn’t have a business to work at” will only works if you give them enough individual autonomy that their actions actually affect the business. And that just isn’t going to happen for low level jobs.
- bsder 2y ago
  I suspect the issue is that the number of customers is dropping--thus the excessive marketing costs. $10 is a weak tipping point and then $20 is a strong tipping point. If you cross $10, I'm going to ask if there is something I can substitute. For sweetgreen, the answer is likely that I can go hit the local grocery store and grab a prepackaged salad. If I'm just looking for non-junk calories for lunch, that's way more than sufficient. This is dangerous as the mindspace starts decreasing. If you cross $20, you had better be an actively good food experience. Otherwise, I'm looking for another place to eat or pre-preparing something myself. $20 buys a nice steak at the grocery store. Once you get me comparing your restaurant to a pound slab of ribeye, you've got a deep, deep problem.
  - twic 2y ago
    A ready-to-eat salad and a raw steak seem like products in completely different markets.
JumpCrisscross 2y ago
It looks likes Sweetgreen's food costs (28% of sticker and 24% of costs) are on the low end of the restaurant industry's average [1] and middle of the road for fast food [2]. The 35% corporate overhead seems like the exception. McDonald's, for example, charges a 4 to 5% royalty [3]. [1] https://www.7shifts.com/blog/restaurant-costs/ https://www.7shifts.com/blog/restaurant-costs/ 25 to 40% [2] https://restaurant.lunchbox.io/what-are-food-costs-for-a-fast-food-restaurant/ https://restaurant.lunchbox.io/what-are-food-costs-for-a-fas... 25% [3] https://www.franchisedirect.com/foodfranchises/mcdonalds-franchise-07030/ufoc/ https://www.franchisedirect.com/foodfranchises/mcdonalds-fra...
- tptacek 2y ago
  This is kind of a weak article, isn't it? For one thing: it's not the economics of a salad, but rather the economics of a rapidly expanding brick-and-mortar business. But mostly, it's like just a couple paragraphs, ending with (pp) "maybe steak salads will be a game changer".
  - JumpCrisscross 2y ago
    > kind of a weak article, isn't it? It's a bit all over the place. It looks like Sweetgreen's operations are cash-flow positive [1], which makes the claim that their unit economics are broken turn on their equipment's lifecycle costs. [1] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001477815/6442e95a-067d-4d63-8a4d-821bc5025fb3.pdf https://d18rn0p25nwr6d.cloudfront.net/CIK-0001477815/6442e95...
  - pvg 2y ago
    if it's a venison steak salad it will be.
solatic 2y ago
So basically, they're profitable except for their marketing costs, like most unprofitable growth companies? Those overhead figures really need more resolution to make sense of.
culi 2y ago
[flagged]
- Geeek 2y ago
  Perhaps they believe in a different mission then the one you believe in?
  - culi 2y ago
    It's not about me. The largest student protest since Vietnam is currently happening. The majority of young Americans[0] are pro-Palestine and those numbers have only been growing I just think it's interesting that a company who's branding is so strongly tied to that demographic is cool with being seen so loudly on the wrong side of this by young people and the left [0] https://www.pewresearch.org/short-reads/2024/04/02/younger-americans-stand-out-in-their-views-of-the-israel-hamas-war/ https://www.pewresearch.org/short-reads/2024/04/02/younger-a...
    - Geeek 2y ago
      > majority of young Americans are pro-Palestine Yeah, no. A very loud group of young college aged students are currently taking in a side in a conflict they know very little about. That's about it.
      - culi 2y ago
        Nope. There's stats https://www.pewresearch.org/short-reads/2024/04/02/younger-americans-stand-out-in-their-views-of-the-israel-hamas-war/ https://www.pewresearch.org/short-reads/2024/04/02/younger-a... 60% of young adults say they support Palestinian people. That number is only 46% for Israeli
        Geeek 2y ago
        The majority you speak of is "a third of adults under 30 say their sympathies lie either entirely or mostly with the Palestinian people..." that is not majority.
solatic 2y ago
The article is a bit disingenuous; when their offerings are expanding to include in-office daily lunches: https://outpost.sweetgreen.com/ https://outpost.sweetgreen.com/ then they're not exactly the same business model as a McDonald's and it's tougher to make the argument that you can simply scale company-wide finances on a per-unit level.
joezydeco 2y ago
Half of my office Doordashes these salads for lunch. I was really thinking this was the next Chipotle (before the turmoil and general suckitude settled in). But, man, this is more like Uber for lettuce.
ben7799 2y ago
I don't understand how this company somehow manages to convince people they are particularly innovative or that they deserve some kind of "tech company" reputation or valuation. It's just another faddish restaurant going through it's lifecycle. Who knows if they will be around in the long run. As soon as they are suddenly not cool people will move onto whatever else is new and cool. I have one very close to my office, the food is fine, the prices are high, the service and experience kind of stinks for the price. Salad is also super easy and cheap to make yourself. If their customers discover how easy it is to make a salad themselves that is not going to help. I wonder how much of the administrative overhead is excessive compensation. Pretend you are a tech unicorn and your founders/execs probably demand compensation that is out of line for the restaurant industry where profits don't look anything like FAANG.
- akira2501 2y ago
  > Who knows if they will be around in the long run. With 23% of revenue going to administrative overhead? They will not be.
- reducesuffering 2y ago
  They don't deserve some kind of "tech co" valuation, they deserve a Chipotle ($87 billion market cap) level valuation eventually. Contrary to most comments here, and the demand for Sweetgreens shows, Sweetgreens is actually nailing the holy trifecta of 1) healthy 2) tasty 3) fast, while not being too expensive for most people, just like Chipotle. They also do have a leg up technology-wise, as they have good devs and tech stack (for a non tech co) and acquired some smart MIT students working on fully automated food bowls that is showing a lot of promise. I expect to see a lot more of them all over the US and approach current Chipotle status in valuation and size in the next 7 years.
greenie_beans 2y ago
[flagged]
subroutine 2y ago
Souplantation did it better and didn't survive.
paxys 2y ago
Should be titled "Sweetgreen's latest earnings report" since that is all there is in the article, just in too many words.
karaterobot 2y ago
I don't understand how it costs $4.35 in hourly labor to make a salad. I know you've got prep cooks, servers/cashiers, dishwashers, and managers. I assume some of these roles overlap in practice. If everyone makes $18 an hour on average, and there's five people on the clock, that's $90 an hour in labor. So, if they average 7 x $15 salads an hour, which seems rather low, shouldn't that cover labor costs at the franchise? This is oversimplified and makes many assumptions, that's obvious. I'm wondering what the missing piece is.
- joezydeco 2y ago
  Labor burden is always more than the amount the worker is getting for gross pay. That $18 is more like $25 when you add unemployment insurance, benefits, etc. I agree the labor math here is really off, but there must be other factors.
greenie_beans 2y ago
my comment got flagged for saying "our society needs to shame anybody who will pay for a $20 salad", probably got downvoted by all the folks who pay $20 for a salad lol

44 points by jseliger 2y ago

If you found the title bewildering (I sure did), it might help to know that "Sweetgreen" is apparently a restaurant that sells salads.

JumpCrisscross 2y ago
> might help to know that "Sweetgreen" is apparently a restaurant that sells salads The first five words are "shares in salad seller Sweetgreen."
- akira2501 2y ago
  None of which appear in the HN title.

jerlam 2y ago

I went on a Sweetgreen phase earlier this year, and I'm so surprised that they can't seem to make any money. Most of their business appears to be delivery via apps, so they have minimal front-end staff. Their food wasn't uniquely great, just fresh and overpriced. There was always a line. They have low amounts of seating, so lower real estate costs than somewhere like Chipotle.

darth_avocado 2y ago
> Their food wasn't uniquely great, just fresh and overpriced. Sweetgreen originally was chef designed salads. They had fresh unique salads, a little pricey, but still accessible to the masses. Their popularity was because their salads tasted great. Unfortunately they pivoted to a business model of maximum profitability, which meant removing a lot of salads that took longer to prep for and streamlined the ingredients. In the process, they kept the mediocre stuff that tasted okay and removed unique and tastier stuff. You get the sweet greens version of cobb and Caesar, meanwhile their Mediterranean and Mexican salads were gone. They pivoted so hard that they no longer meet their original selling point.
- jdminhbg 2y ago
  > Unfortunately they pivoted to a business model of maximum profitability Based on the article, they still haven't manage to pivot to any profitability.
  - zeroonetwothree 2y ago
    I suppose the maximum profitability could still be negative
- infecto 2y ago
  The company is still unprofitable so perhaps the thing you enjoyed cannot be had at a price consumers are willing to pay.
  - darth_avocado 2y ago
    Unfortunately, there are many sweetgreen rip offs in my city that offer the original sweetgreen experience at the same price point. Which makes me think, either sweetgreen isn't managed well or the other places are also losing money (which doesn't make much business sense).
    - infecto 2y ago
      Hard to say what the apples to apples comparison is. The biggest difference most likely with those copy cat clones is the food supply chain. Not sure how much it has changed but one of sweetgreen's challenges has been working closer to the farm which can be more costly and harder to scale across geographies. The clones may just be getting everything from sysco. I don't follow sweetgreen very well and it could very well be mismanaged but I suspect those clones you see are apple to oranges in comparison.
      - darth_avocado 2y ago
        Maybe. I would like them to do a market research on what % of their customers would pay $17 for a Caesar salad for their lettuce to come from a local farm and what % would prefer to pay $17 for a tasty salad curated by a chef, but with not all ingredients sourced locally. And once they have that info, I'd like them to decide which one of the two they are from a mission perspective. Nothing wrong with being either, as long as the expectations are set.
annoyingnoob 2y ago
I tried Sweetgreen a couple of times. The food was okay but overpriced, probably would go back but for the staff. The staff was just not nice at all, for no reason, twice. If you don't appreciate your customers then you won't stay in business, a simple smile isn't a lot to ask, just be nice that's it. If you are going to put a frowning, seemingly annoyed, human at the front then maybe just go with self-checkout.
- whimsicalism 2y ago
  thank god i don't have to work a customer facing job, customers sound insufferable
  - annoyingnoob 2y ago
    Insufferable because I smiled, said hello, spent money with you, and expected a smile in return? When a kiosk is more friendly than your employee maybe the customer is not the problem.
- deleted 2y ago
  [deleted]
- jerlam 2y ago
  Their normal "customer" is an annoyed, impatient Doordash driver. I glanced at their delivery kitchen and it had 3x the staff of the front. I wouldn't be surprised if their front of house was really the back of house employees who don't want to be talking to in-person customers.
- parpfish 2y ago
  Low level employees have no reason to be appreciative of the customers. Don’t take it personally. If you want them to be appreciative of customers, you need to give them an incentive structure that makes them treat customers as something other than a hurdle to overcome. And just saying “if there were no customers, you wouldn’t have a business to work at” will only works if you give them enough individual autonomy that their actions actually affect the business. And that just isn’t going to happen for low level jobs.
bsder 2y ago
I suspect the issue is that the number of customers is dropping--thus the excessive marketing costs. $10 is a weak tipping point and then $20 is a strong tipping point. If you cross $10, I'm going to ask if there is something I can substitute. For sweetgreen, the answer is likely that I can go hit the local grocery store and grab a prepackaged salad. If I'm just looking for non-junk calories for lunch, that's way more than sufficient. This is dangerous as the mindspace starts decreasing. If you cross $20, you had better be an actively good food experience. Otherwise, I'm looking for another place to eat or pre-preparing something myself. $20 buys a nice steak at the grocery store. Once you get me comparing your restaurant to a pound slab of ribeye, you've got a deep, deep problem.
- twic 2y ago
  A ready-to-eat salad and a raw steak seem like products in completely different markets.

JumpCrisscross 2y ago

It looks likes Sweetgreen's food costs (28% of sticker and 24% of costs) are on the low end of the restaurant industry's average [1] and middle of the road for fast food [2]. The 35% corporate overhead seems like the exception. McDonald's, for example, charges a 4 to 5% royalty [3]. [1] https://www.7shifts.com/blog/restaurant-costs/ https://www.7shifts.com/blog/restaurant-costs/ 25 to 40% [2] https://restaurant.lunchbox.io/what-are-food-costs-for-a-fast-food-restaurant/ https://restaurant.lunchbox.io/what-are-food-costs-for-a-fas... 25% [3] https://www.franchisedirect.com/foodfranchises/mcdonalds-franchise-07030/ufoc/ https://www.franchisedirect.com/foodfranchises/mcdonalds-fra...

tptacek 2y ago
This is kind of a weak article, isn't it? For one thing: it's not the economics of a salad, but rather the economics of a rapidly expanding brick-and-mortar business. But mostly, it's like just a couple paragraphs, ending with (pp) "maybe steak salads will be a game changer".
- JumpCrisscross 2y ago
  > kind of a weak article, isn't it? It's a bit all over the place. It looks like Sweetgreen's operations are cash-flow positive [1], which makes the claim that their unit economics are broken turn on their equipment's lifecycle costs. [1] https://d18rn0p25nwr6d.cloudfront.net/CIK-0001477815/6442e95a-067d-4d63-8a4d-821bc5025fb3.pdf https://d18rn0p25nwr6d.cloudfront.net/CIK-0001477815/6442e95...
- pvg 2y ago
  if it's a venison steak salad it will be.

solatic 2y ago

So basically, they're profitable except for their marketing costs, like most unprofitable growth companies? Those overhead figures really need more resolution to make sense of.

culi 2y ago

[flagged]

Geeek 2y ago
Perhaps they believe in a different mission then the one you believe in?
- culi 2y ago
  It's not about me. The largest student protest since Vietnam is currently happening. The majority of young Americans[0] are pro-Palestine and those numbers have only been growing I just think it's interesting that a company who's branding is so strongly tied to that demographic is cool with being seen so loudly on the wrong side of this by young people and the left [0] https://www.pewresearch.org/short-reads/2024/04/02/younger-americans-stand-out-in-their-views-of-the-israel-hamas-war/ https://www.pewresearch.org/short-reads/2024/04/02/younger-a...
  - Geeek 2y ago
    > majority of young Americans are pro-Palestine Yeah, no. A very loud group of young college aged students are currently taking in a side in a conflict they know very little about. That's about it.
    - culi 2y ago
      Nope. There's stats https://www.pewresearch.org/short-reads/2024/04/02/younger-americans-stand-out-in-their-views-of-the-israel-hamas-war/ https://www.pewresearch.org/short-reads/2024/04/02/younger-a... 60% of young adults say they support Palestinian people. That number is only 46% for Israeli
      - Geeek 2y ago
        The majority you speak of is "a third of adults under 30 say their sympathies lie either entirely or mostly with the Palestinian people..." that is not majority.

solatic 2y ago

The article is a bit disingenuous; when their offerings are expanding to include in-office daily lunches: https://outpost.sweetgreen.com/ https://outpost.sweetgreen.com/ then they're not exactly the same business model as a McDonald's and it's tougher to make the argument that you can simply scale company-wide finances on a per-unit level.

joezydeco 2y ago

Half of my office Doordashes these salads for lunch. I was really thinking this was the next Chipotle (before the turmoil and general suckitude settled in). But, man, this is more like Uber for lettuce.

ben7799 2y ago

I don't understand how this company somehow manages to convince people they are particularly innovative or that they deserve some kind of "tech company" reputation or valuation. It's just another faddish restaurant going through it's lifecycle. Who knows if they will be around in the long run. As soon as they are suddenly not cool people will move onto whatever else is new and cool. I have one very close to my office, the food is fine, the prices are high, the service and experience kind of stinks for the price. Salad is also super easy and cheap to make yourself. If their customers discover how easy it is to make a salad themselves that is not going to help. I wonder how much of the administrative overhead is excessive compensation. Pretend you are a tech unicorn and your founders/execs probably demand compensation that is out of line for the restaurant industry where profits don't look anything like FAANG.

akira2501 2y ago
> Who knows if they will be around in the long run. With 23% of revenue going to administrative overhead? They will not be.
reducesuffering 2y ago
They don't deserve some kind of "tech co" valuation, they deserve a Chipotle ($87 billion market cap) level valuation eventually. Contrary to most comments here, and the demand for Sweetgreens shows, Sweetgreens is actually nailing the holy trifecta of 1) healthy 2) tasty 3) fast, while not being too expensive for most people, just like Chipotle. They also do have a leg up technology-wise, as they have good devs and tech stack (for a non tech co) and acquired some smart MIT students working on fully automated food bowls that is showing a lot of promise. I expect to see a lot more of them all over the US and approach current Chipotle status in valuation and size in the next 7 years.

greenie_beans 2y ago

[flagged]

subroutine 2y ago

Souplantation did it better and didn't survive.

paxys 2y ago

Should be titled "Sweetgreen's latest earnings report" since that is all there is in the article, just in too many words.

karaterobot 2y ago

I don't understand how it costs $4.35 in hourly labor to make a salad. I know you've got prep cooks, servers/cashiers, dishwashers, and managers. I assume some of these roles overlap in practice. If everyone makes $18 an hour on average, and there's five people on the clock, that's $90 an hour in labor. So, if they average 7 x $15 salads an hour, which seems rather low, shouldn't that cover labor costs at the franchise? This is oversimplified and makes many assumptions, that's obvious. I'm wondering what the missing piece is.

joezydeco 2y ago
Labor burden is always more than the amount the worker is getting for gross pay. That $18 is more like $25 when you add unemployment insurance, benefits, etc. I agree the labor math here is really off, but there must be other factors.

greenie_beans 2y ago

my comment got flagged for saying "our society needs to shame anybody who will pay for a $20 salad", probably got downvoted by all the folks who pay $20 for a salad lol