Sweetgreen Franchise Cost & 3 Alternatives For 2022

Written by: Owen Boyd
Last Updated by Marina Longo: July 17, 2022
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Over the last several years, American consumers have become increasingly aware of the ingredients in their food and have begun to demand healthier options.

As a result, the “fresh” fast food industry has formed to provide these healthier food options without sacrificing convenience and affordability.

Founded in 2007, Sweetgreen is a pioneer in this new industry.  

Contents

However, it is important to note that Sweetgreen is not a franchise. As of November 2021, each Sweetgreen location is company-owned, and Sweetgreen does not plan on franchising in the near future. As opposed to other franchises marketing healthy food like Freshii, Tropical Smoothie Cafe, and Playa Bowls, Sweetgreen is able to maintain much tighter control of its supply chains and operations.  

 

This article analyzes Sweetgreen’s November 2021 IPO Investment Prospectus filed with the SEC to weigh the strengths and weaknesses of their business.  

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Sweetgreen History  

Sweetgreen began out of three Georgetown students’ dissatisfaction with their food options, which were either slow, expensive, and fresh or fast, cheap, and unhealthy. So, they decided to offer a third option where they could serve fresh food without sacrificing quality or convenience and opened the first Sweetgreen restaurant.  

By 2021, Sweetgreen has grown to 140 restaurants, and they remain committed to quality and convenience, as well as to their sustainability and environmental goals.

Sweetgreen Restaurant Costs

The following table breaks down the restaurant operating costs section of Sweetgreen’s income statement on a per-restaurant basis. In 2020, restaurant operating costs totaled about $229,317,000. In that year, there were 119 Sweetgreen restaurants, so on average, it cost $1,927,033.61 to operate a Sweetgreen location.

Restaurant Operating Costs, 2020

Expense Cost
Food, beverage, and packaging $555,915.97
Labor and related expenses $703,285.71
Occupancy and related expenses $367,857.14
Other restaurant operating costs $299,974.79
Total $1,927,033.61
sweetgreen restaurant

Definitions for each type of expense

Sweetgreen’s November 2021 IPO Investment Prospectus provides the following definitions for each type of expense:  

Food, Beverage, and Packaging  

Direct costs associated with food, beverage, and packaging of our menu items. We anticipate food, beverage and packaging costs on an absolute dollar basis will increase for the foreseeable future to the extent we experience additional in-store orders as restrictions related to the COVID-19 pandemic ease, as we open additional restaurants, and as a result our revenue grows.” 

Labor and Related Expenses

“Salaries, benefits, payroll taxes, workers compensation expenses, and other expenses related to our restaurant employees. As with other variable expense items, we expect labor costs to grow as our revenue grows.” 

Occupancy and Related Expenses

“Restaurant-level occupancy expenses (including rent, common area expenses and certain local taxes), maintenance and utilities, and exclude occupancy expenses associated with unopened restaurants, which are recorded separately in pre-opening costs. We anticipate occupancy and related expenses on an absolute dollar basis will increase for the foreseeable future to the extent we continue to open new restaurants and revenue grows.” 

Other Restaurant Operating Costs

“Other operating expenses incidental to operating our restaurants, such as third-party delivery fees, non-perishable supplies, repairs and maintenance, restaurant-level marketing, credit card fees and property insurance. We expect that other restaurant operating costs will increase on an absolute dollar basis for the foreseeable future to the extent we continue to open new restaurants and our revenue grows. Other restaurant operating costs as a percentage of revenue are expected to increase in line with growth in our Native Delivery, Outpost, and Marketplace Channels, as these channels are impacted by third-party delivery fees. However, as revenue increases, we expect that other restaurant operating costs, such as repairs and maintenance and property insurance, as a percentage of revenue will decline.” 

Locations

A significant share of Sweetgreen’s 140 restaurants are located in urban areas like New York, Los Angeles, Boston, and Washington, D.C. They are especially concentrated in New York, which has represented about a third of Sweetgreen’s total revenue in each of the last two years.  

sweetgreen locations USA

Risk Factors

  • Competition in fast casual and fast food industry 
  • Pandemics/disease outbreaks (COVID-19) 
  • Changes in economic conditions and customer behavior trends 
  • Growth dependent on ability to open new restaurants 
  • Risks of expansion into new markets – variability in costs, demand, sourcing, etc. 
  • Increases in labor costs, labor shortages, and any difficulties in attracting, motivating, and retaining well-qualified employees (thinking of things like Covid) 
  • Changes in food and supply costs or failure to receive frequent deliveries of food ingredients and other supplies 
  • New information or attitudes regarding diet and health could result in changes in regulations and customer consumption habits 
  • Focus on environmental sustainability and social initiatives may increase costs, and inability to meet sustainability goals could harm reputation 

Sweetgreen Financial Statements

Sweetgreen Income Statement

 Fiscal Year Ended (in thousands)
 Dec 27, 2020Dec 29, 2019
Consolidated Statements of Operations Data   
Revenue$220,615$274,151
Restaurant operating costs (exclusive of depreciation and amortization presented separately below):  
Food, beverage and packing66,15483,966
Labor and related expenses83,69186,547
Occupancy and related expenses43,77537,050
Other restaurant operating costs35,69722,613
Total restaurant operating costs229,317230,176
Operating expenses:  
General and administrative99,14288,818
Depreciation and amortization26,85119,416
Pre-opening costs4,5515,405
Impairment of long-lived assets1,456
Loss on disposal of property and equipment891409
Total operating expenses132,891114,048
Loss from operations(141,593)(70,073)
Interest income(1,018)(2,724)
Interest expense40488
Other expense245480
Net loss before income taxes(141,224)(67,917)
Income tax provision
Net loss$(141,224)$(67,917)
franchise specialist

Sweetgreen Balance Sheet

Sweetgreen Balance Sheet

 As of
 Dec 27, 2020Dec 29, 2019Sept 26, 2021
 (in thousands)
Consolidated Balance Sheet Data   
Cash and cash equivalents$102,640$249,257$137,031
Working capital (1)79,541228,664113,581
Assets (total)265,683386,420406,000
Liabilities (total)67,40753,977117,721
Preferred stock505,638505,638614,496
Total stockholders (deficit)(307,362)(173,195)(327,217)

(1) Working capital is defined as current assets less current liabilities. See our consolidated financial statements and the related notes included elsewhere in this prospectus for further details regarding our current assets and current liabilities

sweetgreen table

Sweetgreen Cashflows

Sweetgreen Cash Flows

  Fiscal Year EndedThirty-Nince Weeks Ended
 December 27, 2020December 29, 2019September 26, 2021September 27, 2020
 (in thousands)
Net cash used inoperating activities$(90,352)$(37,198)$(36,215)$(66,702)
investing activities(58,405)(50,468)(69,746)(43,012)
Net cash provided by financing activities2,145149,796140,55516,685
(decrease) Net increase in cash and cash equivalents and restricted cash$(146,612)$62,130$34,594$(93,029)
sweetgreen logo

Sweetgreen Key Performance Metrics

Sweetgreen Key Performance Metrics

 Fiscal Year EndedThirteen Weeks EndedThirty-Nince Weeks Ended
 December 27, 2020December 29, 2019September 26, 2021September 27, 2020September 26, 2021September 27, 2020
(dollar amounts in thousands)
Net New Restraurant Openings15151172111
Average Unit Volume (as adjusted)$2,194$2,967$2,459$2,313$2,4592,313
Same-Store Sales Change (as adjusted) (%)(26%)15%43%(34%)21%(26%)
Restaurant-Level Profit$(8,702)$43,975$13,134$(4,706)$28,060$(6,344)
Restaurant-Level Profit Margin (%)(4%)16%14%(8%)12%(4%)
Adjusted EBITDA$(107,483)$(46,344)$(14,085)$(28,408)$(48,928)$(78,487)
Adjusted EBITDA Margin (%)(49%)(17%)(15%)(51%)(20%)(49%)
Total Digital Revenue Percentage75%50%63%79%68%74%
Owned Digital Revenue Percentage56%43%43%58%47%57%
sweetgreen magazine article

Sweetgreen Quarterly Earnings Statement

Quarterly Earnings Statement

 Thirteen Weeks Ended
 Sept 26, 2021June 27, 2021Mar 28, 2021Dec 27, 2020Sept 27, 2020June 28, 2020Mar 29, 2020Dec 29, 2019Sept 29, 2019June 30, 2019Mar 31, 2019
(dollar amounts in thousands)
Consolidated Statements of Operations Data:           
Revenue$95,844$86,212$61,392$59,180$55,549$32,918$72,969$69,318$74,065$71,539$59,228
Net loss$(30,066)$(26,883)$(30,47)$(41,066)$(38,859)$(39,290)$(24,008)$(26,594)$(16,823)$(12,828)$(11,671)
Other Financial and Operating Data:           
Net New Restaurant Openings119147317422
Average Unit Volume$2,459$2,447$2,075$2,194$2,313$2,518$2,981$2,967$2,863$2,748$2,662
Same-Store Sales Change43%86%(26%)(28%)(34%)(46%)2%15%16%12%17%
Total Digital Revenue %63%68%77%78%79%97%59%54%51%47%48%
Owned Digital Revenue %43%48%53%54%58%76%48%43%43%43%44%

Financial Statement Key Insights 

As of November 2021, Sweetgreen has yet to make a profit. While the growth of new restaurants from 29 locations in 2014 to 140 locations in 2021 has led to a 523% increase in revenue, restaurant operating costs and corporate operating expenses have also skyrocketed.  

 

The balance sheet, statement of cash flows, and table of key performance metrics only provide data on 2019 and 2020. Relative to 2019, Sweetgreen experienced an increase in stockholder deficit, a decrease in cash and cash equivalents, and a decrease in many of its key performance metrics like same-store sales and restaurant-level profit in 2020. 

 

The quarterly earnings statement breaks down Sweetgreen’s revenue, profit, and other financial and operating data from 2019 through Q3 of 2021. By the most recent quarter, revenue and same-store sales have recovered from its 2020 Q2 low, but average unit volume has not grown since 2019, and Sweetgreen has not been able to reduce its earnings deficit. 

Net stores opened/closed 

sweetgreen-count

Sweetgreen has opened 118 new restaurants between 2014 and Q3 2021, averaging about 15 new restaurants a year. As of 2021, Sweetgreen is still squarely in its growth phase.

Conclusion

While Sweetgreen has in many ways recovered from the impacts of COVID-19, they are still a growing company that has yet to make a profit. Their path to profitability will require them to continue scaling up and opening new locations, and they will also need to reduce the restaurant operating costs. Also, their ability to do so will depend in part on the extent to which labor and other costs return to pre-pandemic levels.  

Interested in learning more about Sweetgreen’s restaurant and other franchise opportunities?

Check out our listings page on the Vetted Biz website for much more information about franchise opportunities. 

franchise specialist
This article is based on a video originally recorded on Vetted Biz Youtube Channel

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