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Same-store sales were up 4% in the fourth quarter versus 36% the year prior. That’s primarily due to a 6% increase in menu prices, with a 2% decline in transaction mix.

Sweetgreen to launch loyalty, subscription programs in April

The fast-casual restaurant brand will also introduce tipping before the end of the year

Los Angeles-based restaurant chain Sweetgreen is set to launch its first loyalty program in April, executives said on the fourth-quarter earnings call on Thursday.

Sweetpass, which was piloted in 2022 as a limited-time offering, is currently in the test phase as a full loyalty app in Colorado.

The new program will have both a paid subscription and a free option.

The chain’s app saw a redesign last year, with enhanced features on both the front and back ends to improve its ease of use for customers.

These announcements come on the heels of the chain’s January promotion, which encouraged customers to visit Sweetgreen stores three times in the month to get an award. While not included in the earnings period, which ended on December 25, the Green January promotion had the chain’s highest challenge opt-in engagement and exceeded the target for completion.

“We were delighted with the response,” said co-founder and CEO Jonathan Neman.

The fast-casual chain also saw success with its new prototype locations — the digital-only location in Washington D.C. and the drive-thru in Schaumberg, Ill.

Seventy-five percent of customers at the drive-thru store used the pickup lane — customers must order ahead and pick up orders through the drive-thru lane, as opposed to placing orders there — and checks were 20% higher than in nearby Chicago stores, according to Neman.

Sweetgreen’s digital sales reached 61% in the fourth quarter, 40% of which were owned digital sales. However, that’s down from the fourth quarter of 2021, when digital sales made up 65% of the chain’s business and owned digital revenue was 43%.

Same-store sales were up 4% in the fourth quarter versus 36% the year prior. That’s primarily due to a 6% increase in menu prices, with a 2% decline in transaction mix.

Total revenue was $118.6 million versus $96.4 million in the prior year period, an increase of 23%, and restaurants saw AUVs increase from $2.6 million in the year prior to $2.9 million.

Adjusted EBITDA was -$17.9 million versus adjusted EBITDA of -$14.2 million in the prior year period, and the adjusted EBITDA margin was -15% for both periods. Restaurant-level profit was $12.8 million, and margins were 11%, versus a profit of $12.3 million and margin of 13% in the prior year period.

For the full year, total revenue was $470.1 million versus $339.9 million in the prior fiscal year, an increase of 38% and there was a same-store sales change of 13% versus 25% the year prior.

Sweetgreen is also planning to introduce tipping to all restaurants by the end of the year.

“We believe it will improve team member turnover and create an overall better customer experience,” said Neman.

The chain is also planning to expand its dessert offering and introduce chocolates in 2023. Sweetgreen launched its first dessert in 2022 in partnership with the chain’s chef, Malcolm Livingston II, called the Crispy Rice treat.

In addition to desserts, the chain is planning to launch new healthy sodas and relaunch hummus in stores this year.

Catering, which had a soft launch in 2022, has proven to be a boon for Sweetgreen. Without any marketing, catering doubled in size in Q4.

The outlook for stores, however, has softened. Neman said new store openings for 2023 will be 35, down from the 36 net new units opened in 2022.

This is due to a “quality over quantity” approach from the chain which is reducing its support staff center costs in half to focus on profitability.

“Since we went public a little more than a year ago, the macro-economic environment has become more challenging,” Neman said.

That includes a volatile supply chain, difficult staffing environment, and the lack of return to office Sweetgreen used to depend on.

However, Sweetgreen is still pushing. December had the lowest workforce turnover in the chain’s ten-year history and tenure for managers went up by almost 10 months. Callouts also remained 25% less than in the summer and the chain is finally fully staffed.

The top 10 stores across the fleet were also operating 20% higher throttle in January than in December.

Sweetgreen is still testing new things, despite the macro-economic environment. The chain’s Infinite Kitchen, a proprietary technology that will allow for fully automated restaurants, will be rolled out in two restaurants — a new build and a remodel — in undisclosed locations this year.

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