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Sweetgreen is investing in its Infinite Kitchen model.

Sweetgreen is still not profitable. Why?

The fast-casual restaurant brand is focusing on new models as it strives to break even

Sweetgreen, once the darling of the restaurant industry after its incredible IPO, has once again fallen short. The fast-casual chain based out of Los Angeles reported third-quarter results on Thursday, and the chain has yet to turn a profit.

The chain had a net loss of $25.1 million, compared to last year, when net loss was $51 million. So, while the chain is improving net loss, it has yet to turn a profitable quarter since going public in October 2021.

Loss from operations margin was 17% compared to 41% in the year prior.

The chain plans to have restaurant-level profit margins of 16.5% and 17.5% by the end of 2023.

Part of that, though not confirmed, is due to the chain’s investment in new locations. Namely, the automated “Infinite Kitchen” in Naperville, Ill.

“What I can say is that the deployment of the Infinite Kitchen will be accretive to our return on capital,” CEO Jonathan Neman said. “So whatever the incremental costs will be, the gains from the leverage on the labor will be accretive to that return on capital and what we expect in a classic unit.”

This prototype uses an automated makeline and has no staff to greet people or take their orders. The order is placed on a kiosk and the customer can watch the robots make their bowls.

Sweetgreen is going all in on these locations. During their third-quarter earnings call, Neman said that the chain is planning on opening between seven and nine new Infinite Kitchens next year. That’s part of the 23 to 28 new restaurants planned for 2024, a slowdown from this year where the chain is on target to open 35 net new restaurants.

Additionally, two to four existing Sweetgreen locations will be retrofitted to become Infinite Kitchens.

In touting the success of the automated makeline, executives said it saves on labor and is more efficient.

“All the feedback we get is people love it,” said Neman. “They love the speed. They love the cleanliness, the hospitality, the experience we’re able to bring. And our team members love it as well. We see lower turnover. It’s a more enjoyable experience to work in.”

Same-store sales for the company were up 4% on the quarter, compared to 6% in the year prior. Sweetgreen saw revenue rise from $124 million in the year prior to $153.4 million last quarter. The chain saw a total digital revenue percentage of 58% and owned digital revenue percentage of 37%, versus 60% and 40%, respectively, in the prior year period.

“We delivered another solid quarter that included 20%+ revenue growth, 300 basis points of restaurant level margin expansion from the prior year period, and positive adjusted EBITDA,” said Neman. “We are pleased with our results and remain focused on driving long-term, profitable growth so that we can capture a massive market opportunity. I could not be more excited about the future of Sweetgreen and the progress we are making to redefine fast food.”

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