Sweetgreen, Inc. Q4 FY2025 Earnings Call

Thank you for your patience. I would like to welcome everyone to the Sweetgreen, Inc. Fourth Quarter 2025 Earnings Call. I will now hand the call over to Rebecca Nounou, VP, Head of Investor Relations. Please proceed.

Thank you, and good afternoon, everyone. Speaking on today's call will be Jonathan Neman, Co-Founder and Chief Executive Officer; and Jamie McConnell, Chief Financial Officer. Both will be available for questions during the Q&A session following the prepared remarks. Today's call is being webcast live and recorded for replay. The earnings release is available on the Investor Relations section of Sweetgreen website at investor.sweetgreen.com. I'd like to remind everyone that the information under the heading Forward-Looking Statements included in our earnings release also applies to our comments made during the call. These forward-looking statements are based on information as of today, and we assume no obligation to publicly update or revise our forward-looking statements. We also direct you to our earnings release for additional information regarding our use of non-GAAP financial measures, including reconciliations of our non-GAAP financial measures mentioned on the call with their corresponding GAAP measures. Our earnings release can be found on our investor website. And now I'll turn the call over to Jonathan to kick things off.

Thank you, Rebecca, and thank you to everyone joining us this afternoon. Our team members are our most important ingredient; they are the heart behind every meal we serve from the people leading our restaurants and serving guests every day to the teams in our support center. Every team member plays a role in bringing our mission of connecting people to real food to life. I want to thank our teams for staying disciplined and focused on the fundamentals during what has been a challenging operating environment. In that spirit, I want to recognize my co-founder and long-time partner Nathaniel Ru. From our first day at Georgetown to building Sweetgreen together, Nate has been a defining force behind our culture, our creativity, and our belief that the smallest details are what make a brand truly special. While Nate has stepped back from his day-to-day role, I’m grateful he'll continue to support us from the Board as we build what's next for Sweetgreen. Nate, Nick, and I are all confident that the team we have in place today is set up to navigate Sweetgreen through this moment and lead us into our next phase of growth. Our full year results make it clear there is more work to do as we position the business for the future. For fiscal year 2025, revenue was $679.5 million. We continue to experience traffic pressure. Comparable sales for the year declined 7.9%. We opened 35 net new restaurants, ending the year with 281 locations. Restaurant-level margin was 15.2%, and adjusted EBITDA was a loss of $11 million. I'll start with an update on our Sweet Growth Transformation plan, and Jamie will walk through the financials in more detail. We are executing with urgency across the business and are one quarter into our transformation plan, which is focused on five strategic priorities: one, operational excellence; two, food quality and menu innovation; three, personalized experience; four, brand relevance; and five, disciplined profitable investments. While the financial impact will take time to materialize, we are strengthening the foundation of the company. We are improving operations, elevating food quality, accelerating menu innovation, and strengthening our value proposition, all guided by clear return thresholds. We are staying relentlessly focused on our guests and acting on what matters most to them. As I walk through our strategic priorities, I'll share a few encouraging signs where the foundational work is beginning to show up in the business. Starting with operational excellence, which remains the foundation of our ability to win with guests. We are building the systems and discipline required to deliver consistent high-quality execution across every restaurant every day. Let me share where we are. Over the summer, we implemented Project One Best Way, our system-wide effort to elevate operational excellence through clear standards, performance-based leadership, and measured execution. Today, approximately two-thirds of our restaurants are hitting our great bar based on our internal operational audit. What's most encouraging is the shift in the distribution this quarter with more restaurants exceeding the standard and fewer falling below, reflecting improved consistency across the fleet. Importantly, 'great' is not a static benchmark. As performance improves, we continue to raise the bar by increasing both the standard score and our expectations for what constitutes great. Throughput is where operational discipline translates into results. In any great kitchen, 'mise en place' means having everything in its place before the rush. That same principle drives our 'Rush Ready Before Peak' initiative, ensuring the right team members are in position, prep is complete, and stations are set before peak volume hits. We've just started to introduce real-time throughput visibility to our field teams, giving them the ability to see performance and adjust in the moment. We know that speed and accuracy during peak periods are what drive both guest satisfaction and team confidence, and we're building the muscle memory across the system to deliver consistently. We've also strengthened how we measure and drive performance. The restaurant scorecard we introduced last quarter gives teams clear visibility into a focused set of metrics: sales, throughput, customer satisfaction, labor, food quality, and people. So they know exactly where we're winning and where we need to improve. During my restaurant visits, I review scorecards with our teams and walk the Sweet Path, a framework that breaks each restaurant into clear zones with simple, consistent standards for how we show up every day. We're encouraged by the progress we're seeing, but we know there's more work to do. We're still seeing inconsistencies in areas like ingredient availability and ordering as well as team scheduling, and we're addressing them directly by improving our tools, retraining teams system-wide, and realigning quarterly bonus incentives around the financial and operational metrics that matter most. Our goal is to equip restaurant leaders with clear data and streamlined systems so they can think and act like owners accountable for sales, margins, and the guest experience. Food quality and menu innovation are at the heart of who we are. Our menu sets us apart, built on real culinary credibility and made from scratch with ingredients from farmers and partners we know and trust. Delivering delicious food executed consistently is non-negotiable. It's how we compete, and it's how we win. A recent example is our internal Miso My Salmon campaign launched in December to sharpen execution and elevate salmon quality across the system. We extended marinade times to deepen the flavor and refined cooking and presentation, serving the fat side up for better caramelization and a more vibrant appearance. We took the same disciplined approach with chicken, updating our recipe for juicy results alongside upgrades to our golden quinoa, white rice, and napa cabbage slaw that you can try in our restaurants today. This is our culture of culinary technique and practice, constantly refining how we prep, cook, and present our food. Menu innovation supported by strong operational execution can be a key driver of comparable growth. Our stage-gate process implemented in 2025 guides this innovation by ensuring we test and learn while maintaining operational excellence in our restaurants. Today, we have the most robust innovation pipeline in Sweetgreen's history designed to diversify menu occasions, expand categories, attract new customers, and drive frequency with existing ones. We kicked off 2026 with two limited-time-only menus. The first was a collaboration with Function Health and their Co-Founder and Chief Medical Officer, Dr. Mark Hyman. Built entirely from existing ingredients, the menu was operationally simple to execute while reinforcing the quality and integrity of our offerings, and demonstrated how we can deliver credible wellness forward innovation without adding complexity in our restaurants. Our second limited-time menu launched on February 3 with the Winter Harvest Bowl, a seasonal take on our best-selling bowl featuring Maple-Glazed Squash and the vegetable of the Year, Charred Balsamic Cabbage. At the same time, we brought back feta cheese to our core lineup, a frequently requested ingredient by loyal customers and brand fans. Taken together with our innovation pipeline, the menu calendar reflects our focus on creating newness on the menu and bringing customers fresh, seasonal ingredients with compelling sourcing stories throughout the year. Our biggest menu expansion planned for 2026 is the launch of Wraps, which began innovation testing in eight restaurants in the Los Angeles market in January. As part of our stage-gate process, we're learning how to execute Wraps at scale while protecting throughput. Operational details like tortilla-pressed placement have been key focus areas in our eight restaurant tests, and we're actively iterating based on those insights. Building on those learnings, we expanded Wraps to a broader market pilot last week across select locations in Manhattan, the Midwest, and Los Angeles. The lineup, Classic Chicken Caesar, Chicken Salad Baking Club, and Chicken Jalapeño Ranch begins at $10.95 at select locations in New York City, and the full lineup is priced below $15 across all markets for in-store and pickup orders. The early feedback is encouraging, and if performance meets our stage-gate criteria for customer acquisition and retention, we expect to expand the platform in mid-2026. Improving value perception remains one of our highest priorities. With guests increasingly focused on value and quality while pulling back on overall restaurant spending, we know Sweetgreen must deliver on both dimensions without compromising the experience that defines our brand. In 2025, we took important steps forward, including increasing protein portions, reintroducing lower-priced seasonal offerings, launching 12 daily greens, and leaning into the $10 'Tis the Season Harvest Bowl to meet guests where they are. While these actions strengthen our value positioning, we recognize there is more work to do. Following the comprehensive review of our menu and pricing architecture, we have identified a focused set of initiatives to simplify and strengthen the overall experience. Testing is underway, beginning with Wraps pricing and loyalty entry price drops. We will also test a re-architected Create Your Own platform designed to deliver greater price clarity and a more intuitive ordering experience alongside clearly defined entry price entrees across our core menu categories later this year as we pace and sequence these moves over the next several quarters. Together, these initiatives are designed to create a more transparent value ladder, giving guests confidence in what they are paying while supporting incremental traffic and transactions across a broader range of price points. At Sweetgreen, value has never been just about price. It's rooted in the farmers we source from, the quality of their ingredients, scratch cooking, generous portions, and a consistent experience. Our 2026 initiatives are focused on making that value clearer and easier to access at every touchpoint. Our personalized digital experience strategy is built to increase customer frequency and spend through one-to-one messages and incentives. The $10 'Tis the Season Harvest Bowl promotion in December was a strong proof point for our loyalty-first approach to value and guest engagement. By making the offer exclusive to loyalty members via the Sweetgreen app, we brought both new and reactivated guests directly into our ecosystem. It was our highest performing reactivation promotion to date. We are listening to customers and following this up with a $10 Chicken Avocado Ranch offer on February 9. This continued to build momentum with the playbook we call Craving of The Month, a loyalty exclusive limited-time offer featuring craveable menu items available only through the Sweetgreen app, designed to give members a compelling reason to engage with the brand every month. Scan-to-pay now represents approximately 20% of frontline transactions, bringing in-store guests into our loyalty ecosystem and giving us full visibility into their Sweetgreen behavior and preferences. The impact is tangible; loyalty members who transact both digitally and in-store visit nearly twice as frequently as digital-only customers. We believe this is a key lever to drive higher frequency omnichannel behavior and ultimately the flywheel that builds lasting lifetime value among our most valuable guests. At our best, our brand creates culture and makes the spaces we occupy more real, vibrant, and connected. In the fourth quarter, our protein-focused campaign resonated with guests seeking more filling, satisfying meals. Built on the insight that protein stopped being about food, we cut through the noise with the launch of the Power Max Protein Plate, delivering over 100 grams of protein from real ingredients like quinoa and chicken with no fillers and generating strong social buzz and brand relevance. In February, we launched our expanded catering platform, including the Build Your Own Sweetgreen Bar, and are seeing strong early traction. Anchored by our Here For The Bowl campaign and a big game activation at San Francisco's Ferry Building Farmers Market, the platform extends Sweetgreen into group occasions and serves as a meaningful new customer acquisition channel. Shifting to our last pillar, which is disciplined profitable investment. In the fourth quarter, we opened 15 net new restaurants, including eight Infinity Kitchens. We also entered three new markets during the fourth quarter – Cincinnati, Sacramento with two Infinite Kitchen restaurants, and Arkansas. We opened our Bentonville restaurant in Q4 and our Fayetteville restaurant in Q1 2026. We also expanded our presence in Arizona with a second location during the fourth quarter. On the Infinite Kitchen front, the technology continues to deliver on its promise: faster throughput, improved order accuracy, and elevated food quality, all while creating a better experience for both guests and team members. In the quarter, established Infinity Kitchens delivered higher AUVs and labor savings of more than 700 basis points compared to their classic counterparts of similar age. In November, we opened our first Infinity Kitchen Sweetgreen location in Costa Mesa, California, expanding this technology into a new format designed to serve suburban markets and capture drive-through occasions. The location is performing well, and we are excited to grow this format further. We ended the year with 30 Infinity Kitchen locations. With the Spyce team now part of Wonder, we remain confident in the continuity and trajectory of the platform. The partnership is working. Since the transition, we have successfully opened two new Infinity Kitchen locations in the first quarter, Long Beach and our first in the DMV market at Pike 7. We continue to roll out software improvements, including new capabilities around green portioning precision, demonstrating that development and deployment momentum remains firmly intact. Over the past year, we strengthened the foundation of Sweetgreen by putting the guests at the center of every decision. We've rebuilt discipline around the fundamentals that matter most: great food, speed, genuine hospitality, and clear restaurant-level ownership and accountability. Maintaining that standard consistently across the system remains a top priority because delivering on these basics is what earns trust and keeps guests coming back. At the same time, we are leaning into what makes Sweetgreen different. We are strengthening our core menu, delivering innovation in a disciplined way, building a more connected digital ecosystem, and investing in a brand rooted in the Sweetgreen lifestyle our guests choose to live every day. Looking ahead, the work we need to do is clear: execute with discipline to improve performance quarter-by-quarter and build a stronger, more durable business. While there is still work to do, we're seeing encouraging signs that our efforts are taking hold. I want to thank our team for navigating a challenging year and positioning Sweetgreen for more consistent performance ahead. Now I'll turn over the call to Jamie to review our financial results in detail.

Thank you, Jonathan, and good afternoon, everyone. As Jonathan outlined, the past year was challenging, but it brought clarity on our priorities and the path forward under the Sweet Growth Transformation Plan. While we are still early, the actions we've taken and continue to take give us confidence in the opportunity ahead. Our objective is to build a more resilient operating model that supports consistent long-term financial performance. In my experience, sustained results come from staying relentlessly focused on the guests, empowering and holding our teams accountable, strengthening operational execution, and managing costs with discipline. These principles underpin our strategic priorities; when those fundamentals are in place, growth, margin expansion, and cash flow follow. Across the P&L, we are taking a comprehensive end-to-end approach to improve efficiency and ensure every dollar is working harder. This includes reducing complexity and reinforcing clear ownership and accountability throughout the organization. As Jonathan mentioned, we have updated our field bonus plan to align incentives directly with restaurant-level performance, encouraging our leaders to think and act like owners with full accountability for sales and margin. Turning to our fourth quarter results: Sales were $155.2 million compared to $160.9 million a year ago, with comparable sales down 11.5%. Restaurant-level margin was 10.4%, down from 17.4% last year. During the quarter, we opened 15 net new restaurants, including eight Infinite Kitchens, and ended the year with 281 restaurants. The comparable sales decline was driven by a 13.3% decrease in traffic and mix, partially offset by a 1.8% benefit from menu price increases. The decline also reflects the transition from Sweetpass+ to our new SG Rewards program, which eliminated subscription revenue and introduced a loyalty deferral. We expect the first quarter to be the most challenging of the year. January same-store sales declined 11.8%, impacted by severe weather. In March, we will be lapping the launch of Ripple Fries. The first quarter includes a 70 basis points price. 2025 carryover price fully rolled off in the middle of February. Fourth-quarter food, beverage, and packaging costs were 29.2% of revenue, an increase of 180 basis points year-over-year. The increase was primarily driven by higher ingredient usage and waste, including increased protein portions. These impacts were partially offset by menu pricing and mix. Tariffs impacted the quarter by 20 basis points. Fourth-quarter labor and related expenses were 30.5% of revenue, an increase of 200 basis points year-over-year. This was primarily driven by deleverage from lower sales volumes and wage inflation, partially offset by menu price increases and lower bonus expenses. Other operating expenses were 19.1% of revenue, an increase of 170 basis points year-over-year, driven primarily by deleverage from lower sales volumes, higher marketing spend, and increased repairs and maintenance. G&A expense was $39.7 million in the quarter, an increase of $2.6 million year-over-year, primarily related to one-time stock-based compensation modifications made during the quarter. For 2026, we expect underlying support center costs, excluding stock-based compensation and one-time expenses, to be approximately 13% of revenue, down from 15.3% in 2025 as we streamline the organization and drive greater cost discipline. Fourth-quarter net loss was $49.7 million compared to a net loss of $29 million last year, reflecting the decline in restaurant-level profit. Adjusted EBITDA was a loss of $13.3 million compared to a loss of $600,000 last year, also driven primarily by lower restaurant-level profit. We ended the quarter with $89.2 million in cash. At the beginning of fiscal year 2026, we closed the sale of Spyce, receiving $100 million in cash proceeds. Now turning to fiscal year 2026 guidance. We expect same-store sales to decline in the range of negative 4% to negative 2%. As comparisons ease, we expect same-store sales trends to improve throughout the year. We expect restaurant-level margin to range from 14.2% to 14.7% and adjusted EBITDA to range between $1 million and $6 million. On unit growth, we expect to open about 15 net new restaurants, with nearly half featuring Infinite Kitchen technology. We also plan to enter two new markets, Nashville and Salt Lake City. Our development pipeline is weighted toward the back half of the year. This is inclusive of a handful of closures at the end of their lease term where we see the opportunity to strengthen nearby locations. To close, the opportunity in front of us remains significant. We are rebuilding the fundamentals, strengthening operations, elevating the guest experience, and improving restaurant-level economics. We are committed to building a stronger, more profitable Sweetgreen over the long term. With that, I'll turn the call over to the operator to begin Q&A.

And your first question comes from the line of Jon Tower with Citi.

I guess maybe thinking through the comp guidance that you offered, it sounds like you're not going to be taking much price on the year, if any at all. But can you help us think through the puts and takes with respect to comp growth? I know you provided the cadence, but what you're expecting for timing, say, of Wraps if they make it through the stage gate process in terms of when they may come through the year? And any other drivers to the top line as you're thinking through the business for '26 and beyond.

Yes. Jon, this is Jamie. We expect, like you said, guidance between negative 4% and negative 2%. And so we've had a really choppy beginning of the year with the storms in January and February. However, we have seen a couple of really good weeks. We're being cautious given the economic backdrop, but we're excited about all the things that we have in place. And then we're also excited if Wraps do well in testing, which is looking great that they will launch in Q2.

Okay. And in terms of pricing, do you plan on taking any more or taking any during the year?

We're being cautious given the consumer backdrop, but we'll reevaluate throughout the year. But that's not in our guide.

Okay. And then just last one. In terms of thinking about the building blocks to returning store margins to kind of that high teens, low 20s rate, obviously, sales are going to be a key component in it. But can you speak to any specific cost levers that you have already pulled or plan to pull in '26 to kind of work with you guys as the sales begin to improve?

Yes. So there's a lot of things that we're working on for margins. So sales leverage is obviously going to be the biggest piece. But there's also some operational inefficiencies that we're working on. And one example would be around optimizing our order system for our team members to make sure they're ordering the right items, and we're taking the guesswork out of it. So we're looking to streamline that tool and make sure we get rid of all those manual inputs, so we're ordering correctly. So we do see some opportunity there. We also see opportunity within our supply chain, streamlining and doing some supplier diversification.

Yes. And Jon, the only thing I'll add to that is we've continued to see encouraging signs around our head coach stability and reducing turnover. And we know when we get stable head coaches and reduce turnover, we have more productive teams which also leads to higher margins. So obviously, sales leverage will be the biggest component, but there are a number of operational moves that we're putting in place that, even without any sales leverage, we do have some margin gains to go forward.

Your next question comes from the line of Rahul Kro with JPMorgan.

Can you discuss how the rollout of the Project One Best Way, maybe the first iteration, understanding this is an ongoing process, is progressing? And specifically, can you share some metrics on store performances for the cohort of stores where the rollout has been the earliest and a margin side or anything else to give us more confidence that we are at the inflection is closer to the inflection? And I have a follow-up.

We are very encouraged by our efforts in operational excellence, and I want to recognize our operations team and field leadership. We launched Project One Best Way, and in just two quarters, the number of restaurants scoring well in our internal audits has doubled. We're seeing improved comparable sales and higher customer return rates in these locations as they excel in operational metrics, which encompass our standards and processes, as well as focus on hospitality and food quality. Our studies are thorough, and we plan to maintain this emphasis moving forward, concentrating on not just throughput but also enhancing hospitality and food quality. Earlier, I mentioned improvements we've made to the quality of our core menu items. For example, we've elevated the quality of our salmon using advanced culinary techniques, leading to nearly a 20% increase in its sales velocity. We've also enhanced our rice seasoning for better flavor, and I recommend trying it. Our quinoa has transitioned from plain to golden, and we've revised our chicken cooking methods to ensure it remains juicier. Our strong focus is on our guests and product quality, and we recognize that these efforts foster customer loyalty and retention.

And then reducing complexity is something you mentioned again in the prepared remarks. Can you revisit this topic on what the top priority areas are in the store for 2026, and what kind of changes or impact we should see?

We are continuously evaluating tools and processes, as well as our operations in the restaurant, to find ways to partner with value-added collaborators to simplify tasks. Our commitment to our food principles and focus on scratch-made items requires us to be deliberate about these changes. A significant initiative we implemented last year involved de-stemmed kale, which is expected to lead to ongoing efficiencies. We are also exploring various other areas, such as our steak cooking methods and chicken protein marination, while assessing which dressings and sauces can be adapted without compromising our values. Over the past couple of years, we have developed a strong commercialization capability, and we intend to further enhance this to make our team members' work in the restaurant easier, reduce preparation time, and allow them to dedicate more hours to hospitality and the guest experience.

Your next question comes from the line of Brian Bittner with Oppenheimer.

As it relates to the trends in the business, I realize the storms have had a huge impact, obviously, on the first quarter for the industry and particularly you given where your store base is. But have you attempted to perhaps strip out that headwind and think about the underlying trends and what those look like? Or do you have an estimate perhaps of how big the impact from the storms could be for the first quarter so we can try to better think about the trends in the business?

Yes. So January and February are choppy. The impact of the storms to date is about 320 basis points, but that does not include this latest storm where we have a little over 100 restaurants, so it's really hard to read the first quarter. What I can tell you, given our Northeast densification, what I can tell you is the weeks where we're not seeing any weather, we are seeing some momentum in the business. So that's been great to see.

Okay. That's helpful. And just my follow-up question is related to the restaurant margin guidance for 2026. Maybe you can help unpack how to think about the COGS and labor line items. They've obviously been large sources of deleverage looking backwards. But I think in order to get to the guidance for '26, we need much more stable performance in those two line items, but you're not taking much price and you anticipate comps to be down 2% to 4%. Can you maybe shape expectations for the building blocks of that restaurant margin guidance?

Yes, absolutely. So just over half of it is attributed to sales deleverage, but we also see opportunities in enhancing the protein portion through diversifying suppliers and refining our supply chain while maintaining the quality of our ingredients. Additionally, a significant part of the issue is tied to operational inefficiencies. Jason is doing an excellent job with the team. However, we have realized that we're complicating things for our team members as we visit these restaurants. Therefore, our focus has been on finding ways to simplify their tasks. One example is the predictive ordering tool that we are implementing and optimizing. I believe the other half of our strategy will revolve around supply chain initiatives and employee benefits.

Yes. If I could just add one thing. We did put in a new labor management tool last year, our new workforce management, and we're continuing to optimize that and make sure we have the right labor at the right time in order to capture sales, but also really just not wasting labor, reducing overtime. And so a number of levers for us to pull around operational efficiencies.

Your next question comes from the line of Brian Mullan with Piper Sandler.

A question on the Wrap. I think this is something you've been contemplating for a long time. Is there a way to maybe frame up how big of an opportunity this could be even qualitatively, including as a customer acquisition tool if you get the product and the operations right? And then separately, are you viewing this as a digital-only offering? Or is this something you could envision walking the line and be able to order as well?

We're very excited about Wraps, which we have been developing for about two years. We've focused on perfecting the flavors and establishing a clean supply chain. In January, we conducted a rapid operational test in eight Los Angeles stores to see how it would affect restaurant operations and throughput, and I'm confident it won't be a burden on throughput. We have now transitioned to a market test with approximately 68 restaurants featuring Wraps, which started a week ago, and the results have been quite encouraging. We've seen a steady increase in orders since the launch, and the feedback from guests has been outstanding. Wraps are attracting new customers and occasions that we previously weren't reaching due to being a bowl-only concept. This significantly expands our market potential. Additionally, Wraps will be priced under $15, starting at $10.95, making them a disruptive offering from a pricing standpoint. We also anticipate that guests who order at these lower prices will return more frequently, leading to increased lifetime value or annual spending. Overall, we are pleased with the progress and are preparing for a mid-year launch, contingent on passing our review process. We believe Wraps will be a major milestone for us, supported by significant marketing efforts. They will be available across all channels, not just digital. I encourage everyone to try them and share feedback. We currently have three Wrap options available, and while we may expand the menu, they can be ordered in-store, for pickup, or via our pickup channel.

Okay. That is exciting. And then a follow-up, just a question on development. Maybe you could just talk about what the team is focused on beyond this year. I know given the lead times, you'd normally be focused on '27, '28, maybe you don't want to sign as many leases as you normally would right now. So just talk about how you're managing striking the right balance of slowing down now but not having a gap later in the pipeline if you want to accelerate.

Yes, you've really captured the approach we're taking. It's important for us to maintain a healthy pipeline, which gives us the flexibility to accelerate if our comparable store sales improve, and we are confident in our unit economics. We are cautious about not overcommitting, ensuring we are disciplined with our cash. We've gained valuable insights into where Sweetgreen is most successful. We have a strong pipeline that we feel optimistic about for this year and a solid plan for 2027. However, we are taking a wait-and-see approach regarding signing too many new deals as we refine our unit economics. Once we start seeing positive trends in our comparable store sales and the business momentum builds, we anticipate being able to accelerate our development back to our previous growth targets.

Your next question comes from the line of Dennis Geiger with UBS.

I wanted to touch on loyalty a little more, if you could share a bit more on what you saw in the quarter, including the impact on the comp in the quarter first. And then just anything else on the customer observation, including most frequent guests, how they're using the program and where they are right now versus the old program? Have you seen any updates on that front?

Yes, absolutely. Overall, the program is performing well. We are continuing to see weekly year-over-year growth in new member sign-ups. Loyalty members are spending more than twice as much annually compared to non-loyalty members, which indicates that the program is effective. However, there are still numerous opportunities for improvement. We plan to re-envision and optimize the program later this year by enhancing perks, adding tiers, and increasing benefits, including offering more options at lower tiers. We are also looking to leverage AI and personalization for better offers and communications, which we believe will enhance our targeting and encourage more frequent visits. Overall, we are optimistic about the program, but we have more optimizations in the pipeline to elevate it to a best-in-class standard. Unlike Sweetpass+, this program has broader appeal. Additionally, we introduced scan-to-pay at our restaurants last year, positioning us potentially as the only restaurant allowing a single transaction for scan and pay. The percentage of in-store transactions using scan-to-pay has doubled in the past two quarters, now accounting for about 20% of those transactions. This provides us with more opportunities to engage customers through communication and offers.

Great. And then just if I may, one more on IK. Just as it relates to the higher AUVs that you called out. Any additional comments there, high-level quantification or perhaps anything on throughput metrics, etc., on the IK side of things?

Yes. IK continues to be encouraging. We're seeing similar results that we've talked about in the past, at least 700 basis points of leverage. We did introduce our newer formats with the IK, much better from a customer experience perspective and from an operations perspective. We're going to continue to have that as a huge part of our toolkit. We opened two more stores with Infinite Kitchens this year in Q1, so we're up to 32 stores featuring the Infinite Kitchen. We continue to see the benefits around throughput, accuracy, and wait times. And over time, we think that also gives us a lot of pricing power. So very encouraged by the IK and continue to use it, especially in our more high-volume locations.

Your next question comes from the line of Sara Senatore with Bank of America.

I guess maybe just two follow-ups. One is on the Wraps. What is the implication for maybe operational complexity? I think to your point about bowls, even the Protein Plates probably looked kind of similar in terms of the build or how they went down the make line. But is this going to add complexity? And I guess it sounds like probably not something that you can use the Infinite Kitchen for. So as you're stage gating, I assume you're looking at the operational implications, but just anything you can say on that?

Absolutely. So that was the major focus of our testing. Even before our rapid ops testing, we did a lot of testing in single restaurants where we brought team members together, worked together to co-create the operation; things like where does tortilla placement go? How does the food move down the line? One of the things that we heard from customers and a lot of our surveys and focus groups is that the product is better when the ingredients are mixed before wrapped and the product is better when the Wrap is cut. So those were things that we wanted to ensure we brought to market. And luckily, with a lot of hard work from our operations team, those are things that we were able to enable and are not seeing any slowdown on throughput. We do not expect any additional labor needs in order to do it; it really works beautifully within our current workflows. And it actually does work with the IK. The Infinite Kitchen does put together all of the ingredients, and our team members wrap things up at the finishing station. So it actually works beautifully in those locations as well.

It's great to hear that. Regarding your second question about marketing and value, I understand you invested in value in the fourth quarter and received some positive initial feedback. However, it seems the quarter didn't meet your expectations. Is there an opportunity to enhance not just the value proposition but also the way you communicate it? Are you considering options beyond your loyalty program or in-app marketing to make your messaging more effective, along with introducing new price points?

We see numerous opportunities ahead and have conducted many tests and pilots over the last six months to gain a better understanding of how pricing resonates with our customers. One example is our $10 'Tis the Season Harvest Bowl, which achieved impressive reactivation rates and strong customer acquisition. Notably, the reorder rate for those customers remained high, indicating that the promotion effectively drew people into the brand, and they continued to engage with us afterward. This year, we introduced our 'Craving of The Month' as a value offering for loyalty members, enhancing our loyalty program by attracting more customers. We're seeing not just reactivations from lapsed customers but also new customers joining, and they are engaging with us beyond this initial offer. We are actively working on improving value through our pricing strategy for items like Wraps and are examining our overall pricing architecture. We plan to test a new pricing structure for our Make Your Own Bowls and explore entry-level pricing opportunities, all while being cautious not to compromise our profit margins. Our aim is to provide various options for different consumer groups, aligning with Sweetgreen's mission to connect people with real food and make it accessible. You can expect to see more initiatives focused on pricing and increased value. Last year, we enhanced our protein portions, upgraded several ingredients, and improved the customer experience in our restaurants. Together, these efforts will help drive growth, and we are already seeing some promising early results.

Okay. Regarding the marketing question, it seems you have many initiatives. Are you considering marketing beyond GM, perhaps targeting less frequent customers? I'm curious about how you approach this, whether at the point of purchase or through other means. Though you're relatively small, my main question is whether there's a way to communicate your good value more widely.

Yes. I think you'll see more of that from us across many of our channels. I think you'll also see we've reevaluated our marketing mix; we're spending a lot of our money lower funnel. And I think you'll start to see more top-of-funnel brand awareness. We know as we do that, as we create more brand salience, it actually improves our return on ad spend lower in the funnel. And if you go back to kind of what made Sweetgreen, going back to our roots, it was really a lot of that brand marketing and storytelling. So I think you'll see a healthy balance of the brand marketing top-of-funnel brand awareness, things like collaborations and ways we play into culture, as well as getting really efficient and optimized bottom funnel, whether that be our media spend and/or what we can do through our own channels and our loyalty program. So kudos to our marketing team for really reinventing how we go to market and speak to more guests, and I think you'll only see that improve throughout the next couple of quarters.

Your next question comes from the line of Brian Harbour with Morgan Stanley.

Are you doing IK retrofits at this point? I guess I'm just curious because that's clearly something that kind of reduces complexity, or is that not a focus at this point?

It's not a huge focus for us. We have done a handful of them. I think we will continue to look at them as leases come up when we're doing full renovations or relocations. So for example, in the past few months, we did relocate two stores, one being our Union Square restaurant that lease was up. We moved to a better location on the avenue and opened with an IK. Similarly, our first New York store at the Nomad moved across the street and opened it with an IK. So you'll see it being done selectively, but the retrofit is not a huge focus for us right now.

Okay. Got it. And just the slight change to store openings this year, are those just getting delayed or you haven't sort of signed some of those leases anywhere? I guess like the broader question is, do you sort of have different views about where it makes sense to open at this point?

I think we've seen a lot of success in our new and emerging markets, which proves the total addressable market question this year. In the past couple of quarters, we opened new markets such as Arkansas, Phoenix, which is doing incredibly well, and even a place like Cincinnati. So we continue to go where we know it works. We're really trying to open places where we have a high degree of confidence we can both have the right real estate, have the people leadership there, and support it from a supply chain perspective. And so we have a high degree of confidence in the pipeline for this year, and we've gotten a lot smarter about where to put new locations in what format. I also had it in the prepared remarks, but we have seen a lot of success with our Sweetlane; the most we have our first one in Schaumburg, we opened another one in Costa Mesa, and we have another one coming very soon. And obviously, those are harder to find, but it's a really great format for us that we're continuing to lean into.

Your next question comes from the line of Andrew Charles with TD Cowen.

Jonathan, with your greater focus on protein and fiber as part of the marketing efforts. Is there any evidence that your efforts are resonating with GLP users via your loyalty program or any other data you can collect on this? And then I have a follow-up.

It's difficult to determine because our users don't inform us about their use of GLP-1s. However, it is evident that many people are using them. I believe that as GLP-1 adoption grows, we will benefit from all our research. When people start using GLP-1s, they tend to seek more protein-rich and fresher food. A study published by William Blair a couple of years ago analyzed the preferences of customers after starting GLP-1, and we were the only brand that saw an increase in frequency. Overall, we view this as a positive trend, but we currently lack concrete evidence in our data.

Okay. And then, Jamie, I know in 2025, the brand closed three restaurants that were near the end of their lease, and I'm curious if you had enough time in your role to review the portfolio to identify stores where it might make sense to close stores permanently before their new lease term as a way to improve same-store sales, margins, and free cash flow as a way to help accelerate the turnaround.

Yes. No, we definitely are looking at that, and there was one that was closed in Q4, and we have a handful that are closing this year, but those are all near the lease term. But absolutely, we're looking at the whole portfolio, and the ones that are not cash flow positive, we're taking a hard look at.

Your next question comes from the line of Chris Carril with KeyBanc Capital Markets.

So can you maybe talk to the digital mix growth that you're seeing more recently, both across total and owned channels? Is that a function of increasing loyalty engagement or scan-to-pay? Or is it maybe driven by non-digital customers reducing frequency? And if it is that latter guest, how do you plan to reengage those non-digital guests?

Yes. So I will say that we're seeing some healthy pickup in our native business, our first-party channel, and I think that's part of some of the loyalty promotions that we're doing. Last year in the marketplace, it was a tough environment. There was a lot of value going on, but I think we intentionally put them through our own channels. And like Jonathan said, we're seeing the stickiness of those transactions in that second order rate increase. However, we do see tremendous opportunity in the marketplace area to grow our third party as well. So that's all work that's underway.

Yes. Regarding your question about our in-store business, it is our most important channel in many ways. It is where we attract many of our guests, allowing them to enjoy fresh food and the hospitality experience while learning about our brand. We are focused on improving both hospitality and throughput, and we have a clear understanding of the right metrics to ensure we're on the right path. A key aspect is how we incentivize our teams to provide a great experience, which encourages customers to return within 30 days. When customers come back within that timeframe, their annual spending significantly increases compared to those who don’t return. Sweetgreen relies on customer frequency and loyalty, so the in-store experience is a crucial channel we are concentrating on this year.

Got it. And then I guess as my follow-up, can you maybe comment on any differences you're seeing in sales trends across geographic regions, if any? Curious specifically if you're seeing any material differences between your legacy markets versus newer markets?

Yes. So I'd say Northeast is still under pressure, but I will tell you, when I started in September, that was the first market that we visited as a management team. And there is a lot of work that's being done by Jason and team, and they hired a new RGM. We went back just this month, and it was encouraging to see all the work that's getting done and how delicious our food is and how operations are turning around. So that's been promising as kind of the hope and future ahead. But one thing that's been great to see is our California market. That market has been under pressure. If you think about last year, we had the fires and different things, but we are seeing some nice momentum in our business in California.

Your next question comes from the line of Jeffrey Bernstein with Barclays.

Great. Thank you very much. Jonathan, it seems like over the past couple of quarters, there were lots of talk of trends by income, age, ethnicity, but it does seem like, at least in recent months, perhaps there's some talking about maybe less bifurcation between those buckets and maybe less of a concern. Just wondering if there's any update in terms of your trends by any of those cohorts? And if there is an income concern when I see you talking more about value; how do you measure your value perception, maybe where do you score you're willing to reset the margin target to be more aggressive pushing value? And then I had one follow-up.

In terms of our cohorts, we're observing similar data. For Q4, we experienced a slight decline across all cohorts, but there's been a bit of improvement in Q1, which is encouraging. I'll let you discuss the value aspect.

Yes. I think the goal here is, obviously, anything we do from a value perspective, we have to make up in transactions. So we don't see the margin deleverage. And so that's why we're looking very carefully at the price architecture. It's not a wholesale price decrease; it's more of a value ladder to have more options in. And we know as we do that, we see more frequency. So we're trying to protect the margin as we offer more price value.

Yes. And we're definitely going to test every price move that we do to make sure we're getting those incremental transactions.

Your next question comes from the line of Sharon Zackfia with William Blair.

I guess, Jonathan, I'm intrigued by the idea of simplifying the pricing architecture, particularly for the Create Your Own. Can you remind us about what percent of your sales are to Create Your Own at this point? And how simple can you make it? It does feel like sometimes I need a quantum physics degree to figure out what my bowl might cost before I order it.

Yes, we hear you on that. So it's about one-fourth of our business in terms of the Create Your Own. There's obviously many more people ordering signatures and modifying them. But in the True Create Your Own, it's about one-fourth of our business. So it's a very important segment for us. It's a little early to say exactly what we're doing, but it will be radically simplified, and I think better for the guest. Today, to your point, it does feel like you're getting nickel and dimed down the line. So we want to make it where you kind of know what you're getting for a very simple price and making sure that is really competitive in the marketplace. So more to come on that; that will be thoroughly tested through our stage-gate process. But I do think that will be a major lever for us as we simplify our pricing structure and offer better price value.

Your next question comes from the line of Logan Reich with RBC Capital Markets.

I was just wondering if you could give an update on how the new store productivity has been tracking through the year and for the Q4 openings?

Yes. So I would say for the Q4 openings, it's hard to tell, right? There's been a deceleration in the business. So I would say it's something that we're continuing to monitor, and we're looking forward to make sure in 2026 we're only getting the best sites, and we're working on all the things under the growth plan. So I would say it's too early to comment on the 2025 productivity. But we are seeing some great things when you look at areas, some of the new markets like Arizona that haven't been impacted by weather, very promising results there.

There are no further questions at this time. Ladies and gentlemen, that concludes today's call. Thank you all for joining. You may now disconnect.