Sweetgreen Announces Layoffs and Growth in the Suburbs

Sweetgreen is the latest foodservice chain to announce it let go of staff, CNBC reported. 

The business laid off 5% of its support center workforce and downsized to a smaller office building to lower operating expenses. 

“We made these changes to lower operating expenses and protect our path to profitability in this uncertain environment,” CFO Mitch Reback said during an earnings call. Reback added that these employee reductions are expected to result in a $4 million annual savings from general and administrative expenses.

It is anticipated that severance packages and related benefits will cost the company between $500,000 to $800,000, while the office change will cost around $8.4 million to $9.9 million. Both moves are likely to impact third-quarter results.

During the earnings call, executives said the slowdown could be attributed to multiple factors, such as “unprecedented levels of summer travel,” a slow return to the office, as well as another wave of COVID cases.

The company also reported that the reluctance to return to metropolitan cities influenced these decisions, adding that their suburban stores are doing better than their city locations. 

This shift in focus toward suburban locations is not limited to Sweetgreen. Restaurant chains and franchises have been seeing the benefit of placing emphasis outside of metropolitan areas for several years. 

The pandemic highlighted the value of these locations as people fled major cities, such as New York. And with many workers choosing not to return to their prospective cities, there was an opportunity for other franchises to recruit new talent and customer bases. For example, Just Salad, another popular fast-casual chain popular in cities, started focusing growth efforts on suburban markets in 2021. 

Even before the pandemic, Sweetgreen was transitioning out of the city and into suburban neighborhoods, though it still has a large footprint in those regions, Eat This, Not That! reported. 

“At the end of 2019, our footprint was 65% urban, 35% suburban," Reback said on the earnings call. “Today, it's 50/50. At the end of 2019, our urban restaurants had an AUV of $3.1 million, and our suburban restaurants had an AUV of $2.7 million. At the end of the second quarter of 2022, AUVs flipped [and] urban SUVs are now $2.7 million, and suburban EVs are $3.1 million.”