Sweetgreen, Inc. (SG) Earnings Call Transcript & Summary

All right. Good afternoon, everyone. My name is John Glass, cover restaurants at Morgan Stanley. It's my pleasure to welcome you all to our 7th Day of our conference and the next several sessions, restaurants. And I'm going to introduce Sweetgreen in a second to you. Before I do that though, let me just make once more this important disclosure, which is for important disclosures, please see the Morgan Stanley Research Disclosure Website at morganstanley.com/researchdisclosures. So it is my pleasure to introduce 2 members of the management team of Sweetgreen, Nick Jammet, Co-Founder and Chief Concept Officer, Sweetgreen; Mitch Reback, the company's Chief Financial Officer. I thought the way we'd structure this is, we'll first hear a little bit about your backgrounds, right? Although Sweetgreen is a known quantity to all of us in New York and up and down the East Coast and the West Coast, maybe the founding story isn't as clear. And so, I'd love to hear a little bit about that and same as Mitch has gotten there. And then we'll talk a little bit about both the drivers of the business, development and maybe some of the current topics du jour if you will.

So with that, Nick, what's your story? How did you -- you're a Co-Founder. How did it all happen? And what do you do for the business today?

Yes. First of all, thanks for having us here today. Excited to tell our story and give you updates on where we are today at Sweetgreen. Sweetgreen was born 15 years ago when myself, Jonathan and Nathaniel were seniors at Georgetown. And we all kind of bonded around the fact of having parents that were immigrants and entrepreneurs and grew up in households where they were building things with blood, sweat and tears. And so we saw that path for ourselves. And at the same time, we had this problem of having nowhere to eat that made sense for us. So we wrote a business plan, raised $350,000 from anyone that would give us money, teachers, old bosses, kind of anyone and opened our first store in 560 square feet. And the idea was pretty simple is to redefine fast food and create this new option when we looked around at the time, all the food that was the most craveable, the most accessible, the coolest brand was all the least healthy. So we wanted to create that for food that was healthy and create a brand that could create a desire for food that maybe feel good. So we did that and over the course of 15 years we've grown the business together, city to city and created a brand that stands for something more than just a bowl of food.

And you have a background in the restaurant industry, your family does. What is that?

Yes, I came from a hospitality background. My family ran very high-end fine dining restaurants here in New York, so very different than fast food. But we try to incorporate as much of that sense of hospitality and how you want to make people feel even in a fast food setting.

Thank you. How did you arrive, Mitch? What's your Sweetgreen story?

So by the way, thank you, John, for having us. I was the CFO at Drybar. And I left Drybar and there was a person working at Drybar who left before me and joined Sweetgreen. And as soon as I left Drybar, she called and said, would I agree to meet with Jon, Nick and Nate and have lunch? She told Jon, Nick and Nate, they wanted to meet me because I was the only CFO who brought his own salad to work every day. So I agreed to meet them for lunch thinking I would get a salad. Instead they took me out for sushi and I refused to eat. But we got along great and I've been with the business for just under 8 years now.

That's wonderful. Thank you. Can we talk a little bit, Nic, first, just about the brand evolution, and I guess I wanted to start by thinking about this concept of -- where you are in that evolution of the menu, right? It was born -- Sweetgreen is a solid concept. I think there's now a notion that to get people to eat healthier, you've got to evolve your menu in ways that really -- to make this a mass appeal brand. So how do you think about sort of the evolution, particularly the food in the business and how you sort of create that mass appeal going beyond what I think was your historically core customer?

Sure. So I would say, over the course of 15 years, our menu and offering has evolved dramatically. And I would say I see that continuing over the next foreseeable future. And really, the goal for us is to create an offering that is broad enough to fit most consumers on the scale from light to hearty and really fit different need states in their day and life and really ultimately broaden who our consumer is. I think if you look at our consumer today and who is standing in line at Sweetgreen, it is dramatically different than 5 years ago, 10 years ago and certainly 15 years ago. And so it's been exciting to see regionally and demographically, psychographically, our customer really broaden. And so for us, the real focus is next 2 years is really to broaden our menu to be heartier, really focusing on more proteins. So again, heartier offering and then really focusing on attachments, really some of the, honestly, quite frankly, low-hanging fruit that we haven't really focused on. For the past 5 years, we've been really focused on new channels. And it's allowed us to create things like best-in-class delivery, native delivery and digital connection with our customer and then creation of things like Outpost. And so for us now, we're very focused on really broadening the menu as we expand more into suburban areas. Things like kids' menus and more proteins and desserts and a deeper beverage offering, really create a lot of value for the customer and for the P&L.

Just 2 questions. What's up with drinks? Now as you think about expanding your menu, you needed to added desserts recently. You've got proteins like chicken, but you don't have any drink. I mean, you've got a couple cans of seltzer. I would think you're leaving a lot of money on the table. What happened and why not more?

Yes. So pre-COVID, we had a decent beverage offering that consisted of a bunch of house-made offerings from Fresca's lemonades, house made teas. During COVID, when our front of houses for the most part kind of paused, the self-serve customer touch drink stations also, we kind of got rid of those and reallocated that real estate and the front of house for digital pickup shelves, because that part of our business is growing so much. We then pivoted to a fully bottled offering. We have since added multiple selections in bottled offerings. So whether it's kombucha's, cold brewed coffee, we also have a number of selections we'll be adding over the next year. But I agree, it's huge opportunity for us and we are excited to be adding lots of different options for our customers there.

But before we go to digital, which is important. But since we're talking about food, food and prices kind of go together, how do you respond to the view that Sweetgreen is a higher priced offering that somehow is out of reach for the average consumer. I have my own view on maybe what that perception or misperception is. And I'd love to hear from you as a Founder and sort of -- and also, Mitch, as you look at the data, what that says. How do you feel about your price points versus your peers?

Yes, great question. I'll start by saying that we are incredibly proud of the quality of food we serve. So when you think about the -- what we spend on the quality of the supply chain, with our farmers and partners and growers, for us from a nutrition, from a flavor point of view, it all kind of starts there in our supply network. So really proud of that and for us really excited about continuing to tell that story around the quality of the product. When it comes to price, we always believe in having a range on our price. So like every market for us has an entry point under $10. So making sure that customers have the option to self-select into whatever range they want. We also do believe pricing and loyalty and all the promos kind of go hand in hand. So we are really excited. We've been testing different components of our new loyalty program. And we'll be launching that next year. And we think that will continue to drive value for customers as our customer tends to be higher frequency. And that customer sees the value and the quality of the food and the food he has.

Anything to add Mitch in terms of pricing? I mean how do you aspire to price versus national brands, whether that's a Chipotle or Panera or how do you think about the framework for pricing of this brand?

Let me begin by kind of echoing what Nick said. I think that the way we source real food is a more expensive labor model that requires a higher price point. One of the things that we've seen happened in the past year is many of our competitors who are more protein heavy than we are have been under a lot more inflationary pressure and have taken a lot more price and a lot more frequently than we've taken it. So we'd like to kind of see ourselves at a premium price point but not so premium that we limit the market.

And you feel you're there now. I guess my observation is that that perception and reality are different. When you took it, taken what, 6% pricing this year? I think the competitive set in some cases, you could argue took twice that much, which goes a lot of ways to closing that gap.

That's right. I think that's exactly right. Our view is we've taken about half what a lot of our competitors have taken in 2022.

Can you talk about sort of digital is probably the other most defining characteristics of Sweet brand, Sweetgreen in terms of the brand evolution. Can you just talk about what the key stats are? What was the insight early on that you thought -- you had to have be a digital brand, right? I think the term digitally native is often used with Sweetgreen. What was the insight that got you there? What is different about your offering? And then maybe we could talk about what you're doing to that in '23? But first the background, why you even thought about that first place?

Yes. I think we launched our first app over a decade ago. And I still remember when we put those pickup shelves in our front of house in one of our restaurants in Boston and some people looked at us like we were crazy that the customer is going to grab their own bowl. But for us, the idea was all about removing as much friction as possible between the consumer and their healthy food, whether that was accessibility, waiting in lines, flavor and craveability. We wanted to make it as easy as possible for people to come and engage with our food. And at that point, we had seen long lines. And so customer feedback was, I don't have time to wait in your lines. And we then start adding the digital make lines to add more capacity and further remove that friction, so customers could order ahead, walk and just pick it up. We've been since obviously has added delivery and that's been a huge growth driver just like for others in the industry. But for us, it just comes back to removing as much friction, making it as easy as possible to interact with our food.

And what are the other advantages, though? I mean, I think during the IPO process, you talked a lot about the frequency of a digital versus non-digital customer and so in various bands. And this all goes to the point about what you want to do going forward in terms of loyalty. But first of all, what is the advantage that you have and what your customer acquisition costs you have for your digital business? What are some of those key metrics?

I think starting with the type of food we serve, what's exciting is the type of food we serve is food you can eat every day, not just because of the range of flavors and the range of ingredients and how customizable it is. 75% of customers either order a custom bowl or customize their bowl. So customers are opting into exactly what they need. So because that product lends itself to high frequency, we wanted to make sure our experience also did the same. And so for us, we have 5 channel model and we've seen that customers that interact with multiple channels, their frequency grows exponentially. So customers that interact with 2 or 3 channels, you see their frequency multiply. And so again, it's -- personally for me, the more you eat this kind of food, the more addicting it is. So when customers feel good eating this food, we think it lends itself to a higher frequency customer that kind of gets into the behavior and rhythm of eating a certain kind of food that makes you feel good.

And what are the metrics, like digital versus a non-digital customer, how much more frequently do they consume Sweetgreen?

So 60% of our business is digital and really impressive part of that is 2/3 of that is native, so thinking about our own native channels, so our website, our app and Outpost. And customers interact with more than 1 of those 5 channels I think about 2.5x more frequent.

What is the motivation? So tell me about digital in '23, we've talked about loyalty and you've done a lot of test, right, you've done Sweetpass. There's rewards and challenges. I'm not going to get the phrase right, but it's something like that this summer, all leading into this, I'll call it, a more comprehensive loyalty program in '23. What is that? What's the goal there? And I guess I would reflect and say that often times loyalty programs are kind of viewed as something that more mature brands do, like once we have built out a business, we enter into loyalty to kind of create another layer of sales. Why is this the right time for you to have a loyalty program in your business versus waiting because ultimately there is a cost associated with loyalty program as well as some benefits?

So for the majority of our history, we have had a loyalty program. And we did pause it during COVID to really take the time to understand the customer behavior we wanted to drive and then build this new version. So for us, it was a very simple program that was more discount-driven. And we've really focused the last 2 years and then ultimately, what we're going to launch next year on a program that is more customizable and targeted to our customers and creates more value for them individually. So less like kind of universal peanut butter and more making sure that it drives right behaviors for the right customers.

So can you give an example? I think your Co-CEO or your Co-Founder, Jonathan, has talked a lot about kind of the behavior shift that you've seen with the Sweet rewards program, for example, a Sweetpass program, right, where you buy a program and you get a discount over time. And what that did from a frequency standpoint? Do you have any of those metrics that kind of would help us all understand why this loyalty program might be a big idea?

Yes. So our Sweetpass was kind of a quick test we did in January. And it was a subscription, which, again, we're excited for components of that to be part of our new loyalty program. But we saw customers transact up to 5 more transactions in that 30 days that opted in Sweetpass. So for again, this was just some insight and early indication of the value that could create for especially high-frequency customers and moving customers up the frequency chain.

Okay. I'm going to pivot to development. This is a key element of Sweetgreen obviously with the number of stores you have today and your goal is still ultimately be a national brand besides some of the others in the category. Can you just first talk about how you're thinking about development, historically where the legacy store base has been? As you think about development in '22-'23 geographically, and then I want to fill in a little bit about kind of the operating environment. But first just where are you today urban versus suburban, New York versus rest because I think we all are biased. And what's the go-forward goal in terms of development from a mix?

Sure. So Sweetgreen started in our early years, very heavily north east, very heavily urban. And years ago, we started really broadening beyond just regionally and in terms of formats and trade areas. But we have slowly built a national footprint. So starting in the Northeast, really, obviously, we started in D.C., then Pennsylvania, New York, Boston. We then went to Chicago and L.A. and have since in the past couple of years, opened in Texas, multiple markets in Texas, Florida, Northern California and then this year throughout the Midwest. And so for us, we've built this national footprint that comes with our national supply chain and supply network. And so really exciting to be able to introduce the brand in all of these different neighborhoods and cities and communities that honestly 15 years ago, we probably thought we couldn't open in. So it's really exciting to see the brand resonate in so many different places with so many different types of customers. This year, especially, we opened in a number of new markets. Probably the most new markets we've ever done in 1 year, which included some adjacent markets like San Diego and then 3 new markets in the Midwest, Minneapolis, Indianapolis and Detroit. And then we'll be opening in Tampa next week. At the same time, we also invested heavily in some new formats, really understanding some different customer experiences in our format toolkit. So we opened our first digital pickup kitchen in Mount Vernon in D.C. And then about a month ago, we opened our first pull-through lane, our first Sweetlane. We've been incredibly happy with how both have opened and their progress so far. So it's exciting to see this toolkit we have of different experiences and formats that we can use in our development cycle. I will say that for us, the bright spot of beer has really been our Midwest openings, where we kind of went in with our full playbook of community marketing, really hiring the right leadership and really executing on all fronts and all 3 markets have opened really strong. It's been exciting to see our food and brand resonate there. And when I talked about the expanded offering, we did open in those markets with kids' meals, some more plates and we just launched desserts. So we're starting to really start to see the breadth of that menu and the value it can create especially in suburban trade areas. Today, the fleet sits about half urban, half suburban. For the past few years, our pipeline has been majority suburban. And we started that shift pre-COVID. And it's been exciting to see -- Mitch can talk about some of the results, but the strength of the suburban AUVs and the performance in the suburbs.

Can you do that? Can we talk about the AUVs suburban versus urban? You said you could. And secondly, it's super important to talk about these mid-western openings because I think that's the future of this company is can it work in the Minneapolis of the world? So first, maybe urban suburban, and then let's talk about the Minneapolis's?

I guess, as Nick said, we can, we can. I think we disclosed in the second quarter that the AUVs in the suburban markets now, at the end of the second quarter, exceeded the urban, which is a really interesting point for Sweetgreen given how well known we are as an urban concept and really a central business concept. So we've been very happy at the kind of the growth we've seen outside of the urban centers. And I think that's really, really important because that's where the majority of the country is in that type of a more urban suburban mix versus a heavy CBD type of environment like Midtown. So we've been very pleased with the metrics here.

Midwestern markets, you just talked to it. Indianapolis, Minneapolis, Tampa, Detroit, now to be clear, these are probably more of the affluent suburbs of those cities. Is that [ written that way? ]

Yes.

So one, how have they gone specifically? And 2, how big do you think those markets can be considering you're probably picking some pretty good early real estate?

You're correct that we did start off in the more affluent areas, obviously. We've been very happy with the openings. Most of them have exceeded our pro forma. So they've opened up very, very strong, see really a great customer receptivity to Sweetgreen in those markets. What we generally have found is that as we've opened up like that, we filled in with a few stores. We've actually grown the market and have been able to extend the footprint, not too atypical for a lot of retail establishments. As you develop a market, you open up more of that market and we feel very happy out there.

You said pro forma. So remind us what the pro forma is maybe generically?

Generically, what we've disclosed is $2.8 million to $3 million year 2 with an 18% to 20% restaurant level margin. While it's early, the stores have been opened, as Nick pointed out, like under a quarter. All of them are on track to hit or exceed those metrics.

That's great. If you looked at the country as a whole across end markets, best markets, worse markets from a volume standpoint, is there a pattern where you'd say in this region of the country, they're lower in this region, they're higher. But from a sales, what one understands is there's cost differences. Is there a discernible difference or is it or not?

So let me talk about existing markets and I'll talk about the new markets. The existing markets, New York has always been high. It was high pre-pandemic and even in this environment of whatever we're referring to as kind of emerging from the pandemic still is high. So New York is at the high end. It offsets our legacy market of Washington D.C. and Philadelphia, where we have older smaller stores. The rest of the existing markets have shown a very high degree of consistency across the markets. The new markets and we look at them and we've talked about them is the Southeast and now at the upper Midwest. What we found is the Upper Midwest opened very strong as we kind of reengaged with more of a community marketing deployment model. And the Southeast where we opened up kind of in this transitory pandemic stage, where we basically built a store, opened a store and didn't support it with marketing, opened slower. What we find is as we've gone back in and reopened these markets with marketing, they're beginning to pick up. We have a lot of confidence in the market as some of the investors have commented to me you needed to be more optimistic on Miami over Indianapolis. And if you're exceeding Miami metrics and Indianapolis, clearly, there's something in the execution as opposed to the…

In Miami, one of the -- you said the Southeast, is it literally Miami?

We count Miami as part of that kind of corridor to Atlanta.

Before leaving development, just talk about your confidence level in hitting targets for 2023, remind us what your goal is. I think you have started to talk about '22 and '23 combined now maybe versus talking about '23 singularly. You have been relatively immune, at least my observation is from a slowdown or sort of missing of targets where -- which has been more common. What do you attribute that to? And is there a possible risk in the pipeline as we think about '23?

Yes. I would say, first of all, a lot of gratitude to our development team. I think they've done a brilliant job keeping the pipeline going with quality real estate. And then in a really tough environment, designing them and building them. We're seeing a lot of supply chain issues, just like most other concepts. But our development team has done a really great job. I think we've disclosed that we have 43 leases signed for next year. So we have a high level of confidence in next year. And we're starting to build up the pipeline for the year, for 2024. And for us, the focus is really on continuing to really just open high-quality real estate and execute really well. And really for us next year, one of the biggest tests in those 43, are the 2 Spyce locations that we're opening. So really making sure that we can understand what that looks like in terms of our pipeline in years '24 and out. Today, we have a high level of confidence in that technology. And so we're excited to see that come to life. And really, what we've been spending most of our time on is the customer experience that goes into that format. But I would say in terms of general growth, we have high confidence in next year. And for us, we kind of see our pace after that holding consistent, steady, really focus less on accelerating growth and more to some of the quality of that.

Can you say that, just to be clear, percent or units, right? Because I think originally, there was a view that year-on-year, there would be more absolute units per year. Are you not thinking that way as much and more like a constant number of units?

For the next 2 years, we are thinking probably more consistent level of units, maybe it grows slowly. But for us, the priority today is really like accelerating our path to profitability and understanding a number of units and how the pipeline connects to that. And how we can just really continue to execute really well like we did in the Upper Midwest and the openings this year. So it's really important for us to not accelerate -- to not put growth above profitability.

And is that a change in philosophy just thinking about this out loud and how you're thinking about the business today versus maybe you did a year ago, just given some of the things that -- we can get into some of the current details. But is it a change in thinking versus like 18 months ago and how you would have executed against this plan?

Yes. And I'll let Mitch speak more to this also. But I think we realized the environment has shifted around us. And it's important to get to that point of profitability to control our growth and really do it in a really responsible way with high-quality real estate. And we're really excited about the bets we are making around the format and R&D and really excited about the TAM. And I think there's a little less pressure on getting -- accelerating that today than there was 18 months ago.

I think, John, what I would say is that when we look at the long-term TAM of the company and the tailwinds behind the business and the type of food we serve, nothing has changed. When we look at our near-term deployment, not a lot has changed. When we think about the external world, we think that the world has changed a little bit more in terms of accelerating our path to profitability. We've always maintained that that was a critical element to the business that when we talk about becoming a sustainable business, part of that is our food. Part of that is becoming sustainable for a free cash flow basis. So I would say that philosophically not a lot has changed. We're just increasingly more resolute at getting there.

Okay. I want to come back to that path to profitability in a moment. I want to first though, turn to operations for 2 reasons. One is I think last -- and this is moving into the current events portion of the discussion. Last quarter or 2, there was a little bit more discussion around, one, the macro, but now maybe a little bit more about execution, right? There's either been retention in full-time versus part-time. We can get into those details. But and probably I think there was a conversation about your execution. Then, most recently, there was some news that Chris Carr, your Chief Operating Officer is leaving the business. Maybe can you connect those 2 dots, if there are 2 dots to connect there and just generally talk about where you think there's an opportunity from an execution standpoint, either one? Open question.

Let me first say, I don't think the dots connect, right. I think there have been some operational issues in the business and I'll talk about them. I think Chris' decision to leave the business is really heavily grounded personally and some personal choices for Chris. And Chris did great work for Sweetgreen. And we consider him a good friend and a great leader in the business. Now, Stephanie Traut, who is replacing Chris, was hired by Chris. She came out of Starbucks where she did a lot of labor deployment. Chris was a great leader. Stephanie brings a lot of leadership skills to the business, but she's also a very hands-on operator. So much more operationally oriented. We're happy to see that. In terms of the operational issues in the business, I think the simplest way to think about it is, during the pandemic, we are very highly digital and we really perfected the digital model. And with our turnover, as front lines came back, we had virtually no team members who ever worked the front line with customers. And what we have found and what we heard from a lot of our customers is that the environment could be improved upon. So what we really did is go back and begin to retrain our team members on basic hospitality, running the front lines, improving the throughput and trying to make the in-store experience better for the customer. Already beginning to see some results with that.

And Mitch can you talk a little bit about just going back to current environment kind of the top line environment, right? The business slowed in May. A lot of businesses slowed in May or June, you pick your time frame. There was a shift in the consumer. I think there's some hope that the return to fall and normalcy maybe would reflect and back to office reflect another inflection point. How did that play out? Did it not play out? What and where and when if it did or didn't happen?

John, what I think is going on with Sweetgreen is our footprint is really small at 180. And I think what we find is that the customer is moving a lot. By moving a lot, some days are home, some days they come to work, some days they travel. And as this happens, our business has been volatile. I don't think there's anything different with the product, the brand or our fit with our customer. I think it's much more a function of where is the customer in any given day. For example, in Midtown, New York, the business is not quite back to where it was in 2019. But it's very strong, Tuesday, Wednesday, Thursday. Friday looks like a Saturday and Monday is kind of a half day. So it's really a function of where the customer happens to be. And I think -- I think that that's going to take some evolution. I think in 6 months or so, it's going to settle down to whatever this normalcy is and the business will kind of move from there.

And I think -- I mean we had Shake Shack here yesterday. I think they would say the same thing. We're sort of a Tuesday to Thursday work day and the weekends just became longer. What can you do, however, as a business to drive -- you're young business. You really talked a little bit about digital, given that the world has shifted versus what you may have expected 2 years ago. Is there anything -- what is in your control, therefore to drive sales, whether it's amplifying the delivery aspect of your business to make sure that as customers when they're home get Sweetgreen or amplifying, whatever else it is or to migrate the footprint, what can you do in this environment to help yourself from a top line perspective?

Yes. I think like most folks in our industry, we've spent more time than ever scenario planning the different ways our business can grow, where our customer is going and what that might mean for the business. And we think we have a lot of levers and a lot of power, whether it's in broadening our products like I've talked about. I think the biggest tool we have is the trajectory of our pipeline being more suburban and really meeting the customer where they are. That being said, also on the channel side, we introduced catering this year. So as people do return to office or we want to maximize those 3-day work weeks, that new channel is really helping us think about that. So I think obviously, loyalty and marketing strategy, which we've talked about, I think all these things create levers for us to capture more value from the customer and ultimately acquire more new customers.

Can we talk about the path to profitability? So you have a unique model and so far as you deliberately lose money, right, in a sense that your store level profitability is certainly respectable. But your G&A spending is large for your size. Number one question I've gotten about Sweetgreen over the last couple of years is where they're spending all that money, right? As I think before stock comp, it's over $100 million, right? So Mitch, can you just sort of walk through -- before we talk about path-to-profitability, what is that being spent on? Do you still have the conviction that you're spending it in the right ways and the right places and Nick you can certainly chime in. And then we'll talk about kind of where you get to profitability.

So let me begin, John, by saying many investors over the years when I would raise money privately, would all say to me, what attracts me to Sweetgreen is when I look at it, you have the best brand, the best product, the best technology and the best team in the industry. And I would always remark and they all came at a cost. None of it was free. And when we discussed the timing of why we went public, a big piece of what we said, is we believe that there was heavy investments were behind the business. That we had gotten to a point where we were able to leverage those investments going forward over more units and that the deep investing phase of the business was behind it. So we are really sticking with that commitment. We believe we are investing in the right places. You can see it in our digital penetration. You can see in the strength of our brand. The fact that we're able to expand nationally with the local supply chain would be another example. We sell a product where the customer can taste the freshness. So that's what's so important in building a national brand around our product. And when we look at it, we feel pretty resolute that we're in a position to gain levers as we go forward. In terms of the path to profitability, it's really not complicated. Its more units generating higher restaurant level profit with no more than a fixed G&A going out over the next few years.

Yes. And so to be clear about that, Mitch, you talked about, I think, 2 quarters ago about maybe lowering some of your G&A spend, right? So you cut the base.

Right.

And in dollars, should we expect G&A to grow? Or is this -- how would the investors think about G&A in '23 and '24 relative to '22? Is it fixed dollar, better sales or…?

Certainly in 2023, fixed dollars.

Speaking of that, Mitch, just how does one think about '23 early days, understanding you haven't guided -- we're not done with the fourth quarter quite yet. What are the headlines in 2023 around inflation, development? You just touched on G&A. I don't know if there's any other early insights you can provide.

Well, as you pointed out, John, we really haven't guided around 2023. I can only echo what we said earlier. We do have 43 leases signed. We do see flat G&A. We think that there's -- what should I say, we see the world trying to settle down from a customer migration pattern, which I think will help the business as we come through 2023. Knowing where our customers are each day can help us balance the business a little better.

Okay. Nick, I want to give you the last word on automation. So it's a big idea. It probably isn't something that's going to be impactful for a few more years. You mentioned Spyce just for the benefit of those here. Spyce, what's the big idea here? And when do you think you'll start to get some real affirmative data on whether you can automate your business?

Yes. So Spyce is -- was our first major acquisition happened about a little over a year ago. And it was a company founded by 4 MIT engineers. And we've known them for 5 years, really been tracking them since before they even launched. And we acquired them last year because they basically created an automated assembly version of Sweetgreen. They modeled their technology very much after our menu. And they had 2 restaurants live for a year. Then once we acquired them, we put our menu live into one of those restaurants as a pop-up. We have since -- they have since built a live lab unit that is more specifically tailored to our menu and where it's going. And so for us, it's really exciting because we have a high level of confidence in the actual technology and the automation. We spent this past year at the same time, really building thoughtfully what the customer experience and the format is around that. Our digital pickup kitchen that we just opened was kind of a test connected to that, really understanding that front-of-house experience with no frontline, really excited to open the 2 this upcoming year. And as we talk about our pipeline and not speeding up, what's really exciting is as this does come to life, our ability to affect a higher percentage of the fleet in the outer years becomes very valuable. We haven't disclosed the new P&L profile, the new margin profile of this format. But it does automate the majority of the assembly, which if you've been in a Sweetgreen you can count the bodies today, we have 2 engines of, an online ordering and digital engine and a frontline make engine. And in some of our higher volumes, you can count the number of team members that are there. And what's really exciting is aside from the first order benefits, thinking about a number of team members and labor hours, there is this whole second order list of benefits around team member experience, order accuracy, turnover, perfect portioning, product consistency and quality that this machine unlocks. So it's really exciting to see the ultimate format come to life, where it will be a better customer experience, a better team member experience and ultimately a better you know P&L.

Nick, Mitch, thank you. We're going to have to leave it there, but thank you very much. Happy holidays to you and happy holidays you all. Thanks for listening.

Thank you.