Sweetgreen Bets on Fries and Loyalty for Growth

Sweetgreen (NYSE: SG) held its fourth-quarter 2024 earnings call on February 26, 2025, revealing significant progress in its mission to redefine fast food through superior sourcing, culinary excellence, and innovative technology. While the restaurant chain faces near-term challenges, management outlined several strategic initiatives to drive growth and expand margins in 2025. Here are the three most important insights for long-term investors.

First Full Year of Adjusted EBITDA Profitability

Sweetgreen achieved its first full year of positive adjusted EBITDA (earnings before interest, taxes, depreciation, and appreciation) in 2024. The company reported adjusted EBITDA of $18.7 million for 2024, a $21.5 million improvement over the prior year.

2024 marked the first full year of positive adjusted EBITDA in our company's history, a key milestone that confirms our strategy is working. We are committed to leveraging our G&A, all while we scale our real estate footprint with the Infinite Kitchen, increase the pace of menu innovation and strategically invest in additional marketing.

-- Jonathan Neman, Co-Founder, Chairman, President, and CEO

This progress comes alongside restaurant-level margin expansion of over 200 basis points year over year to 19.6%, showing Sweetgreen's improving operational efficiency as it now operates 246 locations.

Infinite Kitchen Driving Margin Expansion

Sweetgreen's automated kitchen technology -- Infinite Kitchen -- is delivering substantial labor cost reductions and improved operational efficiency across the company's expanding footprint.

These locations are delivering at least 7 percentage points in labor savings and 1 point in improved COGS [cost of goods sold] compared to restaurants of similar age and volume. Additionally, our class of Infinite Kitchens is driving higher native digital sales due to their high throughput and consistency, which leads to a better guest experience.

-- Jonathan Neman

Management cited strong results from their Infinite Kitchen locations, including a 30% margin achieved by the Hingham, Massachusetts, location in its first full month. With 12 Infinite Kitchens now operational, Sweetgreen plans to accelerate this technology deployment in 2025, installing it in 20 of the 40 planned new restaurant locations.

Menu Innovation and Loyalty Program to Drive Traffic

Sweetgreen is dramatically increasing its pace of menu innovation and launching a revamped loyalty program to drive customer frequency and broaden its customer base.

In 2025, we are significantly increasing the pace of innovation across multiple areas of the business to create a steady drumbeat of newness to increase frequency, broaden our customer base and deepen brand loyalty. This includes an accelerated approach to menu innovation and the introduction of a new loyalty program supported by strategic investments in personalized CRM [customer relationship management] and paid media.

-- Jonathan Neman

The company announced the launch of Ripple Fries this month, a five-ingredient air-fried alternative to traditional fries that achieved the highest attach rate of any side in testing. Additionally, Sweetgreen will roll out SG Rewards, a points-based loyalty program, nationwide in April 2025, offering customers 10 points for every eligible dollar spent.

Looking Ahead

Sweetgreen's management expressed confidence for 2025 despite near-term headwinds from external challenges including extreme weather and the wildfires in Los Angeles, which makes up nearly 15% of Sweetgreen's revenue. For 2025, the company expects revenue between $760 million and $780 million, same-store sales growth of 1%-3%, and adjusted EBITDA between $32 million and $38 million.

With the Infinite Kitchen's proven labor efficiencies, a revamped loyalty program, and an accelerated innovation pipeline centered around craveable menu items, Sweetgreen appears positioned to strengthen its competitive position in the fast-casual segment. CEO Jonathan Neman emphasized their clear focus to "strengthen the brand, drive guest engagement, expand our footprint strategically and operate with excellence," with particular emphasis on driving traffic through menu innovation, launching new restaurant formats, and elevating the digital experience.

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David Kretzmann has no position in any of the stocks mentioned. The Motley Fool recommends Sweetgreen. The Motley Fool has a disclosure policy.