Sweetgreen CEO Jonathan Neman on agentic commerce doubling since June, dinner menu launch, and Cyclospora fallout

person with us. I'll tell you about Figma while he comes in. Agents, meet the canvas. Your AI agents can now create and modify your Figma files with design system context. And we have gotten from Sweet Green. Welcome back to the show. Great to see you.

Incredible fit. Incredible fit. I need to get the same cuz I'm a more casual guy as you can see. That's kind of a good middle ground.

You could go anywhere. You could go anywhere in that.

No, you're not getting turned away. Good to see you guys.

What do we have here?

What do we have?

So, we brought you We brought you some new things. are launching tomorrow.

These feel warm.

These are uh our new sourdough chocolate chip cookies are launching tomorrow. Um

cookies came early every day.

And then we're the big launch. This is the this is a small piece of it, but we're launching uh dinner plates tomorrow.

Dinner. We brought you guys We brought it for we brought it for everyone here. So uh

amazing.

Fantastic to see uh some of the new things that we launched. Um the really the hero is this new chicken. So, really leaning into the protein. It's a new rotisserie

new rotisserie style chicken and it's it's 50% bigger.

And this has 250 g of protein in it.

No, no, no, no, not quite.

But, uh, but you'll see it's a lot more chicken. A lotier protein in it.

Um, so I know you guys are on on air, but for later we'll

Yeah. Yeah. Yeah. It's this is uh it's tough to sit here and be able to smell it, but but not want to eat on air, but um you know, it looks amazing. You've solved the uh you know the younger version of me. I wouldn't have had to ask for double protein.

Yeah, exactly.

You solved that

for sure. How's the business doing overall? Tell how Q3 shake out.

Uh we just reported Q3. We're seeing a lot of momentum. You know, we saw a lot of disruption from Cycllospora, but I think this the transformation strategy we're on is working and

we saw September comps get flat as cycllospora started to fade. October comped 5% and November accelerated.

That's good. So I think all the things are working. It starts just better customer uh experience in restaurants. A lot of it's just the consistency and the investments we've made around training development, how we pay our teams.

A lot of it's the menu working and resonating. So Wraps, which we launched here, launched six months ago.

We launched, you know, a few different versions of it. We had this big collaboration with Molly Baz going this past month.

Awesome.

Um which has done really well. And so yeah, and I think you know the marketing branding is all all been a little bit more culturally relevant. So, a lot of good momentum. A lot of good momentum for the company.

Have you been seeing any movement in agentic commerce? There's this post from open tables native integration with

just shared that on our company Slack.

190,000 people to restaurants just in the month of September. At the same time, like last week we were talking about like, oh wow, agent stuff is not taking off because there was some report that like Muse drove like 12 customers to Door Dash or something like that. But what have you been seeing? Like what's actually happening? So it's interesting to me that we're seeing more traffic than companies that do you know million you know many times many more times our volume. So

it listen it's it's still small but growing rapidly.

Okay.

Um from June till October

pretty much saw Agentic uh orders. It pretty much doubled from June to October and you're seeing that accelerate now.

Um

it makes sense. The products are so complicated to use. are buried in other apps and you got to install a new app or or figure out the new flow and set it up and that just takes time.

Yeah. And so it works today out of the box. You know the even the daily had like an episode about Muse and in that episode they order sweet green.

No way. No cool.

We're now very close to announcing connectors with Muse Instinct.

You know we'll play with everyone. also have our own

uh our own agent where it will be more around the personalization and kind of brand voice that we want.

Sure.

Um obviously Door Dash and others are going to have their agent. So we see this as a very exciting platform shift

and that's because you want you want people to use you you prefer somebody use a sweet green agent you guys get the order and then figure out how to get it to the customer versus like having it come through an Uber Eats or Door Dash.

Yeah. Listen, Uber, Door Dash is actually our partner for the logistics side on our native what we call our native delivery, but we prefer if we have the direct relationship. We get we have the data, we can email them and market to them. So, we see the higher LTV of that guest.

Um, obviously we make a better margin for the guest. It's much better because we charge uh there's a markup on marketplaces. All restaurants are marking up on marketplaces to make sure the margin works. So coming direct that that becomes one of the big opportunities around this platform shift. But we're excited. It's growing a ton. We've set up our you know the investments we've made in our technology and infrastructure has set it up where we can move really quickly on this

and we're just seeing month and month overmonth increases here and I think over time this will be a pretty big force in the industry.

What work do you guys do to track uh consumer trends and preferences around health? When I think like sourdough chocolate chip cookies, like that feels like you're uh I've seen that kind of as a value prop like hero ingredient for baked goods and like like the farmers market, right, when I go uh near my house. So, it's very exciting that you guys are like kind of closing the sort of closing the loop faster from like consumer preference to like here's a product that you can get in tons and tons of uh in tons of restaurants all over the country. Um, but like how early does is your team working to like identify those trends because ideally it's like you notice that this is something that people are wanting and then you can immediately start R&D and get the product out.

Yeah. So, you see it first in the coast and you see it on social media. Yeah.

So, you know, we have a lot of restaurants on New York and New York and LA, but we also have a lot of restaurants in the middle of the country in the suburbs in Indianapolis. We have about 300 restaurants nationally. So, we have to we are watching all these trends and finding out like where's that right tipping point moment where with our help we can make something kind of go mainstream. Sourdough is one of those examples. Like us getting rid of seed oils was another one of those examples.

Bring it back post midterms. You're

know what's really funny? We got rid of seed oils fair. Okay.

We got we got rid of seed oils in 2022 and then after the midterms happened after after the election we had a lot of people we had a lot of people ask us I I had the New York Times ask if we got rid of seed we we got rid of seed oils because of this. I'm like no we got this years ago.

No the reason I was so the reason I was so bullish on that trend is like there's very few things where uh it's like uh better for you uh and tastes better, right? And so like the combination of those two things just make it like a very natural decision.

It's not like you're making this big sacrifice. Like a lot of stuff historically like if you wanted to just eat

if you wanted to be vegan and then you're eating like vegan chicken it's like that's an extreme sacrifice. It's just not it's not going to take uh it's not going to taste as good. So and certain people will will make that call.

You hit our exact like what is sweet green in a nutshell? Like what is our job?

Yeah.

Is making food that tastes better and is better for you. Like that is like our number one thing that we try to think about how we do every single day.

On your question, there's also like a lot of these like trend spotters that we watch. Like Infatuation came out with one today around like trends and things like that. We're always watching those.

I'd say my partner Nick is probably like a little bit of an oracle as it comes to this having done this for so long and so tapped in.

Yeah.

Um really can kind of like see ahead on when those things are kind of growing and when they'll crest. There are a lot of now AI tools that are helping us you know we use you know listen labs is one that we use for like for for understanding the consumer they just got acquired by Salesforce

we all we've also looked at a lot of these digital twin

companies you guys have probably seen some of these ones are fascinating if they can

they're useful for you

we're just piloting it but it's really interesting like we just looked at this one called Simile

yeah yeah we've had the founder on

yeah I mean so

no he was he we always mess with him where we're like so how many times have you simulated this conversation like well I knew you were going to ask that.

It's funny. Um go back to cycllospora.

Yeah.

Sweet green was not affected directly but take me through a little bit of that story and how it wound up affecting you through the second order effects. This is the lettuce contamination that people probably heard about over the summer. But how did you learn about it, process that story? How did it actually affect the business? Why?

Yeah. So cycllospora is a parasite that

comes through the water typically and what happened is there was an there's an outbreak because it was in some iceberg lettuce from a single farm um in Mexico that got into the Taco Bell supply chain.

Yeah. Okay. I remember these

the number of you know what people have to know about cycles is it's an endemic. It happens every year. It's happened every year. You just never heard about it. Interesting.

There's about you know there's thousands of reported cases every year. about 10,000 reported cases.

Yeah. But it's small.

It's small. There was a lot of reporting this year. I won't comment on to why, but there was a lot of reporting on it. Even when it was small in the hundreds of cases, a lot of people were starting, you know, the media was picking it up and talking about it.

And I think it was one of those things that, you know, we weren't impacted. Many others were not impact. You know, most others weren't impacted. It was really a singular farm in Taco Bell being impacted. But the media and then the derivatives of it and the memes started saying, you know, explosive diarrhea,

you know, don't eat lettuce. At one point they said, don't eat blueberries. And then that narrative just got out of control.

Yep.

And we did a lot to try to like calm that. Talk about we know where our food comes from. We're not impacted.

But people were just spooked. I mean, you probably saw it in your own communities. People are just staying away from produce, lettuce, and all those things. And so,

you know, it took it took almost, you know, over two months of that to kind of go away,

but thank God.

That's why I went carnivore 5 years ago.

That was that was the reason.

Yeah. I was just terrified of psychosphora to eat steaks every day.

It it was a moment for us to like talk to our consumers more about all of a sudden people cared a lot about where their food was coming from.

Totally. Which is actually good for the benefit because you've already set up all the infrastructure. Now you have to go pivot everything. No, we got it's just a messenger

and we we have something that most restaurants don't which is traceability. So we have this fact that we can trace all of our ingredients directly to the farm at the case number. So we know like

you know at this restaurant at this time this food was served and if there was an issue we could trace that back. So there's an opportunity to tell that story

but at the end of the day people were spooked. You know the the media was the narrative just got so out of control and thank god it went away and people are back to eating salads.

Yeah. Honestly, I forgot about it until this conversation. But I do remember at the time seeing the headlines and and just texting my wife being like, "Hey, like just be mindful, you know."

Well, the other thing is, you know, Sweet Green, we're very known for salads. You can see here, this is doesn't look like a salad at all,

you know. And and so it did give us an opportunity to really lean into the other parts of the menu. Um especially as you know, we got ready, we knew this was coming, our big plates launch. Yep. So really pushing into really like the same sourcing ethos, scratch cooking ethos,

but you know, hardy food, rice, chicken, broccoli, you know,

uh we had uh Keller uh from Zipline on the show uh last week talking about uh it's been fun to talk with him and get and get updates. Some one of the things I'm most excited about is being able to access restaurants that are like typically like outside of so many of my favorite restaurants are outside of delivery range from my house.

And uh that just feels like something that for you guys as you're thinking about, you know, what stores you're you're currently in, what what new stores you're adding, something to be mindful of because I think at this point there's enough momentum. It feels like feels very inevitable that like a lot of the food that you will get delivered uh will be through these sort of like you know local drone delivery networks. But how are you thinking about it timelinewise?

Yeah. Um I love Keller. I met him I don't know 2018 or 19 probably and went and saw you know what he was building and was super impressed. We signed up to be an early partner with them. Um I think what it's going to do is it's going to accelerate what you've already seen which is needing less restaurants to fulfill a demand a demand. So whereas typic you know maybe in New York you'd have 60 restaurants maybe you don't need 60 maybe you need 40

because because of the omni channel nature of it I think

drone is just going to accelerate that. It's still very early in terms of the number of orders they're doing where they're doing it mostly, you know, working. It's not really working much in the urban environment. So, it really unlocks the suburban.

But the I think the way he's kind of run his business focusing on Africa and like the medical supplies first to really prove out a business case and build a business model around it and then get into food. And of course, the partnership was with Walmart was brilliant. So, I think I definitely I'm much more bullish on that than I am like the robots

like the robots, you know, on on that are driving along the sidewalk. Yeah.

Um, you obviously Door Dash has their version, Door Dash Air, I think more and more people, but I think the way uh Zipline has built it is is really clever.

Yeah. If they quiet, people will probably be more receptive to the drone in the air. Yeah.

Well, I just think when when uh when they're ubiquitous, even in certain regions, people are going to just order takeout a lot more cuz it's like

ordering takeout is awesome and whatever, but uh depending on where you are, it's like every single time it arrives, it's not in the condition that it should be, which is like

Well, and it's it's expensive.

Yeah,

it's expensive when you add the tip and everything. And this can this can really actually start to solve for that.

How have you thought about ghost kitchens? Have you ever done a physical location, a kitchen with where you cannot walk in and buy something? It's delivery only.

So early in the ghost kitchen days, we piloted a bunch of them. Okay.

Um we found that they didn't really make sense because you still have so much of the capital.

Yeah.

And it turns out that having your sign on the door and having people be able to walk in does drive a lot of demand.

Y

what we do do is we do effectively build a ghost kitchen in our restaurant.

Sure. Some have they all have at least like a digital make line, but we have

probably 15 or 20 restaurants around the country. They're almost like our delivery catering hubs. Sure.

So we have, you know, in kind of super dense areas, you'll have a full sweet green restaurant with its own digital line, but somewhere either upstairs, downstairs, or in the back will be a separate

separate like kitchen in order where we can move all the delivery and catering. And that helps us get the delivery drivers and the flow out of the restaurants nearby so they can focus on the customer there. And for large catering orders, um they can be very disruptive to the to the core operations. So we kind of have this like hybrid approach where we build these hybrid ghost kitchen restaurants.

Um I think that there's there's brands that have made it work, especially if you can work on multip you know work multiple day parts and the guys that are doing like multiple brands under a kitchen. Yeah, that seems like the more and that's like knockoffs

and it's good to it's a good way to test into a market because you can open for less capital. You can kind of test into it but you'll see like

you know even like Goop like they started Ghost Kitchen they just open a brick and mortar. Y

so it kind of is think about it like the way like a DTC like every DTC company will start as a DTC and if they're successful they'll open they'll go omni channel and open retail. I see restaurants in a similar way where it's a good way to like test your product,

be able to iterate quickly,

but over time if you want a real brand, you're going to want brick and mortar as well.

What areas or locations or types of retail locations are on the biggest upswing? Like everyone has been talking about like the death of the American mall for years, but what's growing? I mean, we were in New York and there were like lines down the streets for a bunch of stores. Um, is it more urban environments? wealthier communities, suburban areas, like where where are you seeing like an upswing in just retail value?

Yeah. Um well, it's it's actually interesting in the restaurant world. What's what was totally out of fashion is hot again. Okay. The the two of the hottest restaurants right now, public company restaurants,

Cheesecake Factory.

Yeah.

Um and I mean, look at their

That's because of the That's because of the aesthetics in there.

That's by I'm curious. I'm really curious to see what happens to their sales cuz they just reported earnings and it they reported before the whole

White House aesthetic conversation happened. So, I'm curious what that did to their sales. The other one has been Chili's

Chili

Cheesecake Factory up 100% year to date.

And look at And look at Chili's chili. Look at the Chili's like three-year stock chart. They've also done well. So, you're seeing a lot of these casual dining type places do really well. You know, I think that younger consumer wanting experiences again. Interestingly, malls,

yeah,

are we don't have a lot of mall restaurants. We have like a handful of them. Yeah. But you are seeing an upswing in traffic in a lot of malls. Yeah.

What you're seeing in real estate is similar to what you're seeing in the overall economy. It's kind of this K-shape.

Yeah.

Where like the best real estate is getting way more expensive and then there's like a divergence for the rest.

Yeah. I love these chain restaurants, but it's always hard to get a group of friends to go to one because all my friends are hidy toy and too fancy for these things. So, what I'll do is I'll say, "Okay, yeah, I want to go to the Cheesecake Factory, but I know you don't want to go because you don't think that it's high quality." But let me tell you, the chef at this one in particular because it's

like if you know, you know,

genius. He's a savant and it will be unlike any other cheesecake. This one punches above its weight class by a thousandx. So, we got to go. You would agree.

They They do have an executive chef in every restaurant. I'll give them some credit and there must be some variation. The worst cheesecake factory in the world in the world probably 10 times worse than the best.

By the way, we have a ton of variation in our restaurants because if you're making your food from scratch in the restaurants and you're not bringing it in bagged and putting in a microwave, you're going to have that variance. Like the biggest thing we worked on in terms of launching this is we had to upskill our the chefs in all the

the kitchen. So we have,

you know, 800 of these chefs, these what we call kitchen leads and over the

smells so good. This is brutal. We got we got a next time you're only allowed to come you're only allowed to come at the end of the

show a lunch break during the show.

We got like 20 20 cookies you will be okay

but yeah the v I mean the variance in skill level really can drive the food quality and and credit like shake cheesecake huge portions maybe not so good for you in that respect they actually make their food from scratch. Yeah,

they they are like do have a we we've hired a lot of people from Cheesecake

and I like hiring them because they know how to deal with a ton of complexity. Like if you can run if you can run a kitchen

cuz the menu is just

menu that massive like you can come and run a Sweet Green.

I mean I believe what's the what's the state of like emerging restaurant brands? Because I feel like you guys from from from what I can remember, you guys prompted like a wave of people being like, I'm going to make the sweet green for X or what whatever whatever their category was. And so many of them, I imagine, got to like a handful of locations and then really like for some reason or another didn't break out and get to the to to the hundreds of restaurant scale. But like what do you what do you when you're meeting a a early stage founder that is like maybe going from one to five locations what indicators do you look for that they can go to to hundreds?

So it's really hard you know I I advise a lot of these founders and I what I tell them is you e you got to kind of pick you either got to stay in the like zero to five maybe seven or eight restaurants where you can manage the whole thing yourselves and you can make a lot of money. You have seven

successful restaurants. you don't need a lot of infrastructure and overhead or if you decide to go and want to scale it, it's a totally different game because now you have to build real infrastructure, invest in GNA and restaurants are so capital intensive. I think one reason you saw Sweet Greens and others growing in the 2010s is it the Zerp era helped us all right we were able to raise enormous amounts of money.

Sure. um where you know it's really hard to do that and most restaurants that get to that point kind of have to scale slowly and scale through their own cash flow.

Yeah. Like I mean this happens with so many like in consumer packaged goods people be like well this company got to two billion of sales bootstrapped and it's like well they did that over 40 years. It's

like and multiple years they were growing like 5%.

I mean it' be like Red Bull.

Yeah. pretty sure that guy

it took it took a long it took a long time

in Thailand

and I think what to answer your question there's a lot of brands that I that do that are awesome but the the big question is always how scalable is it like if it works really well in like urban New York with five restaurants

most of the United States is suburban like you have to be able to work in the suburban strip center as well as you work you know in Soho

how big of a cost is real estate Real estate

is it is it the majority of

No, no, no. Labor is the labor is the biggest driver of everything in a restaurant. Like the the price of your food is dictated by the cost of labor more than the cost of the food.

Interesting. I always had this I always had this question about why isn't there a a chain restaurant that is a coffee shop in the morning, a lunch spot in the afternoon, and then dinner with drinks in a bar that goes until like almost 2 a.m. And so you're effectively willing to take customers money from 6:00 in the morning with a cup of coffee till one p 1 a.m. with a with a glass of wine or a beer. And the reason is that even though you'd be, you know, advertising the rental cost or the the real estate cost over more hours in the day,

that's not going to do that much. And you're adding so much more complexity.

Yeah. It's it's the complexity.

Try to find five people that are down to work

every night. Yeah.

That have shifts who would just work 23 hours a day and I would show them Jaco Welling's good. And I would say this is the path to greatness. But people people are trying, you know, like what makes McDonald's great? Three great three solid day parts. Yes. They're one of the only brands that have breakfast, solid breakfast, a lunch, and dinner.

And it all works.

All works. Wendy's, you guys are following that story. You know, they have the hostile takeover happening right now. Everything.

What's happening to their stock with the Jensen news?

Oh yeah, didn't start at Wendy's.

Up 2%.

No, it started at Denny's. Denny's started at Denny's.

What is the Denny's stock doing? That's the question.

Uh, delisted.

Realistic.

Wow.

Real estate's about real estate's about eight.

You want it to be definitely sub 10% revenue. Like if you're good like a Chipotle is running like probably five or 6% of revenue on real estate.

Your mental model was couldn't have been more wrong.

But but you know where you you're not wrong is you are leveraging the capex and you're leveraging the management labor. And so those are two big parts of it. But

so you're saying there's a

there's a way like

you know if you guys have probably been to like Great White here in LA.

Oh yeah. Yeah.

Like they do a great job because they've they've really figured out an all day menu. Like they're do great breakfast, great lunch, great dinner, great weekends and and it works. This is why like why we're so focused on dinner. We have an amazing lunch. We have like an incredible lunch business, but only about a third of our business happens around after 5:00 p.m.

Yeah. And so like for us to win and really like achieve our mission and open thousands of restaurants, we need our dinner to be as strong as our lunch.

Yeah. Well, thank you so much. Great to see you as always.

Always great to see you up.

Let's hang us. Let's hang. We'll talk to you later. Let me tell you about MongoDB. What's the only thing faster than the AI market, your business on MongoDB? Don't just build AI, own the