During a stellar quarter for sales at Sweetgreen, the trendy salad chain is still feeling the effect of office workers who are working from home, especially in urban markets.
“[T]he COVID-19 pandemic has significantly impacted our financial results in these urban locations far more negatively than our suburban locations,” said Mitch Reback, Sweetgreen’s chief financial officer.
Office occupancy is still lagging. An average of 38% of workers are back in the office across 10 major US cities, according to data from security firm Kastle Systems. As of March 2, just under a third of workers were back in the office in New York. In San Francisco, that statistic is 28%.
The company has figured out a strategy that takes those new work patterns into account.
“[W]e’re not expecting [office occupancy] to come anywhere near 100%, but for us, it doesn’t need to,” said Reback. Part of Sweetgreen’s confidence, he said, comes from having invested in delivery, drive-thru service, and pick-up only restaurants, as well as offering online-only menu items. Customers also can pick up orders at designated locations in office buildings, residential buildings, and hospitals.
What this suggests is that fancy salad chains can survive without workers coming into the office, if they lean into the changing needs of remote employees, or open new sites like pick-up only locations or ghost kitchens that do away with costly labor or leases.
It’s a reversal of what Sweetgreen said in the filing for its initial stock offering, which warned investors that remote work could pose a financial risk to its business, before it went public last November.
Just Salad, Salata Salad Kitchen
Meanwhile, Just Salad’s CEO, Nick Kenner, told Quartz via email that sales in New York City are back to 2019 levels, in part due to locations in residential areas seeing more foot traffic than prior to the pandemic, suggesting customers who used to grab salads close to the office are still buying them while working from home. The Sweetgreen competitor has a majority of its locations in New York City.
But the recovery from the pandemic has not been equal across business district lunch staples. In Pret A Manger’s stores on Wall Street, for instance, transactions in the last week were 53% of their 2020 pace. And Salata Salad Kitchen, the third-largest US salad chain, serving midwestern states as well as California and Georgia, said downtown locations in Houston, Dallas, Los Angeles, and Charlotte have not fully recovered to pre-pandemic levels.
Editor’s note: This story has been updated to correct a mistake in a Sweetgreen earnings call transcript which said that the greatest growth in the fourth quarter of 2021 had been in urban markets. It was in suburban markets.