Friday, 8 November 2024
by BD Banks
Nicolas Jammet is the co-founder and chief concept officer of Sweetgreen, a health-minded fast-casual restaurant chain with more than 200 locations. In this podcast, Jammet joined Motley Fool host Mary Long for a conversation about:
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Nicolas Jammet: We’re like, this guy is creating vegetables from scratch around optimized flavor. Let’s invent a vegetable together and treat it like it’s the greatest new consumer product in the world and drop it with the same marketing campaign.
Ricky Mulvey: I’m Ricky Mulvey, and that’s Nicolas Jammet, the Co-Founder and Chief Concept Officer of Sweetgreen, a fast-casual restaurant chain focused on healthy eating. Jammet caught up with my colleague, Mary Long for a conversation about how the company transformed from a shop selling salads and frozen yogurt to a high-tech chain with automated kitchens and newly invented vegetables. They also discussed the innovations across the ag-tech space, catching Jammet’s attention and Sweetgreen’s journey to profitability.
Mary Long: When you started Sweetgreen in 2007, originally, the menu looked a little different. Were they you originally selling like froyo and wraps? Why and when did you pivot to salads?
Nicolas Jammet: Well, the core of the concept was always salads and bowls, and we also had froyo soft serve. Actually, the name Sweetgreen comes from froyo and salad, sweet green. We don’t talk about that as much. But the core of the concept was always, let’s create a place where you can have this breadth of menu that you could customize exactly what you’re looking for in a bowl.
Really, whether it’s the fresh vegetables, the greens, the proteins, cheeses, crunch, different flavors throughout the dressings. How can you really create an assortment and an offering where customers can come in and create exactly what they’re looking for and have it be really craveable and tell a story around quality of the ingredients. From Day 1, it was always around really high-quality ingredients that were super fresh, and that made you feel really good, but also was wrapped in an experience that also made you want to engage with the brand.
Mary Long: That experience is perhaps changing as you lean more and more into technology. It was a little over a year ago that you launched your very first infinite kitchen. Now I think you’ve got three, perhaps a fourth coming out in 2025. Paint the picture for us here. What exactly is the infinite kitchen experience like, and how is that different from what I would experience walking into a regular Sweetgreen location?
Nicolas Jammet: I guess, also part of your previous question is, the Sweetgreen experience and offering has evolved a ton in the 17 years. Part of that is just based on us growing to different regions, serving different customers, learning more about how folks are eating or what stories we want to tell them in food. Even though we started as salads and bowls and Froyo and wraps, our menu has evolved a ton. Our menu will continue to evolve. The thing that our menu evolves around is this food ethos, this approach to food, to how we source it, prep it, talk about it, and really wanting to share with our community and our guests, the change we’re trying to create in the food system, and why it’s important, and why it can taste really good.
As part of that evolution, what our restaurant experience looks like, what our guest experience looks like has evolved a ton too. In our history, we’ve invested so much in the technology that powers the experience of how you order, whether we were really early to think about digital ordering channels and having an app. We can remove as much friction for our guests and just make it easier to get this food and order Sweetgreen. That really defined a large part of our growth of just introducing these new channels for customers to order Sweetgreen, engage with it and just have it be really convenient. That was a big platform shift, I think for us in the whole industry.
I would say early on, we also believed and started to learn more about automation, and we believe that was going to be the next great platform shift in food. We started to invest more of our time and energy into learning what that could look like, what existed out there, what people were creating. Ultimately, about six or seven years ago, we met the founders of Spice, which was a company out of Boston, for MIT engineers that were creating a restaurant company powered by automation with a very similar ethos and mission to ours. That really got us excited because it was these four guys that were trying to build the same thing that we wanted to build. We got to know them.
We actually got introduced via one of our first investors, one of the world’s most famous chefs named Daniel Boulud, fine dining, French legend. He was one of their first investors. He was one of our first investors, and he said to me, you should meet these guys. They’re trying to build the same thing, and you should just connect. Got to know them over the years, stayed in touch and then about 3.5 years ago emerging from COVID. We said, what does this look like if we join forces? You all have this incredible technology platform. We have this brand in this futios, and we have some scale.
Instead of us just building automation ourselves, let’s join forces. We acquired them 3.5 years ago, a little over three years ago. It’s been an incredible journey since, really imagining how automation plays a role in the Sweetgreen experience in customer journey and team member journey, really evolving the actual technology that they had built to serve Sweetgreen and the breadth of menu and the evolution that we want. That team, I give them a lot of credit. They’re really brilliant, and they’ve assimilated into Sweetgreen really well, but they self-preserve the beauty of their start up culture. We have eight of them live today, and we’re opening more every month. It’s really exciting to see that format for Sweetgreen come to life, and we’re learning so much about what it means from an experienced design point of view to the economic model of the business to what it means for both customers and team members. We’re learning so much every day, but it’s really exciting to see the results so far.
Mary Long: Can you take us behind the scenes at all at, what it takes to build an automation platform like that, which you have in Sweetgreens, I feel like there are plenty of food robots that can dominate the headlines. People might have heard of autocado, the avocado slicing robot from Chipotle. There is Flippy the burger flipping robot. I think typically when these machines are in headlines, they’re given a very specific job. What’s happening at the infinite kitchen, if I understand it correctly is, rather than having one machine do one task, you have a machine that’s depositing different ingredients and building a bowl itself. I actually think that that’s a pretty fantastic and miraculous task because you have such, as you’ve mentioned, a breadth of ingredients across your menu, that machine has to be able to tell the difference between, this tube is full of goat cheese, and this tube is full of cherry tomatoes, and you have to handle those ingredients really differently so that they appear in the bowl in a clean, appealing way. What does it take to build a machine that is like that?
Nicolas Jammet: Your question is spot on, because I think A in general, I’ll say, I get really excited and we get really energized by just more attention and investment in how automation will show up in the food experience. I think a lot of people believe that there’s investment in different solutions. I think it validates that this will be part of how the restaurant experience evolves, and automation will be a platform shift. It’s exciting to see other technologies come to life. But I think what you reference is a big difference. I think there’s a lot of really great or an array of technologies out there that are more spot automation that replicate one discrete task or one part of someone’s job or the prep for one ingredient. Those are all great, and I think they’re valuable in different ways. But what got us really excited about Spice and the approach was a more holistic approach to creating a platform of automation that can really create a full assembly model. Really built for dozens of ingredients. We have 50 lanes and we have a breadth of ingredients that is more than most restaurants and concepts. To be able to engineer this piece of technology to do the majority of our assembly is really exciting and isn’t just replacing one discrete task.
It really completely reimagines and transforms our whole operation, the team member job, what the experience that Sweetgreen feels like at peak. Then ultimately, the most important thing is it transforms the actual product. If you think about the end result, the product that the customer is engaging with and buying, if you look at whether it’s portion size, accuracy of ingredients, temperature of ingredients, all these things that are now can really be controlled in a different way. It’s really exciting. But in terms of the breadth of the functionality of our infinite kitchen. To your point, it’s not spot automation. It is our full single engine of assembling our meals, which is unlike anything you’re seeing out there today in our space.
Mary Long: I’ve heard you be quite clear that the purpose of these machines is not necessarily to replace human employees. It’s more so to shift the responsibilities of those humans to more hosting, more hospitality work. But I also think it’s tempting, especially from an investor standpoint to hear automation and to think that means efficiency. With the idea in mind that, you’re not looking at these machines to fully replace humans, what labor savings are these machines actually responsible for? I would imagine there’s a big upfront cost in the research development, deployment of these machines. Then what’s the payoff?
Nicolas Jammet: I think you alluded to it a bit in the beginning of your question is, for us, the belief in the investment in automation as a next great platform shift in food it’s not just about efficiency, it’s about reimagining the whole restaurant experience for both sides of the counter and really thinking about a model that is more engaging, more hospitable, and yes, more efficient and just a higher quality team member experience. Customer experience is really the main goal, and ultimately the product experience like I mentioned. For us, it is this broader imagining the world and the model we want to see in, 10, 20 years. We think this really creates a whole new fast food model and experience. As you think about the benefits, and again, this is still early for us. We have eight of them. It’s been about a year and a half, and so we’re learning so much.
But seeing this premise come to life of now a model where the tasks in our restaurants that are more repetitive motion are now automated, and we get to use our team members and this talent in our restaurants to redeploy to really focusing on fresh prep and cooking, and then customer hospitality and engagement is really pretty powerful. We’ve seen it come to life in all those restaurants, but specifically one of our infinite kitchen restaurants is a classic Sweetgreen that we took at a restaurant that had been open for a while, and we converted it to the infinite kitchen. We took an existing team, an existing restaurant replaced their front line and their digital make line. Classic Sweetgreens have multiple engines run by multiple team members. We installed our infinite kitchen there and converted and opened it the summer. Again, it’s still early, but it’s really exciting to see the experience in that restaurant with the same team members that were coming to work every day and having to show up on the front lines and our digital make lines and what that feels like versus now engaging in this infinite kitchen experience for them, it’s completely different. I think you hear it anecdotally when you talk to them, but then you also see it in the numbers.
If you’ve been to a Sweetgreen at peak lunch or if you’ve been to any fast casual restaurant at peak lunch, you know it can be pretty intense and pretty stressful for both the customers and the team members because everyone is trying to get, speed and throughput is really important. It’s really hard to be fast, friendly, and accurate all the same time. I have so much gratitude and love for our 7,000 team members that do that every single day in our restaurants, it can be intense and stressful. Seeing the experience in our infinite kitchen restaurant is really exciting because even at our peak rush, especially the one we converted, it’s just a different energy in the restaurant.
The infinite kitchen is focused on speed and accuracy, and our team members get to be focused on yes, those things as well, like accuracy of the finishing station and how we’re prep and cooking. But mostly on the hospitality and engaging with customers. I’ll give you an example of at peak rush, a brand new customer walks in, that had never been to a Sweetgreen, never heard of it, doesn’t maybe have a friend that brought them in that could give them a little story. You walk in. It is really overwhelming and intimidating to walk into a typical Sweetgreen. When you walk into the infinite kitchen, we have these hosts. Our team members now play this role of a of a host or a concierge, very inspired by the Apple store experience, folks that have just reimagined even retail experience.
But they can now engage with that customer and say, hey, are you new? Is this your first time? Let me actually spend a minute or two or five and explain to you who we are, what we’re about. Let me point to our source board and show you our farmers and what we believe in our ethos. Even if someone really wants to taste something, there’s opportunities for sampling and tasting. There’s this calmness to the experience. Then can order on the kiosks, or that host can actually take out a tablet, order with them and walk them through that step by step. The divergence of different experiences you can opt into in this infinite kitchen is really exciting.
Then, again, on the team member side, we’re seeing really incredible stats on just turnover, and something we focus on. I think if you look at the average turnover in fast food, it’s incredibly high. It’s something that really just shows you that part of the model is just a little broken and needs to evolve. For us, when we see turnover dramatically coming down or decreasing or just being lower in this infinite kitchen format, it shows us that there’s something there from the team member point of view as well.
Mary Long: What would you attribute that to this? I think Sweetgreen has done a really great job of balancing this efficiency that we’ve talked about in the infinite kitchens, as you’ve described, but also in regular Sweetgreen outposts. This efficiency with also, like an experience. You’re not exactly pushing people out the door. They’re still sitting in the restaurants. As you’ve just mentioned, you have such an emphasis on hospitality among team members and really welcoming people, whether it’s their first time or their return loyal customers into the space. I would also imagine though that that is a hard thing to maintain and scale as you are just growing as a company. How do you do that? What would you attribute that ethos among your team members to, exactly?
Nicolas Jammet: It’s a great question, people often ask us, what are the barriers to growth? What are the limits of how fast you can grow? There’s always challenges to growing for any business, but for us, whether it’s creating the supply of our ingredients according to our ethos, or one that really has been a focus for us is just talent and teams. It’s hiring these teams or folks that run our restaurants and have to bring our food to life every day is definitely a challenge. At the core of our business is people. The more that we can reimagine the experience, the tools, the equipment, and whether it’s technology or equipment in our restaurants, to just make that more seamless and make that team member experience even greatest, so they can focus on food quality and hospitality and bringing those things to life, just completely shifts how we think about our growth, which is really exciting about the infinite kitchen. But to your point, I think it’s being really clear about what Sweetgreen is and why we exist, our mission, our purpose, and when we’re recruiting or hiring or training, or retaining all of our team member and talents.
It’s really important to just make sure that we’re always talking about that. Then honestly, as a company that spends so much energy building this incredible supply chain and sourcing all these incredible ingredients from some of the country’s greatest growers and farmers and food partners, making sure that we talk about that internally and externally. Really we talk a lot about food quality and price value and making sure that we talk about what makes us different about the way we source. But then also the training in our restaurants of how we then prep those ingredients. We are doing scratch cooking in all 240 restaurants every day. We are making dressings. We’re roasting proteins, cleaning, chopping greens. We’re doing all these tasks that are so important, and the totality of them together create this fresh, flavorful, craveable experience in the bowl. But so much of the training and the messaging to our team members is really what makes that possible. I think there’s also a whole part of our experience on the team member side that is, how can we reimagine the tools that make those things even easier?
Our technology team years ago built these prep tools in the restaurant. It’s these tablets that sit at our oven station or the cold prep stations that really help our team members understand how much of each thing to prep and cook at any given time. It’s almost like driver turn by turn directions that you’d see in like a rideshare. If you are working, our ovens, which is a really hard position. It’s the heart of the restaurant. You’re roasting meats all day. You’re roasting and cooking things all day long. Cooking the right amount of things at the right time in the right order. If you don’t have to think about that, if you just have a tablet that tells you what you have to do there, that has all the inputs of your forecast, your PMx, all these things that will help you just be more efficient with your time and run that position. There’s tools that we can give our team members to really optimize the quality of the experience and ultimately the consistency of the overall experience.
Mary Long: What goes into recipe development? How much are you trying to drive consumer taste versus responding to what you already know consumers like and want more of?
Nicolas Jammet: This is one of my favorite questions, probably because I think it’s something we’ve done differently at Sweetgreen in a way, and maybe in our early years way too differently. It’s been really exciting about being a public company is we’ve been able to really balance that thinking differently and not so traditional method of whether it’s around product development or talking about our customers. But then also bringing in this incredible team of markers and marking menu strategy team that really thinks about the consumer in a very insight driven way also. When you balance those two things, it’s pretty powerful. I would say in our history, it’s been a really balance of art and science.
It’s really understanding your customer directly, we spend a lot of time listening to our customer, whether it’s direct insights, looking what they’re ordering, looking at changes they’re making to their orders, very data driven here. But at the same time, understanding where the world is going, conversations that are happening broadly in the food system, beliefs we have in our food ethos that we want to come to life. It’s a lot of listening to the customer, but then it’s also a bit of leading them, and then telling the story of why that’s important. In our history, some of our greatest launches and moments have been things that the customer isn’t literally telling you, but you get a sense from understanding the customer that it would mean something, and it’s something they would appreciate.
A few years ago, we did a collaboration with Dan Barber, who’s one of the greatest voices on food and agriculture, and was one of the best restaurants in the world. He was starting this company called Row 7 around breeding seeds for flavor. That sounded so cool to us because our whole message on what customers loved about sweetening was that we took these ingredients whether it’s vegetables or cheeses or proteins that were good for you and raised right and made them really cool and craveable. We were like, this guy is creating vegetables from scratch around optimized flavor. Let’s invent a vegetable together and treat it like it’s the greatest new consumer product in the world and drop it with the same marketing campaign.
He had this koginut squash, which is this beautiful squash that’s bread for flavor and nuttiness and comes out of the ground and then you cure it, and it changes color. We said, great, we’ll take 100,000 seeds. No one had ever grown at scale. We said, we’ll try it. We found six of our farmers around the country, 23 acres and planted these seeds and just crossed our fingers and hope they’d come out of the ground. They did, and then we had this incredible campaign with the koginut squash in a bowl and as a side. We had this whole campaign around the importance of breeding for flavor and dropping this new squash. We treated it like it was the same way Nike would drop a shoe or Apple would drop a product. We had Dan Barber holding up a squash and a billboard in Time Square with this incredible campaign and creative. It was getting people to look at a vegetable differently, or getting them to think about their lunch differently and creating the same energy around a bowl that you would around, again, some of the best consumer products out there. It allowed us to tell the story of our supply chain, but also celebrate this thing that tasted so good.
That’s something you’ll never hear in a focus group or insights, but we understood how it would make our customers feel. At the same time, today, we have this brilliant team, an insights team, and a marketing and menu strategy team and a culinary team that come together and balance the art and science of understanding what occasions are missing on our menu, what need states do our customers want? What compliments our menu the right way? What will attract a broader customer?
Honestly, the funnest part of my job is in our test kitchen in the lab, bringing those things to life and testing all these things. Part of the philosophy is, we need to really test and ideate a lot of things. If 50% of the things you test or ideate shouldn’t work. If everything that you’re testing is working, that you’re not thinking creatively enough, you’re not pushing yourself enough. Really grateful for our marketing teams, culinary teams that bring those things to life every day, and we actually we’ve been on a journey of some radical menu evolution and just really broadening our menu. We’ve got some really exciting things planned for the next year.
Mary Long: We started this conversation talking about automation and robotic technology in the food space. Now, we’ve moved into this very different side of technology in the food space. That’s organic technology, I guess is the way to describe it. I think that this idea of breeding a particular type of vegetable, that’s so fascinating to me. I’ve heard you talk about this before, and so I’m really glad that you brought it up. I’d imagine that you and the other folks on the management team because of these relationships that you have with farmers, you have a front row seat, to pretty cutting edge stuff that’s happening in the ag-tech space. Apart, again, the seeds were a great example of this. Is there anything else that you’re paying attention to in that world that you just think is so cool?
Nicolas Jammet: I could probably talk for a few more hours on that. [laughs] I would say, in general, one of our beliefs at Sweetgreen, and maybe it’s because Sweetgreen was started by three very curious college kids and wanted to change the system was we’ve tried to say, very curious about where the world and technology and products are going. We stay very close to that next generation of products and technology, and we just want to understand where the world is going. Honestly, we feel like we have a role in helping shift where the industry and world is going there.
We try to stay very curious and just try to learn as many things, whether it’s like the number of samples we get for next generation products in our lab here to to just taste what people are creating, what businesses people are starting. I think there’s a lot of excitement and a lot of investment in the last decade in controlled environment ag like the greenhouse grown vegetables and greens, just thinking about that space. We’ve really played and tested with a number of partners in that space. I think you’re seeing some innovation now across like oils. You’re seeing whether it’s zero acre or some of the algae oil companies. A lot of innovation and beverage, I think trying to create that next generation of better for you sweeten differently, whether it’s not alcoholic or soda space. There’s a bunch of innovation across CPG, which is really exciting, even cleaner for you third wave CPG. Whether it’s ag or CPG or just broader food, we try to stay very connected to how folks are innovating across all the different touch points that go into our restaurant.
Mary Long: This is going to be a bit of a pivot, so just bear with me. There’s been a lot of talk about value in the food space lately. Starbucks has seen declining same store sales. McDonald’s is facing the same problem. Your second quarter earnings reported a 9% increase in same store sales. What do you attribute that to? How is Sweetgreen able to counter the downward trends that other fast food and fast casual restaurants are facing these days?
Nicolas Jammet: I think it’s a great question. I think it’s a conversation that we spend a lot of time thinking about. Sweetgreen has a premium product, and we’ve created this category. We’ve talked about how important it is for us to talk about all the inputs that go into our food from how we source it to how we’re scratch cooking to all the technology to ultimately the experience and the quality of the product the customer gets. But so much of our conversation is around just price value. I think ultimately there’s all this talk about, pricing and inflation. Customers are definitely the world’s top of mind for them. We hear that with our customer.
But so much of, I think what’s driving our comps and our performances again, goes back to price value. Do customers feel like they are getting value for what they’re paying and value for all the inputs and the quality of the product? I think there’s been an interesting dynamic of if you look at our price relative to other folks around fast food or fast casual, I think the gap is closing a bit. We’re seeing some really interesting trade up from other typical fast food players or trade down from casual dining. Part of what really got us excited and was the impetus of our big launch last year, which was protein plates, which, again, aside from our broader mandate of just continuing to broaden the menu, but based on the same supply chain, we really were excited about adding this heartier category of food to our menu, but really one of the great insights that we were seeing was, I think if you look at price value of dinner options, especially around delivery, and if folks don’t want to cook for themselves, or they find in grocery pricing, which also there’s concerns over inflation.
But if you want to order something for dinner, especially one of the major cities, order something that is hardy, craveable, has protein at the center, satiating makes you feel good, is food you trust. It’s actually really hard to do for a certain price. For us, we launched this category of protein plates that are ranging from $15-17 depending on the city and the protein. But to be able to get a high quality dinner like that delivered to your door or you pick up at a restaurant for 20 bucks and under, is strong price value. For us, as we look at the changing dynamics around our industry and where we sit, we’re incredibly focused on just again, having that really strong price value, and then making sure that across our pricing, there’s a great range of entry points, and people can self-select into the journey and experience they want. What sets us apart is how we source and what we cook and what we believe around food. We want to make sure customers know that and feel that and taste that.
Mary Long: Just to stick on this value point for a moment. You all have negative operating margins. You have seen a lot of improvement in that realm over recent years. How do you continue to make progress on that front while maintaining this value piece that we’re talking about, without just hiking cost dramatically, because there’s a huge difference between a 15 or $17 salad and a $30 salad.
Nicolas Jammet: We’ve been on a really exciting path toward profitability and really thinking about it in a really disciplined and durable way to make sure that we can build, we have a really strong economic model. We’ve made heavy investments in technology or how we built our supply chain or how we tell our story to our customers. Making sure that with the growth, it really accelerates our path to profitability. We’ve had a number of strong quarters now in a row, we’re accelerating on that journey. We’re excited for continued progress there and just really focus on profitable, disciplined growth, especially as we expand to new regions and add more restaurants. It’s been really exciting to see our new restaurants and new regions perform really well, which helps on that path as well.
Ricky Mulvey: As always, people on the program may have interests in the stocks they talk about. The Motley Fool may have formal recommendations for or against so buyer sells stocks based solely on what you hear. All personal finance content follows Motley Fool editorial standards and is not approved by advertisers. The Motley Fool only picks products that we’d personally recommend to friends like you. Thanks for listening. We’ll see you tomorrow.
Mary Long has no position in any of the stocks mentioned. Ricky Mulvey has positions in Hershey. The Motley Fool has positions in and recommends Apple, Chipotle Mexican Grill, Hershey, Nike, and Starbucks. The Motley Fool recommends Sweetgreen and recommends the following options: short December 2024 $54 puts on Chipotle Mexican Grill. The Motley Fool has a disclosure policy.