Motley Fool Hidden Gems Investing - Sweetgreen Cofounder on Infinite Kitchens and Food Innovation

Episode Date: November 3, 2024

Some companies drop new products. sweetgreen drops new vegetables.  Nicolas Jammet is the Cofounder and Chief Concept Officer of sweetgreen, a health-minded fast casual chain with more than 200 locations. Jammet joined Mary Long for a conversation about:  - The future of automation and eating. - Creating an “Apple-like” retail experience at a restaurant. - sweetgreen’s balance between value and growing to become profitable. Companies discussed: SG Host: Mary Long Guest: Nicolas Jammet Producer: Ricky Mulvey Engineers: Tim Sparks, Heather Horton Learn more about your ad choices. Visit megaphone.fm/adchoices

And we're like, oh, 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. I'm Ricky Mulvey, and that's Nicholas Jemais, the co-founder and chief concept officer of Sweetgreen, a fast, casual restaurant chain focused on healthy eating. Jemais 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 Jemay's attention and Sweetgreen's journey to profitability. When you started Sweetgreen in 2007, the menu looked a little different. Weren't you originally selling like fro-yo and wraps? Why and when did you pivot to salads? Well, the core of the concept was always salads and bowls. And we also had fro-yo, soft serve. So we, you know, actually the name sweet green comes from fro-yo and salad, sweet green. And so we don't talk about that as much, but, you know, 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, you know, in a bowl. So really whether it's the fresh vegetables,

the greens, the, you know, proteins, cheeses, crunch, different flavors throughout the dressing, 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 the quality of the ingredients? And so from day one, 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. And that experience is perhaps changing kind of as you lean more and more into technology. So 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? You know, yeah. And so I guess also part of your previous question is the Sweetgreen experience and offering has evolved a ton in the 17 years. And 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. So 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, to how we prep it, to how we 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, you know, what our restaurant experience looks like, what our guest experience looks like has evolved a ton too. So in our history, we've invested so much in the technology that powers the experience of how you order, whether it was, you know, we were really early to think about digital ordering channels and having an app. So we really, we can remove as much friction for our guests and just make it easier to get this kind of food and order sweet green. And that has that

really, really defined a large part of our growth of just introducing these new channels for customers to order sweet green, engage with it and just have it be really convenient. So that was a big platform shift, I think for us and the whole industry, you know, and 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. And so we started to invest more of our time and energy into learning, you know, what that could look like, what existed out there, what people were creating. And 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, you know, a restaurant company

powered by automation, with a very similar ethos and mission to ours. And that really got us excited, because it was these four guys that were trying to build the same thing that we wanted to build. And so 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 Balud, fine dining French legend. He was one of their first investors. He was one of our first investors. And, you know, he said to me, you should meet these guys. They're building, they're trying to build the same thing and you should just connect. And so got to know them over the years, stayed in touch. And then, you know, about three and a half years ago, you know, emerging from COVID, we kind of said, you know,

let's you know what what does this look like if we join forces you all have this incredible technology platform we have this brand in this food ethos and we have some scale and instead of us just building automation ourselves let's join forces and so we acquired them three and a half years ago a little a little over three years ago and it's been an incredible journey since really imagining how automation plays a role in the sweet green experience and 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, you know,

that team, I give them a lot of credit. They're really brilliant and they've, you know, assimilated into Sweetgreen really well, but they still preserve that beauty, the beauty of their startup culture. We have eight of them live today and we're opening, you know, more, you know, every month. And so 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 experience design point of view to, you know, the economic model of the business to what it means for both customers and team members. And so we're learning so much every day, but it's really exciting to see the results so far. Can you take us behind the scenes at all at like what it takes to build an automation platform

like that, which you have in Sweet Greens? I feel like there are plenty of food robots that kind of can dominate the headlines. People might have heard of AutoCado, the avocado slicing robot from Chipotle. There's Flippy, the burger flipping robot. I think typically when these machines are in headlines, they're given a very specific job. And 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. And 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, oh, 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? You know, 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 you know investment in how automation will show up in the food experience you know I think a lot of people believe that there's investment in different solutions and I think it you know it validates that you know this will be

part of how the restaurant experience evolves and automation will have a you know will be a platform shift so 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 that replicate kind of one discrete task or one part of someone's job or one ingredient the prep for one ingredient and those are all great and i think they're valuable in different ways but you know what got us really excited about spice and the approach was a more holistic approach to let you know creating a platform of automation that can really you know

create a full assembly model so really built for you know dozens of ingredients you know we have you know 50 lanes and all these we have a breadth of ingredients that is more than most you know restaurants and concepts. And so to be able to engineer this piece of technology to do the majority of our assembly is really exciting. Uh, and, and, you know, isn't just replacing one discrete task. It really completely re-imagines and transforms our whole operation, the team member job, what the experience at Sweetgreen feels like at peak. And then ultimately the most important thing is that it transforms the actual product. So if you think about the end result the product that the customer is engaging with and and and buying uh if you look

at whether it's you know portion size accuracy of ingredients temperature of ingredients all these things that are now can really be um controlled in a different way it's really exciting but in terms of the breadth of you know the the functionality of our uh our infinite kitchen it is to your point it's not spot automation it you know it is our full single engine of assembling our meals, which is, you know, unlike anything you're seeing out there today in our space. 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 like shift the responsibilities of those humans to more hosting, more hospitality work. But I also think it's tempting, like, 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 kind of 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. So then what's the payoff? So, you know, 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 is really about, it's not just about efficiency. It's about re-imagining the whole restaurant experience for both sides of the counter and really thinking about a model that is more engaging and more hospitable and yes,

more efficient and just a higher quality team member experience and customer experience is really the main goal and ultimately the product experience, you know, like I mentioned. And so for us, it is this broader, you know, imagining the world and the model we want to see in, you know, 10, 20 years, we think this is really creates a whole new fast food model and experience. And so as you think about the benefits, and again, this is still early for us, we've had, we've eight of them. It's been, you know, almost, it's been about a year and a half. And so we're learning so much, But, you know, seeing this premise come to life of now a model where, you know, the repetitive motion or 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. And, you know, we've seen it come to life in all those restaurants, but specifically one of our Infinite Kitchen restaurants is a classic sweet green that we took, a restaurant that had been open for a while, and we converted it to the Infinite Kitchen.

So we took an existing team, an existing restaurant, replaced their front line and their digital make line. So classic sweet greens have multiple engines run by multiple team members. And so we replaced, we installed our Infinite Kitchen there and converted it and opened it this summer. And so, again, it's still early, but it's really exciting to see the experience in that restaurant with, you know, the same team members that were coming to work every day and having to, you know, show up on the front lines and our general make lines and the, you know, what that feels like versus now engaging in this infinite kitchen experience for them. It's completely different. And I think you hear it, you know, you kind of hear it anecdotally when you talk to them, but then you also see it in the numbers. I mean, 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 like trying to get, you know, speed and throughput is really important. And it's really hard to be, you know, fast, friendly and accurate all at the same time.

And, you know, I have so much gratitude and love for our 7000 team members that do that every single day in our restaurants. You know, 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, you know, it's just a different kind of energy in the restaurant. You know, there isn't this like 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 prepping and cooking, but mostly on the hospitality and engaging with customers. So, you know, I'll give you an example of at peak rush, a brand new customer walks in that had never been to a sweet green, never heard of it, doesn't maybe have a friend that brought them in that could give them a little story. And you walk in and it's really overwhelming and intimidating to walk into a typical sweet green. When you walk into the Infinite Kitchen, we have these hosts. So our team members now play this role of a kind of a host or a concierge, you know, very inspired by like, you know, the Apple store experience or folks that have just reimagined even retail experience.

but they can now you know 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 you know what we believe in our ethos you know even if like someone really wants to taste something there's engaged there's opportunities for sampling and tasting and there's this calmness to the experience and then they can either order you know they can be order they 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. And so the, you know, the divergence of different experiences you can opt into in this infinite kitchen is really

exciting. And then again, on the team member side, we're seeing really incredible stats on just turnover, you know, and something we focus on. I think if you look at the average turnover in fast food, it's, it's incredibly high. And it's something that really just shows you that part of the model is just a little broken and needs to evolve. And so for us, when we see turnover we're 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. What would you attribute that to? I think Sweetgreen has done a really great job of balancing the sufficiency that we've talked about in the infinite kitchens, as you've described,

but also in regular Sweetgreen outposts, the sufficiency with also an experience. You're not exactly pushing people out the door. They're still seating in the restaurants. And as you've just mentioned, like 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. So how do you do that? What would you attribute that ethos among your team members too exactly you know it's a great question and you know people often ask us what is what are the barriers to growth what you know what is what are the the limits of your uh you know how fast

you can grow and you know there's always challenges to growing for any business but for us you know whether it's finding you know creating the supply of our ingredients that according to our ethos or really one that really has been a focus for us is just is talent and teams it's like you know hiring, you know, these teams of folks that run our restaurants and have to bring our food to life every day is definitely, you know, challenging at the core of our business as people. And so the more that we can reimagine the experience, the tools, the equipment, and, you know, whether it's technology or equipment in our restaurants to just make that more seamless and make that team member experience even greater so they can focus on food quality and hospitality and bringing

those things to life, you know, just completely shifts how we think about our growth, which is really exciting about the infinite kitchen but you know to your point i think it's being being really clear about what sweet green is and why we you know why we exist our food our mission our purpose and when we're when we're recruiting or hiring or training or retaining all our team member and talents it's really important to just make sure that we're always talking about that and then you know 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. So 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, you know, the totality of them together create this fresh, flavorful, craveable experience in the bowl. But so much of, you know, the training and the messaging to our team members is really what makes that possible. So, you know, 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? So, you know, our technology team years ago built these prep tools in the restaurant. So 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. So it's almost like driver turn by turn directions that you'd see in like a ride share. So if you are working, you know, our ovens, which is a really hard position, it's like the heart of the restaurant, you're roasting meats all day, you know, we're roasting and cooking things all day long, you know, 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 is, you know, has all the inputs of your, your forecast of your, you know, your, your P mix, all these things that will help you just be more efficient with your time and run that position. So there's tools that we can give our team members to really, you know, optimize the quality of the experience and ultimately the consistency of the, of the overall experience. What goes into recipe development? How much are you trying to drive consumer tastes versus responding to what you already know consumers like and want more of? 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.

And, you know, it's been really exciting about being a public company as we've been able to really balance that, maintaining that, you know, thinking differently and not so traditional, you know, method of whether it's around product development or talking about our customers, but then also bringing in this incredible team of marketers and, you know, marketing and menu strategy team that really thinks about the consumer in a, you know, very insights driven way also. And 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, you know, understanding your customer directly. Like 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, you know, 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 and so it's a bit of it's a lot of listening to the customer but then it's also a bit of leading them right and then telling the story why that's important so in our history of how you know some of our greatest launches and moments have been things that you know the customer isn't literally telling you but you get a sense from understanding the customer that they it would mean something and it's something they would appreciate so you know a

few years ago, we did a collaboration with Dan Barber, who's one of the greatest voices on food and agriculture. And he's one of the best restaurants in the world. He was starting this company called Row 7 around breeding seeds for flavor. And that sounded so cool to us because our whole message and what customers loved about Sweetgreen was that we took these ingredients that were, whether it's vegetables or cheeses or proteins that were good for you and raised right and made them really cool and craveable. And we're like, oh, 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.

And so he had this Kogi nut squash, which is this beautiful squash that's bred for flavor and nuttiness and comes out of the ground and then you cure it and it changes color. And we said, great, we'll take a hundred thousand seeds. No one had ever grown it 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 kind of crossed our fingers and hoped they'd come out of the ground and they did and then you know we had this incredible campaign with the coconut squash in a bowl and as a side and we had this whole campaign around you know around the importance of flavor yeah and like breeding for flavor and in kind of dropping this new squash and we kind of treated it like it was

the same way nike would drop a shoe or apple would drop a product you know we had dan barber holding up a squash and a billboard in times square this incredible campaign and creative And 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. And it allowed us to tell the story of our supply chain, but also celebrate this thing that tasted so good. And so that's something you'll never hear in a focus group or insights, but we understood how it would make our customers feel. And 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 complements our menu the right way, what will attract a broader customer. And then we get to really, 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. And part of the philosophy is we need to really test and ideate a lot of things.

And if, you know, 50% of the things you test or ideate shouldn't work. And if everything that you're testing is working, then you're not thinking creatively enough. You're not pushing yourself enough. So 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, radical menu evolution and just really broadening our menu. We've got some really exciting things planned for the next year. You know, we started this conversation talking about automation and robotic technology in the food space. And now we've kind of moved into this very different side of technology in the food space.

That's like 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. Again, the seeds were a great example of this. is there anything else that's that you're paying attention to in that world that you just think is so cool um yeah i could probably talk for a few more hours on that i mean 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 stay like very curious about where the world and technology and products are going so we stay very close to that next generation of products and technology and we just want to understand where the world is going and honestly we we feel like we have a role in kind of helping shift where the industry and world is going there so 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 like next generation products in our restaurant in our lab here to to just taste what people are creating what businesses people are starting um you know the one you know i think there's a lot of excitement and a lot of investment in the last

decade in like controlled ags like controlled environment ag like the greenhouse grown vegetables and greens just thinking about that space we've really played and tested it with a number of partners in that space i think you're seeing some innovation now across like oils you know you're seeing whether it's zero acre or some of the algae oil companies a lot of innovation in beverage i think trying to create that next generation of better for you you know sweetened differently you know not whether it's whether it's non-alcoholic or soda space there's a bunch of innovation across CPG, which is really exciting, kind of even cleaner for you, third wave CPG. So yeah, we're really, I mean, 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. 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? You know, I think it's a great question. I think it's a conversation that we spend a lot of time thinking about. And really what we, you know, Sweetgreen has a premium product and we've

created this category. And so, you know, 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, right? And I think ultimately there's all this talk about like pricing and inflation and our customers are definitely the world is it's top of mind for them. And, you know, we hear that with our customer, but so much of, I think what's driving, you know, our comps and our performances, again, goes back to price value and do customers feel like they're getting value for what they're paying and value for all the

inputs and the quality of the product and i think there's been an interesting dynamic of you know if you look at our price relative to other folks around fast food or fast casual you know i think the gap is closing a bit so we're seeing some really interesting trade up from other typical fast food players or you know trade down from casual dining and 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, you know, 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 grocery pricing, which also there's, you know, concerns over inflation. But if you want to order something for dinner, especially in one of the major cities, order something that is hearty, craveable, has protein at the center, you know, satiating, makes you feel good, is food you trust, it's actually really hard to do for a certain price.

And so for us, we launched this category of protein plates that are, you know, ranging from $15 to $17 depending on the city and the protein. But to be able to, you know, get a high quality dinner like that delivered to your door or, you know, you pick up at a restaurant for 20 bucks and under, you know, is strong price value. And so 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, you know, a great range of entry points and, you know, people can self-select into the journey and experience they want. But so much of our, you know, what sets us apart is how we source and what we cook and what we believe around food. So we want to make sure customers know that and feel that and taste that. Just to kind of 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 without just and while maintaining this value piece that we're talking about,

without just hiking costs dramatically, because there's a huge difference between a $15 or $17 salad and a $30 salad. Yes. Yeah. We've been on a really exciting path towards 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 to our customers and so 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 where you know we're accelerating on that journey so 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. As always, people on the program may have interests in the stocks they talk about, and The Motley Fool may have formal recommendations for or against, so don't buy or sell 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.

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