Dive Brief:
- Sweetgreen is restructuring its business and cutting its corporate workforce by 20%, CEO and co-founder Jonathan Neman wrote in a letter to employees last week. The staff reduction does not affect positions in the field, and impacts employees at its Culver City, California-based headquarters.
- The chain's two-year restructuring and reorganization plan includes accelerating store growth in new communities, reducing menu and operational complexity, investing in store leadership and enhancing digital ordering. "This means we need to reduce our investment in areas that do not directly support these objectives," Neman wrote in the letter.
- Neman also wrote that the impact from COVID-19 is the impetus behind this decision, citing that many companies are extending work-from-home through next summer, a move that undercuts Sweetgreen's lunch-heavy business.
Dive Insight:
Sweetgreen had hinged its April forecast on the expectation that more employees would return to their workplaces after Labor Day, driving a stronger recovery for the chain.
"The reality is many of our restaurants in dense urban areas, particularly in NYC, have yet to recover," Neman wrote in the letter. "We expect that this will be the case for the foreseeable future."
As a salad concept heavily reliant on lunch in urban markets, the work-from-home environment has been especially tough for Sweetgreen, with the restaurant's business declines ranging from 40% to 80% across the country during the pandemic. The chain has closed or consolidated 21 of its 105 restaurants, Bloomberg reports, mostly in vacant office buildings. Just 84 buildings are now open for pickup and delivery.
Sweetgreen stopped all of its Outpost office deliveries, which launched in 2018 to cater to the midday corporate crowd, during the COVID-19 crisis.
As part of its effort toward recovery, Sweetgreen, which was valued around $1.6 billion last year, pivoted its menu this spring to focus more on dinner entrees and less on grab-and-go lunches. The Plates menu represents the chain’s first food not served in a bowl since its founding in 2007. It's unclear if this new menu, or the chain's new online-only curated menu collections, will be impacted by the chain's plans to reduce menu complexity. The online menu innovations was in the works pre-pandemic, but the launch was expedited due to the disruption of the business. Pre-COVID, about 50% of sales at the chain were digital, and that number has increased by almost 100% this year.
The company has also paused new openings in major markets like Miami and Denver, and is looking at new restaurant designs to maximize curbside pickup and delivery.
"We’re rebuilding Sweetgreen’s physical experience. It’s what the new normal is going to have to be," Chief Concept Officer Nicolas Jammet told Bloomberg.
Sweetgreen is hardly alone in having to lay off corporate staff or restructure its organization because of COVID-19’s devastation. Darden recently shed 11% of its support staff, for example, while the list of restaurant chains that have filed for Chapter 11 protection continues to grow. Despite news of layoffs and a restructure, however, the Commercial Observer reports that Sweetgreen is still on track to open a new, 94,000-square-foot headquarters in Los Angeles in 2022.
