Investors See Big Opportunity In Salad Restaurant Chain Sweetgreen
The quest for the Chipotle of salad continues.
Sweetgreen, a salad chain serving local and organic veggies, has secured $35 million in funding. The round was led by funds managed by T. Rowe Price, with additional funds from Revolution Growth, an investment company founded by AOL veterans Steve Case and Ted Leonsis.
Sweetgreen co-founder and co-CEO Jonathan Neman told BuzzFeed News that the money will be used to support the D.C.-based chain's expansion. It will add roughly 20 staff at its corporate office, which currently employs 50 people, and open new locations.
Sweetgreen currently has 31 stores in the East Coast and California, and plans to open about 10 more this year in cities including Los Angeles, Santa Monica, New York, Boston, D.C. and Philadelphia. It also plans to expand into two new markets in 2016. Sweetgreen owns all its stores and does not plan to franchise, Neman said.
The company also will invest in technology, as 25% of orders are already made through the restaurant's app, which provides data on customer orders and is tied to a rewards program. Technology has been a major focus for some of the country's largest chains, such as Starbucks and Dunkin' Donuts, which see mobile payment and ordering by app as a key avenue to improve customer loyalty and marketing.
To date, the eight-year-old company has raised $95 million, a large sum for any business.
"We believe Sweetgreen has the rare combination of mission-focused culture, excellent products and a strong business model that has the potential to create a market defining-category leader," Henry Ellenbogen, portfolio manager at T. Rowe Price, said in a statement. Ellenbogen has also invested in Twitter, Warby Parker, and WeWork.
Investor interest in a salad chain in particular is surprising, though the greens themselves may not be Sweetgreen's biggest strength. "Salad bars are passé," said Mary Chapman, senior director of product innovation at restaurant consultancy Technomic. There was a bump in the salad restaurant business in the 1980s and again about 10 years ago, she said. Now, "you need to have a gimmick" to succeed in the salad category, "and there's a lot of buzz about [Sweetgreen's] healthy, local, organic positioning." Chapman says the fact the restaurants also serve rice and quinoa bowls in addition to salads may be an advantage.
Sweetgreen's branding may be familiar to those who have eaten at burrito chain Chipotle, which markets its products as "Food With Integrity." "We source local and organic ingredients from farmers we know and partners we trust," Sweetgreen states on its website. It focuses on "flexible, customizable offerings" and "humanely-raised livestock."
As they would in a Chipotle, customers walk through a line and watch their salads, or bowls of rice and quinoa, come together one ingredient at a time—a system that also facilitates customization, an in-demand feature with today's customers.
The average Sweetgreen bill is about $10, according to Technomic. The firm estimates Sweetgreen's sales increased 36.6% to $39.2 million in 2014, with the average store making $1.6 million, the range of what a Wendy's makes.
Sweetgreen disputes this figure, but declined to offer actual sales data. A spokeswoman pointed BuzzFeed News to an article from November 2014 in which it forecasted 2014 sales of $50 million. The spokeswoman said revenue is on track to grow by at least 50 percent this year.