Local veggies, national scale: Sweetgreen co-founders

Speaker A
Hey, listeners. On May 13, we invite you to join us and Reid Hoffman for a new virtual strategy session presented in alliance with Capital one business. You'll hear insights from fellow entrepreneurs about how to be at the forefront of leading change with AI. So go to mastersofscale.com AI Strategy right now to register for free. Again, that's mastersofscale.com AI strategy.

Looking forward to seeing you there.

Jonathan Nieman
August 1, 2007 anything that could have gone wrong, went wrong that day. Oh, no. I think it was a few days before that that we were opening. We had the laptop with all of the recipes that we had stored on it sitting in our apartment, and it got stolen. And this was before the cloud.

And so we had to spend the last 24 hours before we opened trying to re memorize all of the recipes and sit in this kitchen all day to kind of reformulate them, whether it's the dressings, how we put things together.

Nathaniel Rue
We had this thing called sweet float, which was our organic frozen yogurt, and it had a very specific recipe in the ratios. And I just, we figured out everything. Else, but that was the last thing. I just still have this burning image in my mind. Nate standing over the machine all night, he's putting together different recipes.

His hands are like, deep in the machine. We have to clean it and keep doing it. And I remember right before we were opening, he pulls it out. He's like, I think this is it. All tastes were like, okay, that's it.

And that was the recipe we just. Had to push through. And it was kind of that gauntlet moment for us to kind of say, hey, we're going to do this. And even if it's not 100% perfect, showing up and just opening our doors, day one, it was a really big milestone for us. That's Jonathan Nieman and Nathaniel Rue, along with Nicholas Jamais.

Jeff Berman
The three are the co founders of Sweetgreen. For the few of you who don't yet know it, Sweetgreen is a fast, casual food chain focused on fresh salads, green bowls, and other healthy food. This near disaster story of day one, location one stands out because from the outside, theirs is a straight up and to the right unicorn journey. Nick, Nate, and Jonathan founded Sweetgreen in 2007 as seniors at Georgetown University in Washington, DC. That first restaurant was tiny, just 500 sqft.

Since then, Sweetgreen has grown into a public company and has a market capitalization over $2.5 billion. It's a scale story full of setbacks, including that harrowing laptop burglary that led to invaluable lessons. The three co founders have grown as leaders, bringing Sweetgreen from a dorm room idea to an american success story. That's why we've invited them to share their journey on masters of scale.

Nicholas Jamae
You gotta have incredible talent at every position. There are fires burning when you're going home. Can you believe it? You're such an idiot. And then you go back to this.

Speaker A
This is totally gonna be amazing. There are so many easy ways. I have no idea what to do. Sorry, we made a mistake, but you. Have to time it right.

Nicholas Jamae
Oops. Working at a three bedroom apartment, stuff. That just seems absolutely nutballs. Ten years later. Well, that's just how you do it.

Speaker A
We haven't made just how you do it.

Nathaniel Rue
This is masters of scale.

Speaker G
We'll start the show in a moment. Afterward, from our premier brand partner, Capital one business.

Aparna Saran
I woke up in the middle of the night because I had this nightmare that we were front page news that we've done the stupidest mistake of our life by making the spirit. That's Aparna Saran, chief marketing officer for Capital one business. And she's recalling a moment from her previous position at Capital one when she was heading up a team designing a new business card. We had just made the decision to go all in and sunset the prior version of the product, which was honestly the cash cow for our business. When we made that decision within a senior leadership meeting.

As someone who had been on the journey to build this out for five plus years, it was really exciting. But by the time the weekend hit, I started to feel the responsibility and the pressure. We are taking this big bet on something that ive built. Perhaps youve been there. Youve made a pivotal decision.

Speaker G
And then panic sets in. How would Aparna calm her butterflies and steer her team through this pivot? Well, find out later in the show. It's all part of the Refocus Playbook, a special series where capital one business highlights stories of business owners and leaders using one of Reed's theories of entrepreneurship. Today's Playbook Insight have multiple plan B's?

Jeff Berman
I'm your host, Jeff Berman. Before I sat down for a conversation with Sweetgreen co founders Nicholas Jamae, Jonathan Niemann, and Nathaniel Rue, our producers, and I went to one of their LA locations for lunch.

Speaker C
Can I get a miso glazed salmon bowl? Great. I want it the way God intended it. Yes. To go, please.

Yeah. Thank you.

That's great. Yeah. Thank you.

Jonathan Nieman
And then it also comes with the spicy cashew dressing on the side. If you want to do just one's fine. Yeah. Thank you.

Speaker C
We're at Sweetgreen in mid city Los Angeles on La Brea. I've been going to sweetgreen for probably close to ten years now, essentially since they opened back in Washington DC. And it's kind of mind boggling to think that they now have more than 200 locations nationwide, more than 6000 employees. I think the first salad unicorn the world has ever seen.

You're so kind. Thank you. Thanks, Karen. Appreciate you. Have a great day.

Jeff Berman
Lunch devoured. I went to sit down with the company's three founders, Jonathan, who's now CEO, Nate, head of marketing, and Nick, chief concept officer. I told them their work is literally in my DNA at this point, given how much sweet green I've eaten since I first started going to their original store in DC. The three guys know each other and work together so seemingly well that they rarely talk over each other, but they do pick up each other's sentences. So I'd love to hear the story of how you guys came together as we start the conversation.

Nicholas Jamae
This is Nicholas. So our story starts 20 years ago. We met as freshmen at Georgetown. We were next door neighbors in our freshman dorm room and over the years really bonded around some of the similarities we had in our lives. Kids of immigrants, parents that had come to this country and built business.

And so we had all grew up in this context of our parents building businesses, running it, pouring their blood, sweat into tears into something. We also had this other conversation happening in our life of not feeling good about the options that we had around us to eat. And so there was this daily problem. And so we said, let's solve it, let's write a business plan. And at the time, Georgetown was not the most, I would say, encouraging of entrepreneurship.

Everyone really wanted to. You were geared towards becoming a banker, consultant, more institutional career paths, and DC. Is not exactly the most entrepreneurial town in America. Yeah, all of that stuff, that was more of the culture of Georgetown. But the three of us loved the idea of starting something and solving a problem.

And there was this one lone elective class with an adjunct professor, entrepreneurship. So we all took the class separate semesters. And it really taught you how to build a business plan, how to think about creating something, reaching out for advice, creating a network of other entrepreneurs. And so we started writing the business plan. And so each of you took the class, but at different times had you communicated with each other about the class?

Speaker C
Had one of you taken it first and like, you guys have to do this, or was this total happenstance? You'd each taken the class. This is Nate. I think we all. We all took the class.

Jonathan Nieman
But the thing that actually bonded us even more was that actually all of our parents were entrepreneurs. They almost gave us the permission to say yes in a way where we were getting a lot of nos other places. And just knowing that we could jump off the cliff and, like, do it as three young 21 year olds. And having the support of our parents because we watched them was really helpful, too. And so I can see why you'd come together, given the shared family history and the foundation of this class.

Speaker C
But it's not obvious that you would launch a salad franchise. So how did that become the idea that got you guys going in this direction? For me, I had gone to. We had all studied abroad somewhere our junior year. I had studied in Australia and had just gotten back senior year from experience.

Nathaniel Rue
And one of the things that really stuck with me was the culture there of food and the lifestyle around being healthy. Like, the cool kids surfed and skated and were healthy and went to these healthy cafes, and that was the cool thing to do. And it was such a contrast to how health food was viewed here in the US, especially at the time. Healthy food was not cool. It was this idea of, like, let's create a tiny little restaurant for ourselves, our friends.

We just counted how many. I remember we went. We were like, how many people do we have to serve in a day to break even? And we went and stood outside the other restaurants in the area. We went to the subway, we went to the Chipotle, we went to the Bowie mongers, all these places with a clicker.

And we literally counted, like, okay. Like, they got 300 people in a day. How many people do we need to break even? And it really just started very, very small. And I think, if we want to be honest, we thought it was going to be easy.

We thought it was like, how hard can this be? We found a location. It was right across the street from our dorm. It was 500 sqft. Tiny.

I mean, this thing is a tiny little thing. And I remember we looked at ourselves, we're like, okay, we'll have this open by April 1. It was October. We're like, we'll raise the money. We'll write the business plan.

We'll go buy the food. We'll buy the kitchen equipment. You're going to put it in. We're going to prep the food, and we'll hire some people and call it a day. And it was the middle of the recession.

Yeah, and it was the middle of the recession. We're like, oh, we'll design a cool logo and a brand, and we'll be off to the races. To actually remember the landlord of our Georgetown, our first location, wouldn't even return our call. John called her 30 days in a row, every single day. So she finally took a meeting just to stop the calls, and she ended up giving us a chance.

Nicholas Jamae
She let us sign a lease, and in hindsight, we're like, wow, crazy for her to sign a lease to three students with no background and not much cash in the bank. I've heard a lot of other entrepreneurs talk about this, that if they knew what they were actually getting into, they would have never done it. I remember even we opened the first one at one point, we're like, we'll get to three, and then it'll be self sustaining. It'll just grow on its own. And I think you underestimate how many micro challenges you have to solve.

Nathaniel Rue
It's really so many different businesses within one business. In order to be great, you have to master supply chain. You have to master real estate, construction, design, customer experience, technology. You know, today, automation. You have to be great at leadership and people.

You know, there's so many things that you have to do. And I think for us, we've fallen in love with the difficulty, because how hard it is is what makes the moat and what makes it so valuable and powerful. Over time, adopting a mindset that your business will be successful is important. But what matters more is what you do when the naivete and rush of newness wear off and the challenges set in. It takes an infinite learner's mindset at that point, because the challenges can seem insurmountable.

Jeff Berman
In October 2006, the founders were all still finishing school. When they started to take the plan off of paper and into the real world, the feedback got more blunt. I remember the specific point where we thought originally that we could do it for 100 grand. And so we wrote the business plan. It was Christmas break, and we all start to go to friends and family and all our old bosses to raise money.

Nathaniel Rue
The average investment for us in that first round was about $5,000. We hired an architect, hired a general contractor. They sent us the budget, and the first budget was like, I don't know, three, $400,000 or something. And we just looked at each other. We're like, oh, God, this is not going to work.

This doesn't make sense. We thought it was going to be $100,000 in open April 1, and all of a sudden, it was going to open sometime that summer and cost many times more than that. And I think that was really the moment where it was, okay, this is for real. I called my dad, and I pitched him this idea that I had with these two guys. There's a long pause, and he goes, Nathan, that salad dressing better be damn good.

Jonathan Nieman
And then hangs up the phone. And that was my first piece of advice I got on the business. It's one thing to raise 100,000 from friends and family. It's a lot. And not everyone's in a position to do that.

Speaker C
You guys were amazing. But now you need closer to a half million. So how'd you get there? Talking to a lot of people. Hundreds and hundreds of people.

Nathaniel Rue
It's a painful process, raising money, especially when you're unsuccessful in it, especially when you have to do it with a lot of people. But the value in it was sharpening your vision. We ended up getting about 50 investors in that first round to raise $300,000. That means we have to talk to, like, 50 people. So when you have to have 250 conversations selling this vision, answering all these questions, it really, again, forces you to sharpen your plan.

That was really, really valuable. We had to think about so many aspects of the business because people were giving us money, and we had to be able to answer those things. They had hundreds of conversations to raise the capital they needed. When you're pitching your business, especially early in a round, it's essential to urge prospective investors, including friends and family, to ask to tough questions. This includes getting feedback from investors who say no.

Jeff Berman
Not only did this experience help the trio hone their pitch, it forced them to take a deep dive into their business plan, helping them uncover problems before they reached more critical stages. Their persistence and incorporating feedback paid off. Sweetgreen opened at the end of the summer, the year they graduated. Yes. After the recipe laptop was stolen.

They launched the restaurant August 1, 2007.

It did well enough for them to expand. Two years later, they opened their second sweet green in DC's busy Dupont circle. It was going to be our flagship location, three times the size, three times the cost. And we opened our doors in April of 2009, and we had no customers. Nobody came.

Jonathan Nieman
And that was another moment when we looked at each other and we said. Shit, this isn't gonna work. What went wrong? We were on the wrong side of the block. Across the street was one of the number one Starbucks in the city, and we just had to figure out a way to get people from that side of the street to our side of the street.

Jeff Berman
That's when Nate had an idea. The only things that we knew how to do were to serve healthy food and dj. And so we went to guitar center, bought a $400 speaker, we put it outside, we faced it towards Dupont Circle in the park, and the three of us sat out there. We played music, we passed out menus, we passed out samples every Saturday and Sunday. And it just created this kind of community vibe and energy outside that got people to come to our side of the street.

Jonathan Nieman
And so the next year, we did a block party in the parking lot that we shared with the farmers market, which was really great, free block party with local musicians. And then we really wanted to throw a mini festival where you could serve healthy food and hear great music. And we got linked up to the guys that produce 930 club, and they have a bunch of venues in DC, and they sent us a few ideas. And I remember getting an email from them saying that, okay, the strokes are interested in playing your salad festival. And we had this decision to make at the time where we had to push our chips in and say, we're going to do this big 15,000 person festival, but in order for us to do this, we have to sell it out.

Otherwise we're going to lose a lot of money. You're now in two of the hardest. Businesses in the world, by the way. Now we're in big music production and healthy food. And we looked at each other.

I remember that moment, and we said, it's almost like a no brainer decision because this is something that no other restaurant company would do. And we could think about it as like a, at the time, a content platform for us and a community building platform for us. And so we did it. We booked the Strokes in 2011, sold the whole thing out, and that's what became the Suite Life festival, which we ran for six or seven years in DC. I mean, I'll never forget the COVID of the Washington City paper the next day was the headline was something like, what the hell are three salad kids doing hiring the strokes?

Nicholas Jamae
And it was a full page article. And we're like, yeah, that's exactly why. And it started with 20 people, 30 people, 40 people, ended with 25,000 people in a field at Meriwether Post pavilion. But it was really the beginning of Sweetgreen starting to build this sense of community. And we were building something different that wasn't just another fast food brand.

Jeff Berman
Sweet Life Festival ran for six years, helping build a large following in the DC area and beyond. The founders knew that simply offering a healthier alternative to the fast food around them was not enough. Sweetgreen would only reach the heights they if it was more than a restaurant. The founders wanted to build something that their customers felt emotionally connected to, an identity brand. The festival was a big gamble as a way to do that, but they were willing to take that risk because of how it could burnish and seal Sweetgreen's reputation and gain an even more loyal following.

By 2013, fewer than six years after opening that first restaurant in Georgetown, Sweetgreen had expanded to nearly 20 locations. Perhaps counterintuitively, when it comes to blitzscaling, Sweetgreen did not want to franchise. They preferred a central ownership model. But that meant they needed to build their own foundation for scale. Very early on, we said, we don't want to be a franchise restaurant, because if we do, we may lose control of the quality of what we do.

Nathaniel Rue
We'd rather go a little bit slower and own the end to end experience to ensure that quality and stand the test of time versus opening the floodgates and selling franchises. But at one point, we got an offer from, like, a very legitimate large company that wanted to license the brand and put it in over 100 places. It was a very lucrative deal. It was so attractive. And, you know, at some point when you're in that business, you think that everything is a race.

You're like, you looking at your competition and you're like, oh, my God, they're going, they're franchising, so they're going faster than us. They're going to beat us. It's first to market, but we thought long and hard, and we wanted a business that wasn't just going to have this short term pop and not be around for a long time, but something that could truly stand the test of time. Here's Nick. I think the foundation of the values is really helpful because it allowed us to make the proper decisions.

Nicholas Jamae
Then as we started to build out our team, make sure that we were hiring people that also lived by those values and made decisions in that lens. So much of how we operated those first three restaurants was very mom and pop. It was like farmer coming in the back door. And so we said, how do we put the right systems in place around the things that really make us special? Right?

So we had the values and we were trying to prioritize this food ethos we were creating around serving a different type of product. And so we really started to build, I guess, v one of scalable supply chain according to the ethos that we wanted to serve. And at that point, we decided let's go deeper in this DC, Virginia, Maryland region. Let's really own, build a brand, master this model a bit more before we start spreading ourselves to all these different cities. And in hindsight, probably one of the best decisions we ever made.

Speaker C
And in part, I assume because you. Could work with the same suppliers, right? So you had some quality control, same. Suppliers, understand what it looks like from going from one to three to ten in a region and understand what that system is. And also, you know, you can wrap your arms around one region, you can get to every restaurant.

Nicholas Jamae
You can be really thoughtful. Having restaurants around the country really early is just a whole different set of challenges. This level of attention to sourcing the highest quality local ingredients is an example of the values driving the company's scale strategy. The founding trio of Nate, Nick and Jonathan prioritized environmental sustainability and more healthy eating at scale. But how do you scale a national business model that relies on locally sourced produce?

Jeff Berman
After the break, we hear how Sweetgreen's early pattern of steady growth gave way to a new strategy and big changes. Well be back in a moment after. A word from our premier brand partner, Capital one business.

Aparna Saran
There was panic that set in that night because I didnt want to let people down. Were back with Aparnas Aaron of Capital one business. She was recalling the time she woke up in a cold sweat, terrified that the new product she had been working on might fail. So the next morning she sat down and wrote an email Sunday morning and. I said, you know what, I'm going to just like share this with my peers.

It was very emotional. It was like sort of a cry for help. Aparna realized that if the new product didn't take off, she needed a plan b, preferably multiple plan b's. I'm inviting them to be the thought partners so that we are mitigating as much risk as possible and we have contingency plans in place. As wed make this move youd write something like this and your heart is pounding.

Should I send this? It was a super vulnerable moment for me, but then I was like, im going to just send this. Like whats the worst thatll happen? It cant be worse than being on the front page of the newspaper. So she held her breath and hit send.

Speaker G
What happened next would surprise even her. Well hear about that later in the show. Its all part of Capital one business spotlight on business leaders. Following Reid's refocus playbook.

Speaker C
We'Re back with. Jonathan Nieman, Nathaniel Rue and Nicholas Jermay, the co founders of Sweetgreen to watch the extended conversation, head over to our YouTube channel, where you can find this and more. Before the break, the three co founders had decided that rather than go national right away, they would grow in the DC, Maryland and Virginia area, known to locals as the DMV. When they did enter new markets outside the region, it was with careful planning. Here's Nick.

Nicholas Jamae
We wanted to build enough confidence in the model and the brand before we went to some of these larger cities and building the brand over the first couple years. And just, you know, we got to around 20 restaurants in DC, Virginia, Maryland. We'd gone to Philly. So a little further, really understanding what a second city feels like. And we made a bunch of mistakes on how you hire, how you operate remotely, how you build a second supply chain, how do you build a brand from scratch in a new city?

All these micro learnings that really allowed us to, once we were ready to go to New York, Boston, California, go with some set of a playbook, some sort of belief of how we introduce Sweet green the right way in a new city. New York is just a whole different type of operation than what we were used to. And we wanted to almost start from a blank canvas and say, if we were redesigning this concept for the future and thinking about future proofing sweetgreen for New York and then beyond, what would we do differently? So we hired a brand new architect. We hired a digital agency to help us build a mobile app that was kind of first of its kind, mobile order and pickup, which was new for Sweetgreen.

Jonathan Nieman
And so we spent almost a year and a half in 2012 and 2013 building a new concept. And when we launched New York and Boston, I think in summer of 2013, it felt like a different business and it felt different than the competition. And it also had a digital component to it, which was really important.

Speaker C
When companies hit that second founding that second inflection point, often there are members of the team who've helped get from the first stage to the second stage. You are not the right people to get from that point to the next. Is that what happened with you all as well? I think that's one of the hardest things about building a startup is at each of these inflection points, as you're building scale, you almost have to start over on everything. All of your systems, all of your tools, all of your, you know, everything that you do, including a lot of your team, may not, you know, what was right to get you from zero to 1 may not be right from one to two, because when you start you have small team and everyone's a generalist.

Nathaniel Rue
You need just generalists that do everything. And as you get bigger, you need more specialists. And that generalist may not have the experience of a specialist, but there's such value in having some people along for the ride the whole way, because they're those culture carriers. And so we're really lucky that even today, many people that have been with us ten plus years. It's so fascinating just watching the dynamics among you guys and how seamlessly you move back and forth between who's answering questions and how you play off of each other.

Speaker C
How did you define your roles at the beginning? And how has that changed over time to now? So in the beginning, we did every single job. Cashier, putting lettuce in a bowl, chopping tomatoes, cutting onions, we did it all. And we always say the answers lie inside the restaurants.

Jonathan Nieman
Because it was a really important moment for us to really understand, one, how to operate one of these things, and two, understand all the flaws and the imperfections that make it better.

But in the beginning, we were all kind of co founder, co CEO's of the business. We each did have our own, I would call it passion or natural sphere of influence. So John was in charge of leading a lot of the financing conversations, a lot of the investor relations, even construction at one time, develop, store development and real estate. Nick was always in the center of all the food conversations we were having. Talking to farmers, thinking about how to build a supply chain a little bit differently.

And then my world was always around, how do we tell our story and how do we have fun in terms of building community? That vision that we laid out in the beginning, we think Sweetgreen, whether it has us or not, can be a hundred year business. And that's what we're trying to do. And so we've always tried try to just leave the ego out of it and do what's best for the business.

Speaker C
We had John Mackey on Masters scale recently, and he was talking about the importance of the real estate choices that Whole Foods made and being very deliberate. How has your real estate strategy influenced what you're doing? What we've learned is that every community is different. So what's great in one city may not be great in another city. And I'll give you an example.

Nathaniel Rue
We're here in Los Angeles, so in LA, it's all about accessibility. In New York, very intentionally wanted to tell a story with our real estate. So the best place probably to open in New York would have been Midtown Manhattan. Today, our highest volume locations are in Midtown. Very intentionally did not go to Midtown because we wanted to build a lifestyle brand and be part of the community.

So we went to the Nomad Hotel, we went to Nolita, we went to Williamsburg. We went to these little communities to build a brand that then gave us license to be everywhere. So the closer you can get to your customer and to that local community and remembering that restaurant, retail, it's a local game. So we talk about scale nationally, but it really is like, our business is 230 individual restaurants, and that's what makes the business. Did any of that inform the decision to move to LA in 2016?

Nicholas Jamae
As we looked at the trajectory and arc of the business, we were at this point where we had built a good sized team. We'd opened a couple restaurants, and we were thinking about this journey to being this national brand. We wanted to create, we wanted to win this category, be a national brand. And we looked at California and we knew it was going to be one of our biggest, if not our biggest, market and the importance of winning California. And so we decided, you make that move really once, and let's do it thoughtfully.

And we had about 35, 40 people on the team at the time, and they all moved with us. Wow. And it was quite a journey. And we're really grateful to DC. Our roots are there.

It's where Sweetgreen is born. But we really thought moving the headquarters to California would allow us to really take that next step in being a national brand. Win, win, win goes back to values. Yeah. Tell me about the decision to go public.

Nathaniel Rue
We're a very capital intensive business. We own all of our restaurants. That means we're building each one of these restaurants, as well as a lot of infrastructure to support what we do, whether it be the supply chain, the technology, the brand, et cetera. And I think we got to a point in the business where the markets were in a place, the company was in a place, and we had an opportunity to raise a lot of money to fuel that next chapter for us. And it's funny that some people view an IPO as an exit.

We don't view it as an exit at all. It's just. It's a financing. It's a way to bring capital onto the balance sheet, create a more public platform and more exposure, and continue on this mission. So it's just another day, one type of experience for us.

We thought a lot about it, going into it, about the fact that this really shouldn't make. How we make decisions, especially the important ones there, does create a public scoreboard. There is some short term accountability, and in many ways that helps you operate better. But we're very intentional that having that quarterly earning cycle not change the investments we make over the long term. And I think we've been very fortunate in how we've set that company up.

The shareholders that we've chosen and brought on that are clear with that vision. It's also created a bit of a constructive pressure on keeping us focused as we try to scale and execute. With three founders, there's a million ideas we want to go pursue, and we probably have a history of trying to do too much at once. Being a public company, you have that expectation of having to execute on what you've promised to the street. So it actually creates a bit of this constructive pressure for us to actually try to stay very focused on the business plan at hand.

Jeff Berman
One key component to Sweetgreen's growth is their adoption of technology to make processes like ordering lunch, paying and pickup efficient and quick. The Sweetgreen app was created well before pandemic restrictions forced a lot of restaurants to pivot, giving the company a huge head start on the competition. It was born out of response to one of the good problems a company can have. So the sweetgreen Apple was one of, if not the first restaurant apps that I had on my phone, you mentioned that as a key part of the growth. I'm curious how you decided to make that investment, how it evolved, and particularly what happened for you as COVID hit and the world shut down, that you already had that in place.

Speaker G
Yeah. So we opened our first restaurant August 1, 2007. The iPhone had not been released yet, so the iPhone comes out just a couple months later. It's crazy to think how much the world has changed. I mean, I was working at MySpace at the time.

Nathaniel Rue
The world has changed since that moment. And in many ways, I think we were very lucky because we were 22 years old, digitally native in many ways, and all of a sudden, this revolutionary product comes out. And if you fast forward, we have a few restaurants that open at the time, Amazon. The world is moving towards e commerce. And I remember the saying was, well, you guys are luckier in food because that's the one thing Amazon's never going to do.

It's funny to think about that today as they own whole foods and do a lot more. But at the time, it was viewed that no one's going to buy food online. It was almost thought as crazy. But for us, we had a huge problem in our business, which was really an opportunity, which was we had these huge lines. Once we got going, we would have huge lines.

We were known for these massive lines that would wrap around the block. And because at the time, most of our business was very lunch driven, so you had a very short window to make all of your money, so it was just how fast you could go. And so the simple idea was, wait, why can't you just order on your phone and have a second line? The funny story about that is, at first, probably, like most companies, the online orders would be held behind the counter. You'd have to walk up to our team member and be like, hey, my name is this.

And they'd go behind and grab the order. No one thought you could just leave food out there. We didn't think you could either. Well, one of our restaurants was really small, didn't have much space behind, and had a lot of online orders. So they just started stacking the bowls.

Speaker C
They just took a no call to headquarters, just like, hey, this is what we got to do to make it work. They just put a metro shelf out there and just started stacking orders, and customers just started taking them. And we realized they actually preferred it. It was great. It was like this pure frictionless pickup experience.

Nathaniel Rue
And so then we're like, okay, let's build this into the restaurant. As part of their experimental nature, the founders are keen to find new ways of making their business more efficient wherever possible, while maintaining the quality and experience their customers have come to expect. This is one of the most important parts of Sweetgreen's DNA. So when they do venture into new tech, they do so with a commitment to their values and to their team members. We see technology as an enabler in order to improve that customer experience.

And we use technology in so many parts of our business, whether it be our online ordering or our delivery channels, our, you know, digital that makes up about 60% of our business happens digitally. Wow. We also use a lot of technology in how we enable our operations, whether it be some of the tools we use in the back of house, some of the forecasting around, how we order, how we schedule labor, how we prep our food. And more recently, we've invested in automation, which we think is another accelerant to improving the customer experience. So when you think about a sweetgreen, we do a few things.

We do prep in this restaurant. We buy great food. We prep it, we then assemble it, and then we serve it within that process. What we realize is most restaurants, as they get bigger, they begin to outsource the prep. They take the prep and they put it in a commissary, the food ends up showing up in a bag, the chicken becomes precooked, all of those sorts of things.

In order to manage consistency and create better unit economics. That's something we didn't want to do. We saw the valuable parts about what we do being the hospitality and the prep and the sourcing and the assembly in many ways is actually where a lot of the challenges are. It can be, you know, you can get orders wrong, you can be off on time. And we're like, this is a perfect opportunity for automation to actually improve the customer experience, improve the team member experience, and improve our unity economics.

So like a perfect win win win that over time can actually protect our ethos, because we're going to find efficiencies, not in sacrificing the quality of the food, but using technology to innovate the experience. Is AI in the same lane for you? Are you finding efficiencies through AI that improve the customer experience? We have been for a while. There's a lot we do on the marketing side, CRM.

We're doing a lot today using AI for labor deployment and ordering. We have been playing with a lot around order recommendations, kind of like personalized, personalized menus and those sorts of things. So it's a very exciting time for us to take advantage of some of these different tools. But the automation is really the big platform shift that we've led. We have two restaurants that are automated today.

It's called the infinite kitchen is the technology, and we acquired a company to help us enable this. And we think that over the next 20 years, automation is that next platform shift similar to the digital transformation we've seen over the past 15. Infinite kitchen automates assembly of Sweetgreen's signature salads and bowls. Kitchen staff still cook and prepare all of Sweetgreen's ingredients, sauces and more. And workers still serve guests, guiding them through the menu and helping them get their order just the way they want it.

Jeff Berman
Orders are placed at a kiosk and then the technology helps ensure any specifications or modifications are followed to a tee. You can see how this would reduce human error. On orders, the automated system delivers your lunch without onions or with those extra cucumbers. Jonathan says the impact on labor is nuanced. And the idea of automation, does that replace workers?

Speaker C
Does that eliminate workers? Is that part of the vision for how you expand? So we're mostly putting them in new restaurants. We don't plan on eliminating any workers as part of the rollout, so it's going mostly in new restaurants and in any retrofits that we have, we will keep those jobs for our team members. The way we see it is actually elevating the role of our team members and getting to focus on what really the core of the restaurant is, which is around service and hospitality and also coaching and development.

Nathaniel Rue
And the automation, in many ways, helps us do that, because now it's a little bit easier to run. You can run a really high volume location without having to worry out one part of it and get the team members get to focus on the parts that they enjoy, be it the cooking of the food and the culinary aspect, or the hospitality or the coaching. You know, it's interesting is when we announced it, we were a little bit nervous, how are our teams gonna feel? But the response has been like, can I have one first? Like, people are, people are lining up and the happiness we're seeing in the stores that have it are much higher.

We're seeing much less turnover in the restaurants that feature the infinite kitchen. And so it's still very early, but we're very excited about the opportunities with. Sweetgreen, Nathaniel, Jonathan and Nicholas are in so many ways an embodiment of the american dream. Children of immigrant entrepreneurs who turned a dorm room idea into a publicly traded company valued at more than $2.5 billion. Their persistence and their willingness to learn from challenges while adhering to their core values around sustainability and healthy food have helped drive their scale, strategy and key decisions.

Jeff Berman
And at each inflection point of growth, they have found a way to adapt their business model and their team, demonstrating that to evolve, you may have to start over. As they implement big ideas like an automated kitchen, they're staying mindful of changing pallets, setting up their business to outlive them, and adding value to the world on so many levels. I'm Jeff. Bernie Berman. Thank you for listening.

Nathaniel Rue
And now a final word from our brand partner, Capital one business.

Aparna Saran
Throughout the day, text messages and emails kept pouring in. Whatever you need, just let us know. We're back one more time with Aparna Saran of Capital one business. She was telling us about a Sunday morning email she fired off in a moment of panic. Minutes later, her inbox was overflowing.

Speaker G
And the support she found wasn't just emotional, it was practical. We talked about detailed contingency plans and we created our go to market strategy. Before we are in full rollout mode, we had stage gates so that we could test and quickly learn and iterate. And within a matter of six months, as we were rolling things out channel by channel. Those stage gates would allow us to pivot if we saw something that we didn't like.

That day, Aparna learned a lesson that stayed with her having multiple plan B's doesn't just expand your options, it gives you new opportunities. The best way to pivot is actually open doors for thoughtful conversations, because humility in knowing that you actually don't know everything, as well as the empathy in knowing that disruption is always drastic and abrupt, helps you go through that pivot with other people in a very different way. Capital one business is proud to support entrepreneurs and leaders working to scale their impact from Fortune five hundred s to first time business owners. For more resources to help drive your business forward, visit capitalone.com businesshub. That's Capital one.com businesshub.

Nicholas Jamae
Masters of Scale is a weight watt original our executive producer is Eve Tro. The production team includes Chris Gautier, Tucker Ligursky, Masha Makotanina, and Brandon Klein. Mixing and mastering by Aaron Bastanelli original music by Ryan Holiday. Our head of podcasts is Lital Milad. Visit mastersofscale.com to find the transcript for this episode and to subscribe to our email newsletter.

Local veggies, national scale: Sweetgreen co-founders

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1: The Beginning

2: Scaling Up

3: Embracing Technology

4: Community and Identity

5: Future and Sustainability

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