Sweetgreen Inc

1. DESCRIPTION OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Sweetgreen, Inc., a Delaware corporation, together with its wholly owned subsidiaries (the “Company”), is a mission-driven, next generation restaurant and lifestyle brand that serves healthy food at scale. The Company’s bold vision is to be as ubiquitous as traditional fast food, but with the transparency and quality that consumers increasingly expect. As of December 29, 2024, the Company owned and operated 246 restaurants in 22 states and Washington, D.C. The Company had 25 Net New Restaurant Openings in fiscal year 2024.

The Company was founded in November 2006 and incorporated in the state of Delaware in October 2009 and currently is headquartered in Los Angeles, California. The Company’s operations are conducted asone operating segment andone reportable segment. Additional details on the nature of the Company’s business and their reportable operating segment is included in Note 15, “Segment Reporting”.

Principles of Consolidation—The accompanying consolidated financial statements include the accounts of the Company. All intercompany balances and transactions have been eliminated in consolidation.

Fiscal Year—The Company’s fiscal year is a 52- or 53-week period that ends on the last Sunday of the calendar year. Fiscal years 2024 and 2022 were 52-week periods that ended December 29, 2024 and December 25, 2022, respectively. Fiscal year 2023 was a 53-week period that ended December 31, 2023. In a 52-week fiscal year, each quarter includes 13 weeks of operations. In a 53-week fiscal year, the first, second and third quarters each include 13 weeks of operations, and the fourth quarter includes 14 weeks of operations.

Management’s Use of Estimates—The consolidated financial statements have been prepared by the Company in accordance with accounting principles generally accepted in the United States of America (“GAAP”) and the rules and regulations of the Securities and Exchange Commission (“SEC”). The preparation of consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Significant accounting estimates made by the Company include the income tax valuation allowance, impairment of long-lived assets and right-of-use assets (“ROU assets”), legal liabilities, valuation of the contingent consideration liability, lease accounting matters, and stock-based compensation. These estimates are based on information available as of the date of the consolidated financial statements; therefore, actual results could differ from those estimates.

Cash and Cash Equivalents—The Company considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Amounts receivable from credit card processors are converted to cash shortly after the related sales transaction and are considered to be cash equivalents because they are both short-term and highly liquid in nature. Amounts receivable from sales transactions as of December 29, 2024 and December 31, 2023, were $2.3 million and $3.0 million, respectively.

Restricted Cash—The Company’s restricted cash balance relates to certificates of deposit that are collateral for letters of credit to lease agreements entered into by the Company and letters of credit associated with the Company’s workers’ compensation insurance policy.

The reconciliation of cash and cash equivalents and restricted cash presented in the Company’s accompanying consolidated balance sheets to the total amount shown in its consolidated statements of cash flows is as follows:

Approximately $2.5 million of the restricted cash balance as of December 29, 2024 was associated with letters of credit required by the Company’s workers’ compensation insurance policy. The remaining balance was associated with letters of credit from lease agreements.

Concentrations of Risk— The Company maintains cash balances at several financial institutions located in the United States. The cash balances may, at times, exceed federally insured limits. Accounts are guaranteed by the Federal Deposit Insurance Corporation (“FDIC”) up to $0.3 million.

As of December 29, 2024, December 31, 2023, and December 25, 2022, approximately 25%,28%, and 32%, respectively, of the Company’s revenue was generated from the Company’s restaurants located in the New York City metropolitan area.

Other Current Assets— Other current assets primarily consist of the Employee Retention Credit “ERC”, outstanding receivables from the Company’s distributors and current amortization of deferred costs.

Other Assets— Other Assets primarily consist of deferred costs, which are capitalized implementation costs from cloud computing arrangements in relation the Company’s enterprise resource planning system (“ERP”). These costs amounted to $3.8 million and $4.2 million as of December 29, 2024 and December 31, 2023 and were recorded within other assets in the consolidated balance sheets. The amortization of these costs are recognized within the Company’s consolidated statement of operations under general and administrative expenses over a useful life ofseven years.

Accounts Receivable— Accounts receivable primarily consists of receivables from distributors and receivables from the Company’s Marketplace and Outpost and Catering Channels.

Inventory— Inventory, consisting primarily of food, beverages and supplies, is valued at the lower of cost first-in, first-out cost or net realizable value.

Prepaid Expenses— Prepaid expenses primarily include prepaid office systems, which we amortize over the life of the contract, and prepaid insurance, which is expensed in the period for which it relates.

Property and Equipment—Property and equipment are recorded at cost. Property and equipment are depreciated using the straight-line method over the following estimated useful lives:

Upon retirement or disposal of assets, the accounts are relieved of cost and accumulated depreciation and any related gain or loss is reflected in loss on disposal of property and equipment in the consolidated statement of operations. Assets to be disposed consists of primarily furniture, equipment and fixtures that were replaced in the normal course of business and are reported at the lower of their carrying amount or fair value less estimated cost to sell.

Expenditures for repairs and maintenance are charged directly to expense when incurred. The cost of assets sold, retired, or otherwise disposed of, and the related accumulated depreciation and amortization are eliminated from the accounts, and any resulting gain or loss is included in earnings.

The Company capitalizes certain directly attributable internal costs in conjunction with the acquisition, development and construction of future restaurants, after the restaurant construction is past the planning stage and it is considered probable that the restaurant will open. These costs are included in property and equipment and amortized over the shorter of the life of the related buildings and leasehold improvements or the lease term. Costs related to abandoned sites and other site selection costs that cannot be identified with specific restaurants are charged to general and administrative expenses in the accompanying consolidated statements of operations, and were $0.2 million, $0.3 million and $0.9 million for each of the fiscal years ended December 29, 2024, December 31, 2023 and December 25, 2022, respectively. The Company capitalized internal costs related to site selection and construction activities of $4.6 million and $4.7 million for the fiscal years ended December 29, 2024 and December 31, 2023, respectively.

On September 7, 2021, the Company closed its acquisition of Spyce, a Boston-based restaurant company powered by automation technology, allowing the Company to serve its food in its restaurants via automation (see Note 3). Automated technology associated with the Company’s Infinite Kitchen is included in kitchen equipment within property and equipment. Total research and development was $1.0 million, $1.2 million and $2.0 million for the fiscal years ended December 29, 2024, December 31, 2023 and December 25, 2022, respectively. These costs are primarily costs incurred to develop and improve the Infinite Kitchen, and are recorded within general and administrative costs in the Company’s accompanying consolidated statement of operations.

Restructuring Charges— Restructuring charges are expenses that are paid in connection with reorganization of the Company’s operations during fiscal year 2022 as well as the amortization of the underlying operating lease asset and related real estate andcommon area maintenance fees (“CAM”)charges. Additionally, in conjunction with the Company’s implementation of ASC Topic 842 (“ASC 842”), operating lease assets were evaluated for impairment, and any impairment charges incurred in relation to the assets impacted by the Company’s restructuring was considered a restructuring charge.

For fiscal year 2022, the Company incurred total pre-tax restructuring and related charges of approximately $14.4 million. This included a $13.0 million non-cash restructuring expense, due to a reduction of the Company’s real estate footprint by vacating the premises of the Company’s existing Sweetgreen Support Center and moving to a smaller office space adjacent to the existing location, of which $6.8 million related to impairment of long-lived assets and $5.8 million and $0.4 million related to impairment of the Company’s operating lease asset and closure costs, respectively, associated with the Sweetgreen Support Center, $0.6 million of severance and related benefits from workforce reductions affecting approximately 5% of employees at the Sweetgreen Support Center, $0.6 million of costs related to abandoning certain potential future restaurant sites in an effort to streamline the Company’s future new restaurant openings, and $0.2 million of other related expenses.

For fiscal years 2024 and 2023, stemming from the 2022 reorganization, the Company recorded restructuring charges of $2.3 million and $7.4 million, respectively, primarily related to operating lease asset impairment costs recognized in fiscal year 2023 from the Company’s vacated former Sweetgreen Support Center as well as the amortization of the underlying operating lease asset and related real estate andcommon area maintenance fees (“CAM”)charges. Total operating lease costs included in restructuring charges for fiscal years for 2024 and 2023 were $1.5 million and $1.8 million, respectively, and total variable leases costs included in restructuring charges for fiscal years 2024 and 2023 were $0.5 million and $0.5 million, respectively.

Contingent Consideration—Due to certain conversion features, the contingent consideration issued as part of the Spyce acquisition is considered a liability in accordance with ASC 480. The liability associated with the contingent consideration is initially recorded at fair value (see Note 3 for further details) upon issuance date and is subsequently re-measured to fair value at each reporting date. The initial fair value of the liability for the contingent consideration was $16.4 million and was included as part of the purchase price for the Spyce acquisition. The fair value of the liability as of December 29, 2024 was $15.0 million, of which $9.7 million was included in other current liabilities and $5.3 million was included in contingent consideration liability within the consolidated balance sheets. The fair value of the liability as of December 31, 2023 was $8.4 million and included in contingent consideration liability within the consolidated balance sheets. See Note 3.

Changes in fair value of the contingent consideration is recognized within other expense in the accompanying consolidated statement of operations.

Other Current Liabilities—The other current liabilities is comprised of the short-term portion of the contingent consideration liability. See Note 3.

Goodwill—Goodwill, which represents the excess of the cost of an acquired entity over the fair value of the acquired net assets, has an indefinite life and, accordingly, is not amortized. The Company hasone reporting unit. The Company tests goodwill for impairment annually, or more frequently if events or changes in circumstances indicate that the asset may be impaired.

The Company reviews goodwill for impairment utilizing either a qualitative assessment or a fair value test by comparing the fair value of its reporting unit with its carrying amount. If the Company decides that it is appropriate to perform a qualitative assessment and concludes that the fair value of its reporting unit more likely than not exceeds its carrying value, no further evaluation is necessary. If the Company performs the fair value test, the Company will compare the fair value of a reporting unit with its carrying amount, including goodwill. If the fair value of a reporting unit exceeds its carrying amount, goodwill of the reporting unit is considered not impaired. If the carrying amount of a reporting unit exceeds its fair value, the Company will recognize an impairment charge for the amount by which the carrying amount exceeds its reporting unit’s fair value.

The Company performed the qualitative assessment above and concluded that the fair value of the reporting unit is more likely than not to exceed the carrying value, and did not record any impairment charges related to the carrying amount of goodwill during the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022.

Fair value estimates are subject to change as a result of many factors, including changes in business plans, economic conditions, and the competitive environment, among others. Should actual cash flows and the Company’s future estimates vary adversely from current estimates, the Company may be required to recognize goodwill impairment charges in future years.

Intangible Assets, net— External costs and certain internal costs, including payroll and payroll-related costs for employees, directly associated with developing computer software applications for internal use are capitalized subsequent to the preliminary stage of development as well as developed technology associated with the Company’s Infinite Kitchen. Internal-use software costs are amortized using the straight-line method over athree year estimated useful life of the software when the project is substantially complete and ready for its intended use.

Developed technology intangible assets were recognized in conjunction with the Company’s acquisition of Spyce on September 7, 2021. The estimated useful life of developed technology isfive years.

Lease Acquisition Costs— Lease acquisition costs included key money which is the amount of funds paid to a landlord or tenant to acquire the rights of tenancy under a commercial property lease. These costs are amortized over the respective lease terms that range from 10 to 15 years and are presented net of accumulated amortization.

Revenue Recognition—The Company recognizes food and beverage revenue, net of discounts and incentives, when payment is tendered at the point of sale as the performance obligation has been satisfied, through the Company’s three disaggregated revenue channels: Owned Digital Channels, In Store-Channel (Non-Digital component), and Marketplace Channel.

Owned Digital Channels encompasses the Company’s Pick-Up Channel, Native Delivery Channel, Outpost and Catering Channel, and purchases made in its In-Store Channel via digital scan-to-pay, prior to the elimination of digital scan-to-pay during the fiscal quarter ended September 24, 2023. Pick-Up Channel refers to sales to customers made for pick-up at one of the Company’s restaurants through the Sweetgreen website or mobile app. Native Delivery Channel refers to sales to customers for delivery made through the Sweetgreen website or mobile app. Outpost and Catering Channel refers to sales to customers for delivery made through the Sweetgreen website or mobile app to Outposts, which are the Company’s offsite drop-off points at offices, residential buildings and hospitals. In addition, the Company’s Outpost and Catering Channel includes the Company’s catering offerings, which refer to sales to customers made through the Company’s catering website for pickup at one of the Company’s restaurants or delivery to a customer-specified address.

In-Store Channel (Non-Digital component) refers to sales to customers who make in-store purchases in the Company’s restaurants, whether they pay by cash or credit card, or digital scan-to-pay. Purchases made in the Company’s In-Store Channel via cash or credit card are referred to as “Non-Digital” transactions, and purchases made in the Company’s In-Store Channel via digital scan-to-pay, prior to its elimination in 2023, were included as part of the Company’s Owned Digital Channels.

Marketplace Channel refers to sales to customers for delivery or pick-up made through third-party delivery marketplaces, including DoorDash, Grubhub, Uber Eats, ezCater, Sharebite and others.

Provisions for discounts are provided for in the same period the related sales are recorded. Sales taxes and other taxes collected from customers and remitted to governmental authorities are presented on a net basis, and as such, are excluded from revenues.

Gift Cards—The Company sells gift cards that do not have an expiration date. Upon sale, gift cards are recorded as unearned revenue and included within gift card liability in the accompanying consolidated balance sheets. The revenue from gift cards is recognized when redeemed by customers. Because the Company does not track addresses of gift card purchasers, the relevant jurisdiction related to the requirement for escheatment, the legal obligation to remit unclaimed assets to the state, is the Company’s state of incorporation, which is Delaware. The state of Delaware requires escheatment after 5 years from issuance. The Company does not recognize breakage income because of its requirements to escheat unredeemed gift card balances.

Delivery—The majority of the Company’s restaurant locations offer a delivery option. Delivery services are fulfilled by third-party service providers whether delivery is ordered through the Company’s Native Delivery Channel or Marketplace Channel. With respect to Native Delivery sales, the Company controls the delivery services and recognizes revenue, including delivery revenue, when the delivery partner transfers food or beverage to the customer. For these sales, the Company receives payment directly from the customer at the time of sale. With respect to Marketplace Channel sales, the Company recognizes revenue, excluding delivery fees collected by the delivery partner as the Company does not control the delivery service, when control of the food is delivered to the end customer. The Company receives payment from the delivery partner subsequent to the transfer of food and the payment terms are short-term in nature. For all delivery sales, the Company is considered the principal and recognize the revenue on a gross basis.

Income Taxes—The Company is subject to federal and state income taxes. The Company uses the asset and liability method of accounting for income taxes as set forth in ASC 740, Income Taxes. Under this method, the Company recognizes deferred tax assets and liabilities for the expected future tax consequences of temporary differences between the respective carrying amounts and tax basis of assets and liabilities. All deferred tax assets and liabilities are classified as non-current in the accompanying consolidated balance sheet. Deferred tax assets and liabilities are measured using enacted tax rates expected to apply to taxable income in the years in which those temporary differences are expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized in income in the period that includes the enactment date. A valuation allowance is established against the portion of deferred tax assets that the Company believes will not be realized on a more-likely-than-not basis.

With respect to uncertain tax positions, the Company recognizes in its consolidated financial statements those tax positions determined to be “more likely than not” of being sustained upon examination, based on the technical merits of the positions. For those tax positions where it is “not more likely than not” that a tax benefit will be sustained, no tax benefit is recognized. The Company’s policy is to recognize, when applicable, interest and penalties on uncertain tax positions as part of income tax expense.

Fair Value of Financial Instruments—The fair value measurement accounting guidance creates a fair value hierarchy to prioritize the inputs used to measure fair value into three categories. A financial instrument’s level within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement, where Level 1 is the highest category (observable inputs) and Level 3 is the lowest category (unobservable inputs). The three levels are defined as follows:

Level 1—Quoted prices for identical instruments in active markets.

Level 2—Quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-derived valuations in which significant value drivers are observable.

Level 3—Unobservable inputs for the asset or liability. This includes certain pricing models, discounted cash flow methodologies and similar techniques that use significant unobservable inputs.

The carrying amount of accounts receivable, other current assets, accounts payable, accrued payroll and accrued expenses approximates fair value due to the short-term maturity of these financial instruments. The Company’s contingent consideration liability is carried at fair value determined using Level 3 inputs in the fair value. See Note 3.

Certain assets and liabilities are measured at fair value on a nonrecurring basis. In other words, the instruments are not measured at fair value on an ongoing basis but are subject to fair value adjustments only in certain circumstances (for example, when there is evidence of impairment). See Note 3.

Impairment and Closure Costs— Impairment includes impairment charges related to our long-lived assets, which include property and equipment and internally developed software, andsubsequent to the adoption of ASC 842, operating lease assets. Long-lived assets are reviewed for recoverability at the lowest level in which there are identifiable cash flows (“asset group”). The asset group is at the store-level for restaurant assets and the corporate-level for corporate assets. The carrying amount of a store asset group includes stores’ property and equipment, primarily leasehold improvements, and operating lease assets, net of operating lease liability. The carrying amount of a corporate-level asset group includes Support Center property and equipment, operating lease assets, internally developed software and internally developed technology. Long-lived assets are reviewed by management for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be fully recoverable. When events or circumstances indicate that impairment may be present, management evaluates the probability that future undiscounted net cash flows received will be less than the carrying amount of the asset group. If projected future undiscounted cash flows are less than the carrying value of an asset group, then such assets are written down to their fair values. The Company uses a discounted cash flow model to measure the fair value of an asset group. An impairment charge will be recognized in the amount by which the carrying amount of the store asset group exceeds its fair value. The resulting impairment charge, if any, is allocated to the property and equipment, primarily leasehold improvements, and operating lease assets on a pro rata basis using the relative carrying amounts of those assets. The allocated impairment charge to a long-lived asset is limited to the extent that the impairment charge does not reduce the carrying amount of the long-lived asset below its individual fair value. The estimation of the fair value of an operating lease asset primarily involves the evaluation of current and future market value rental amounts, which are primarily based on recent observable market rental data. The fair value of an operating lease asset is measured using a discounted cash flow valuation technique by discounting the estimated current and future market rental values using a property-specific discount rate.

A number of significant assumptions and estimates are involved in the application of the model to forecast operating cash flows, which are largely unobservable inputs, including future revenue projections. Accordingly, such significant assumptions are classified as Level 3 inputs within the fair value hierarchy. Assumptions used in these forecasts are consistent with internal planning, and include sales growth rates, gross margins, and operating expense in relation to the current economic environment and the Company’s future expectations, competitive factors in its various markets, inflation, sales trends and other relevant economic factors that may impact the store under evaluation. In addition, assumptions used for operating lease assets vacated for future sublease include the Company’s estimated future sublease income and a property specific discount rate. There is uncertainty in the projected undiscounted future cash flows used in the Company’s impairment review analysis, which requires the use of estimates and assumptions. If actual performance does not achieve the projections, or if the assumptions used change in the future, the Company may be required to recognize impairment charges in future periods, and such charges could be material.

The Company determined that triggering events, primarily related to the impact of changing customer behavior trends, including slower than expected return to office and as a result of broader macroeconomic conditions on the Company’s near-term restaurant level cash flow forecast, restructuring activities and anticipated store closures, occurred for certain restaurants and its Support Center, that required an impairment review of the Company’s long-lived assets. No indicators of impairment were found for the Company’s intangible assets for the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022.

Based on the results of the analysis, for the fiscal year ended December 29, 2024, the Company recorded non-cash impairment charges of $1.7 million associated with one store location, which was recorded in impairment and closure costs within the consolidated statement of operations. Of the $1.7 million total non-cash impairment, $1.3 million was related to property and equipment, and $0.4 million was related to operating lease assets. During the fiscal year ended December 31, 2023, the Company recorded non-cash impairment charges of $4.3 million, related to the operating lease asset for the Company’s former Sweetgreen Support Center vacated previously during fiscal year 2022, which was recorded under restructuring charges within the consolidated statement of operations. During the fiscal year ended December 25, 2022 the Company recorded non-cash impairment charge of $15.0 million, of which $8.8 million was related to property and equipment and $6.2 million was related to operating lease assets. Of the $8.8 million of property and equipment impairment, $6.8 million was associated with the Company’s vacated former Sweetgreen Support Center and was recorded inrestructuring charges within the consolidated statement of operations, and $2.0 million was associated with certain store locations and was recorded in impairment and closure costs within the consolidated statement of operations. Of the $6.2 million of operating lease impairment, $5.8 million was associated with the Company’s vacated Sweetgreen Support Center and was recorded inrestructuring charges within the consolidated statement of operations, and $0.4 million was associated with certain store locations and was recorded inimpairment and closure costs within the consolidated statement of operations. Of the $15.0 million total non-cash impairment expense, $12.6 million was included within restructuring charges and $2.4 million was included within impairment and closure costs within the consolidated statement of operations.

Closure costs include lease and related costs associated with closed restaurants including the amortization of the operating lease asset, and expenses associated with common area maintenance fees and real estate taxes for previously impaired stores. During the fiscal year ended December 29, 2024, the Company recognized closure costs of $0.5 million related to the amortization of the operating lease asset and expenses associated with CAM and real estate taxes for previously closed stores, including three previously impaired stores that were closed during the fiscal year ended December 31, 2023. During the fiscal year ended December 25, 2022, the Company closedone store operated by Spyce, which was fully impaired in a prior period. This closure resulted in closure costs of $0.5 million.

Leases— The Company leases restaurants and corporate office space under various non-cancelable lease agreements that expire on various dates through 2038. Lease terms for restaurants generally include a base term of 10 years, with options to extend these leases for additional periods of 5 to 15 years. The Company evaluates contracts entered into to determine whether the contract involves the use of property or equipment, which is either explicitly or implicitly identified in the contract. The Company evaluates whether it controls the use of the asset, which is determined by assessing whether it obtains substantially all economic benefits from the use of the asset, and whether it has the right to direct the use of the asset. If these criteria are met and the contract is identified as a lease, then the Company accounts for the contract under the requirements of ASC 842. The Company also evaluates whether the lease will be accounted for as an operating or finance lease based on the terms of the lease agreement, and when determining the lease term, the Company includes reasonably certain option renewal periods. Many of the Company's leases require payment of real estate taxes, CAM costs and other occupancy costs which are included in occupancy and related expenses on the consolidated statements of operations. Some of the Company’s operating leases include provisions for payment of a fixed CAM amount per annum, and as such, these payments have been included in the calculation of the operating lease liability.

The Company measured the lease liability by discounting the future fixed contractual payments included in the lease agreement, using either the rate explicit in the lease or its incremental borrowing rate (“IBR”). The IBR used to measure the lease liability is derived from the yield curve commensurate with the credit rating of the

Company and further adjusted for seniority based on a notching analysis. The most significant assumption in calculating the IBR is the Company’s credit rating, and the IBR is also subject to judgment.

For leases with a lease term of 12 months or less ("short-term lease"), any fixed lease payments are recognized on a straight-line basis over such term, and are not recognized on the consolidated balance sheets.

Certain leases contain provisions for contingent rent that require additional rental payments based upon restaurant sales volume. Contingent rent is expensed each period as the liability is incurred, and is not included in the initial measurement of operating lease assets and liabilities.

The Company receives tenant improvement allowances, generally in the form of cash, from some of the landlords of its leased properties. The tenant improvement allowances that are expected to be received are included in the measurement of the initial operating lease liability, which are also reflected as a reduction to the initial measurement of the right-of-use asset and amortized over the applicable lease terms.

Contingencies—The Company is subject to various claims, lawsuits, governmental investigations, and administrative proceedings that arise in the ordinary course of business. The Company accrues a liability (which includes litigation costs expected to be incurred) and recognizes an expense for such matters when it is probable that a liability has been incurred and the amount can be reasonably estimated. Estimating liabilities and costs associated with these matters require significant judgment based upon the professional knowledge and experience of management and its legal counsel.

Marketing and Public Relations—Marketing costs, which include the development and production of advertising materials and online marketing tools, are expensed in the period incurred. Marketing expense directly attributable to an individual restaurant is included within other restaurant operating costs. Marketing expense for the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022 was $16.9 million, $14.3 million and $14.5 million, respectively, of which $13.2 million, $10.7 million and $10.9 million, respectively, is included in general and administrative expense, $3.3 million, $3.1 million and $2.7 million, respectively, is included in other restaurant operating costs and $0.4 million, $0.5 million, and $1.0 million is included in preopening costs in the accompanying consolidated statements of operations.

Restaurant Operating Costs—Restaurant operating costs primarily consist of food, beverage, packaging costs for to-go orders, salaries, benefits, and other expenses related to the Company’s in-store employees, maintenance and utilities at the Company’s restaurants, leasing costs for the Company’s restaurants and delivery and processing fees.

Operating Expenses—Operating expenses primarily consist of operations, finance, legal, human resources, administrative personnel, stock-based compensation, depreciation and amortization of assets, and pre-opening costs. Pre-opening costs primarily consist of rent, wages, travel for training and store opening teams, food and other restaurant costs that the Company incurs prior to the opening of a restaurant. These costs are expensed as incurred.

Stock-Based Compensation—The Company recognizes compensation expense resulting from stock-based payments over the period for which the requisite services are provided. The Company uses the Black-Scholes-Merton (“Black-Scholes”) option-pricing model to estimate the fair value of the incentive stock options at the measurement date. Grant date is deemed to be the appropriate measurement date for stock options issued to employees and nonemployees. The use of the Black-Scholes option-pricing model requires the use of subjective assumptions, including the fair value and projected volatility of the underlying common stock and the expected term of the award.

For all stock options granted, the Company calculated the expected term using the simplified method for “plain vanilla” stock option awards. The risk-free interest rate is based on the yield available on U.S. Treasury zero-coupon issues similar in duration to the expected term of the stock-based award. The Company’s common stock has not been publicly traded over the full expected term, and therefore, the Company used the historical volatility of the stock price of similar publicly traded peer companies. The Company utilized a dividend yield ofzero, as it had no history or plan of declaring dividends on its common stock.

The grant date fair value of restricted stock units (“RSUs”) is estimated based on the fair value of the Company’s common stock on the date of grant. Prior to the Company’s initial public offering (“IPO”) in November 2021, RSUs granted by the Company vest upon the satisfaction of both a service-based vesting condition, which is typically four years, and a liquidity event-related performance vesting condition. The liquidity event-related performance vesting condition was achieved upon the consummation of the Company's IPO. Stock-based compensation related to the remaining service-based period after the liquidity event-related performance vesting condition was satisfied will be recorded over the remaining requisite service period using the accelerated attribution method. Since the Company’s IPO in November 2021, the Company only granted RSUs that vest upon the satisfaction of a service-based vesting condition and the compensation expense for these RSUs is recognized on a straight-line basis over the requisite service period.

The Company has granted founder performance-based restricted stock units (“founder PSUs”) that contain a market condition in the form of future stock price targets. The grant date fair value of the founder PSUs was determined using a Monte Carlo simulation model and the Company estimates the derived service period of the founder PSUs. The grant date fair value of founder PSUs containing a market condition is recorded as stock-based compensation over the derived service period using the accelerated attribution method. If the stock price goals are met sooner than the derived service period, any unrecognized compensation expenses related to the founder PSUs will be expensed during the period the stock price targets are achieved. Provided that each founder continues to be employed by the Company through the derived service period, stock-based compensation expense is recognized over the derived service period, regardless of whether the stock price goals are achieved.

Interest Income—Interest income consists of interest earned on cash and cash equivalents.

Interest Expense—Interest expense includes mainly the interest incurred on outstanding indebtedness, as well as amortization of deferred financing costs, mainly debt origination and commitment fees. Debt origination fees are amortized on a straight-line basis over the commitment period.

Net Loss Per Share—The Company calculated basic and diluted net loss per share by dividing income available to common stockholders by the weighted-average number of shares of common stock during each period.

Diluted net loss per share available to common shareholders was computed by giving effect to all potentially dilutive common stock equivalents outstanding for the period. In periods in which the Company reports a net loss available to common shareholders, diluted net loss per share available to common shareholders is the same as basic net loss per share available to common shareholders, since dilutive common shares are not assumed to have been issued if their effect is anti-dilutive. The Company reported net loss available to common shareholders for the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022.

Employee Benefit Plan— The Company sponsors a qualified 401(k) defined contribution plan (the “401k Plan”) covering eligible employees. Participants may contribute a portion of their annual compensation limited to a maximum annual amount set by the Internal Revenue Service. The Company previously matched 50% of an eligible employee’s contribution up to 3% of wages. An employee becomes eligible once the individual has worked at the Company for 6 months, has worked 500 or more hours, and is 21 years or older. The Company has temporarily paused this matching contribution, effective in the fourth fiscal quarter of 2022. For the fiscal year ended December 25, 2022 the matching contribution was $1.0 million.

Recently Adopted Accounting Pronouncements

In November 2023, the Financial Accounting Standards Board (“FASB”), issued Accounting Standards Update (“ASU”) 2023-07, Segment Reporting (Topic 280): Improvements to Reportable Segment Disclosures, which improves reportable segment disclosure primarily through enhanced disclosures about significant segment expenses. The Company adopted ASU No. 2023-07 during the year ended December 29, 2024. See Note 15 "Segment Reporting" in the accompanying notes to the consolidated financial statements for further detail for the expanded disclosures as a result of adopting ASU No. 2023-07.

Recently Issued Accounting Pronouncements Not Yet Adopted

In December 2023, the FASB issued ASU No. 2023-09, “Income Taxes (Topic 740): Improvements to Income Tax Disclosures.” The ASU includes amendments requiring enhanced income tax disclosures, primarily related to standardization and disaggregation of rate reconciliation categories and income taxes paid by jurisdiction. The guidance is effective for fiscal years beginning after December 15, 2024, with early adoption permitted, and should be applied either prospectively or retrospectively. The Company is currently evaluating the impact of adopting this ASU on its disclosures.

In November 2024, the FASB issued ASU No. 2024-03, "Disaggregation of Income Statement Expenses (Subtopic 220-40)." The ASU requires public entities to disaggregate, in a tabular presentation, certain income statement expenses into different categories, such as purchases of inventory, employee compensation, depreciation, and intangible asset amortization. The guidance is effective for fiscal years beginning after December 15, 2026, with early adoption permitted, and may be applied retrospectively. The Company is currently evaluating the impact of adopting this ASU on its consolidated financial statements and related disclosures.

The Company reviewed all other recently issued accounting pronouncements and concluded that they were either not applicable or not expected to have a significant impact to the consolidated financial statements.

2. REVENUE RECOGNITION

Nature of products and services

The Company hasone revenue stream. See Note 1 for a description of the revenue recognition policies.

The following table presents the Company’s revenue for the fiscal years ended December 29, 2024, December 31, 2023 and December 25, 2022 disaggregated by significant revenue channel:

Gift Cards

Gift card liability included in gift card within the accompanying consolidated balance sheet was as follows:

Revenue recognized from the redemption of gift cards that was included in gift card and loyalty liability at the beginning of the year was as follows:

3. FAIR VALUE

The following tables present information about the Company’s financial liabilities measured at fair value on a recurring basis:

Contingent consideration as of December 29, 2024 was $15.0 million of which $9.7 million is included in other current liabilities and $5.3 million is included in contingent consideration within the consolidated balance sheets. The fair value of the contingent consideration was determined based on significant inputs not observable in the market.

Contingent Consideration

On September 7, 2021, the Company closed its acquisition of Spyce Food Co. (“Spyce”), a Boston-based restaurant company powered by automation technology. In connection with the Company’s acquisition the former equity holders of Spyce may receive up to 714,285 additional shares of Class A common stock, calculated based on the initial offering price of the Company’s Class A common stock of $28.00 per share sold in the IPO (the “Reference Price”), contingent on the achievement of certain performance milestones between the closing date of the acquisition and June 30, 2026. Additionally, the former equity holders of Spyce may receive true-up payments in cash, as described here. If as of the second anniversary of the closing date of the acquisition, the 30-Day Volume-Weighted Average Price of the Company’s Class A common stock (“VWAP Price”) is less than the Reference Price, then the Company shall pay to each former equity holder of Spyce that has continually held their respective portion of the 1,316,763 total shares of the Company’s Class A common stock issued in connection with the acquisition during such period, the delta between the Reference Price and the VWAP Price for the upfront portion of the purchase price (“true-up payment”). As of the second anniversary of the closing date of the acquisition, the Company calculated the delta between the Reference Price and the VWAP Price for the upfront portion of the purchase price as $13.62. This resulted in a true-up payment of $10.4 million, due to 570,249 shares that did not meet the continuous holding requirement. The $10.4 million true-up payment is included within financing in the Consolidated Statements of Cash Flows as the payment is less than the original fair value of contingent consideration.

Additionally, if as of the date of the achievement of any of the three milestones, the VWAP Price as of such milestone achievement date is less than the Reference Price, then the Company shall pay to each former equity holder of Spyce that is eligible to receive a milestone payment the delta between the Reference Price and the VWAP Price for the contingent consideration associated with such milestone. The contingent consideration, excluding the true-up payment, which was calculated as noted above, was valued using the Monte Carlo method. The analysis considered, among other items, the equity value, the contractual terms of the Spyce merger agreement, potential liquidity event scenarios (prior to the IPO), the Company’s credit-adjusted discount rate, equity volatility, risk-free rate, and the probability that milestone targets required for issuance of shares under the contingent consideration will be achieved. During the fourth quarter of fiscal 2023, the first milestone was achieved, which resulted in former equity holders of Spyce being eligible to receive $6.0 million. Of this $6.0 million, $2.1 million was issued in Class A common stock, which resulted in 208,042 shares issued, and $3.9 million was issued in cash, based on a VWAP Price of $10.20. This amount became known as of December 31, 2023, and as the stock was issued and payment was made within one year from December 31, 2023, it was included in other current liabilities within the Consolidated Balance Sheets as of December 31, 2023. This amount was not disclosed as a level 3 estimate as of December 31, 2023 as it was a fixed and determinable amount as of December 31, 2023. The stock was issued and cash was paid during the fiscal year ended December 29, 2024.

The following table provides a roll forward of the aggregate fair values of the Company’s contingent consideration, for which fair value is determined using Level 3 inputs.

The following non-financial instruments were measured at fair value, on a nonrecurring basis, as of and for the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022 reflecting certain property and equipment and operating leases for which an impairment loss was recognized during the corresponding periods within impairment and closure costs and restructuring charges within the consolidated statement of operations. For the fiscal year ended December 29, 2024, the Company recorded non-cash impairment charges of $1.7 million associated with one store location, which was recorded in impairment and closure costs within the consolidated statement of operations. Of the $1.7 million total non-cash impairment, $1.3 million was related to property and equipment, and $0.4 million was related to operating lease assets.

The fair value of these assets represents a Level 3 fair value measurement. Unobservable inputs include the discount rate, projected restaurant revenues and expenses, and sublease income if we are closing the restaurant. For the operating lease assets’ fair value estimate as of December 29, 2024, December 31, 2023, and December 25, 2022 the Company estimated the sublease income through early fiscal 2032 and discounted such cash flows using a property specific discount rate of approximately 9.0% to 9.5%.

4. PROPERTY AND EQUIPMENT

Property and equipment are stated at cost. Depreciation is calculated using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized using the straight-line method over the shorter of the lease term or estimated useful life. A summary of property and equipment is as follows:

Depreciation expense for the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022 was $56.4 million, $49.5 million, and $38.8 million, respectively.

Loss on asset disposals for the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022, was $0.3 million, $0.7 million, and $0.3 million, respectively.

As of December 29, 2024, the Company hadnine facilities under construction due to open during 2025. Depreciation commences after a store opens and the related assets are placed in service. December 31, 2023, the Company hadseven facilities under construction, all of which were opened during fiscal year 2024. Depreciation commences after a store opens and the related assets are placed in service.

For the fiscal year ended December 29, 2024, the Company recorded non-cash impairment charges of $1.3 million within impairment and closure costs, within the consolidated statement of operations. The Company did not record any non-cash impairment charges for the fiscal year ended December 31, 2023. For the fiscal year ended December 25, 2022, the Company recorded non-cash impairment charges of $8.8 million, of which $2.0 million was recorded within impairment and closure costs and $6.8 million was recorded within restructuring charges within the consolidated statement of operations.

5. INTANGIBLE ASSETS, NET

The following table presents the Company’s intangible assets, net balances:

Amortization expense for the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022 was $11.0 million, $10.0 million, and $7.7 million, respectively. Estimated amortization for each of the next five years is as follows:

6. ACCRUED EXPENSES

Accrued expenses consist of the following:

7. DEBT

Credit Facility—During fiscal year 2024, the Company was party to a First Amended and Restated Revolving Credit, Delayed Draw Term Loan and Security Agreement (as amended, the “Credit Facility”) with EagleBank. The Credit Facility allowed the Company to borrow up to $45.0 million in the aggregate principal amount under a revolving facility, including the issuance of letters of credit up to $3.5 million. There have been no letters of credit issued, no borrowings, and no repayments under our credit facility during the fiscal years ended December 29, 2024, December 31, 2023, or December 25, 2022. The Company did not renew the Credit Facility in 2024 and it expired pursuant to its terms on December 13, 2024. As of December 29, 2024 and December 31, 2023, the Company had no outstanding balance under the Credit Facility.

As of December 31, 2023, the Company had unamortized loan origination fees of $0.1 million, which are included within the accompanying consolidated balance sheet in other current assets. The Company recognized $0.1 million of interest expense in both fiscal years 2024 and 2023, respectively, related to the amortization of loan origination fees.

8. LEASES

The components of lease cost were as follows:

During the fiscal year ended December 29, 2024, the Company recorded a non-cash impairment charge related to operating lease assets of$0.4 million, which is recorded within impairment and closure costs in the consolidated financial statements. During the fiscal year ended December 31, 2023, the Company recorded non-cash impairment charges related to operating lease assets of $4.3 million, all of which is recorded within restructuring charges in the consolidated statement of operations. During fiscal year December 25, 2022, the Company recorded non-cash impairment charges related to operating lease assets of $6.2 million, of which $5.8 million is recorded within restructuring charges and $0.4 million is recorded within impairment and closure costs in the consolidated financial statements. See Note 1.

As of December 29, 2024, future minimum lease payments for operating leases consisted of the following:

As of December 29, 2024 the Company had additional operating lease commitments of $27.5 million for non-cancelable leases without a possession date, which the Company anticipates will commence in fiscal year 2025. The nature of such lease commitments is consistent with the nature of the leases that the Company has executed thus far.

A summary of lease terms and discount rates for operating leases as of December 29, 2024 and December 31, 2023 is as follows:

Supplemental cash flow information related to leases as of December 29, 2024, December 31, 2023 and December 25, 2022 as follows:

9. COMMON STOCK

The Company has a dual class common stock structure, whereby the Class A common stock is entitled toone vote per share and the Class B common stock is entitled to 10 votes per share. The Class A and Class B common stock have the same dividend and liquidation rights. Any founder’s shares of Class B common stock will convert automatically into Class A common stock, on aone-to-one basis, upon either the (i) the sale or transfer of such share of Class B common stock (except for certain permitted transfers described in the Company’s amended and restated certificate of incorporation, including transfers for tax and estate planning purposes or to any other founder or any affiliate of any founder) or (ii) theone-year anniversary of the death or permanent disability of such founder.

Additionally, all outstanding shares of the Company’s Class B common stock will convert automatically into shares of the Company’s Class A common stock on the final conversion date, defined as the earlier of (i) thenine-month anniversary of the death or permanent disability of the last of the founders; (ii) the last trading day of the fiscal year during which the 10 th anniversary of the effectiveness of the registration statement for the Company’s IPO occurs, and (iii) the date specified by a vote of the holders of a majority of the outstanding shares of Class B common stock; provided, however, that the final conversion date may be extended by the affirmative vote of the holders of the majority of the voting power of the then-outstanding shares of Class A common stock not held by a founder or an affiliate or permitted transferee of a founder and entitled to vote generally in the election of directors, voting together as a single class.

Class A and Class B common stock are collectively referred to as “common stock” throughout the notes to the consolidated financial statements, unless otherwise noted.

As of December 29, 2024 and December 31, 2023, the Company had reserved shares of common stock for issuance in connection with the following:

10. STOCK-BASED COMPENSATION

2021 Equity Incentive Plan

During the fiscal year ended December 26, 2021, the Company adopted the 2021 Equity Incentive Plan (the “2021 Plan”), which allows for issuance of stock options (including incentive stock options and non-qualified stock options), restricted stock units (“RSUs”), including performance-based awards, and other types of awards. The maximum number of shares of common stock that may be issued under the 2021 Plan is 35,166,753, which is the sum of (i)11,500,000 new shares, plus (ii) an additional number of shares consisting of (a) shares that were available for the issuance of awards under any prior equity incentive plans in place (which shall include the Prior Stock Plans (as defined below) prior to the time the Company’s 2021 Plan became effective and (b) any shares of the Company’s common stock subject to outstanding stock options or other stock awards granted under the Prior Stock Plans that on or after the Company’s 2021 Plan became effective, terminate or expire prior to the exercise or settlement; are not issued because the award is settled in cash; are forfeited because of the failure to vest; or are reacquired or withheld (or not issued) to satisfy a tax withholding obligation or the purchase or exercise price. The total number of shares available for grant as of December 29, 2024, was

8,516,216. Options granted generally have vesting terms between twelve months andfour years and have a contractual life of 10 years.

The Company issues shares of Class A common stock upon the vesting and settlement of RSUs and upon the exercises of stock options under the 2021 Plan. The 2021 Plan is administered by the board of directors, or a duly authorized committee of the Company’s board of directors. Options granted to members of the Company’s board of directors generally vest immediately.

All stock options, RSUs and performance based restricted stock awards (“PSUs”) granted prior to the 2021 Plan were rolled into the 2021 Plan. Awards granted prior to the adoption of the 2021 Plan had similar terms with each award vesting between one and 4 year period, and have a contractual life of 10 years.

Spyce Acquisition

In conjunction with the Spyce acquisition, the Company issued shares of restricted stock that were issued to certain Spyce employees. As the value is fixed, the grant date fair value of these shares represents the fair value of the shares on the acquisition date. For the fiscal years ended December 31, 2023 and December 25, 2022, the Company recognized stock-based compensation expense of $2.4 million and $3.4 million, respectively, related to the vested portion of such shares.

2021 Employee Stock Purchase Plan

In conjunction with the IPO, the Company’s board of directors adopted, and the Company’s stockholders approved the Company’s 2021 employee stock purchase plan (the “ESPP”). The Company’s ESPP authorizes the issuance of 3,000,000 shares of common stock under purchase rights granted to the Company’s employees or to the employees of any of its designated affiliates. The number of shares of the Company’s common stock reserved for issuance will automatically increase on January 1 of each year for a period of 10 years, beginning January 1, 2023, by the lesser of (i)1% of the total number of shares of the Company’s common stock outstanding on December 31 of the immediately preceding year; and (ii)4,300,000 shares, except before the date of any such increase, the Company’s board of directors may determine that such increase will be less than the amount set forth in clauses (i) and (ii). On January 1, 2023, the ESPP authorized shares increased by 1,111,331 shares to 4,111,331 in accordance with the above.

As of December 29, 2024, there had been no offering period or purchase period under the ESPP, and no such period will begin unless and until determined by the administrator.

Stock Options

The Company grants stock options to its employees, as well as nonemployees (including directors and others who provide subst antial services to the Company) under the 2021 Plan.

The following table summarizes the Company’s stock option activity for the fiscal years ended December 29, 2024 and December 31, 2023, including options assumed pursuant to the Spyce Plan, as described above:

The total intrinsic value of options exercised in fiscal years 2024, 2023 and 2022 was $50.8 million, $7.5 million and $13.6 million, respectively. The weighted-average fair value of options granted in fiscal years 2024, 2023 and 2022 was $9.72, $9.07, and $8.02, respectively, all of which were granted to employees.

The fair value of each option granted has been estimated as of the date of the grant using the Black-Scholes option-pricing model with the assumptions during the fiscal years ended December 29, 2024, December 31, 2023 and December 25, 2022 included in the table below. The Company has elected to account for forfeitures as they occur.

Fair Value of Common Stock—The Company’s board of directors determines the fair market value of its common stock based on its closing price as reported on close of business the day immediately preceding the date of grant on the New York Stock Exchange.

Risk-Free Interest Rate—The yield on actively traded non-inflation indexed U.S. Treasury notes with the same maturity as the expected term of the underlying options was used as the average risk-free interest rate.

Expected Term—The expected term of options granted to was determined based on management’s expectations of the options granted, which are expected to remain outstanding. The Company calculated the expected term using the simplified method for “plain vanilla” stock option awards.

Expected Volatility—Given the timing of the IPO occurring in 2021, there is not sufficient share price history that extends through the expected term of the options, as such, the Company has elected to use an approximation based on the volatility of other comparable public companies, which compete directly with the Company, over the expected term of the options.

Dividend Yield—The Company has not issued regular dividends on common shares in the past nor does the Company expect to issue dividends in the foreseeable future. As such, the dividend yield has been estimated to bezero.

As of December 29, 2024, there was $21.6 million in unrecognized compensation expense related to unvested stock options arrangements and is expected to be recognized over a weighted average period 2.08 years.

Restricted Stock Units and Performance Stock Units

Restricted stock units

During the fiscal years ended December 29, 2024 and December 31, 2023, the Company issued 535,789 and 428,428 RSUs, respectively, to certain employees, which vest upon the satisfaction of certain service periods. The fair value of these RSUs was determined based on the Company’s closing stock price the business day immediately preceding the date of grant. The service period of these RSUs is satisfied over arange of 0 to 4 years. The RSUs are excluded from common stock issued and outstanding until the satisfaction of these vesting conditions and are not considered a participating security for purposes of calculating net loss per share attributable to common stockholders.

The following table summarizes the Company’s RSU activity for fiscal year ended December 29, 2024:

The weighted-average grant date fair value per RSU granted during the fiscal years ended December 31, 2023 and December 25, 2022 was$9.07 and $19.45, respectively. As of December 29, 2024, unrecognized compensation expense related to RSUs was$9.1 million and is expected to be recognized over a weighted average period of 1.67 years. The fair value of shares earned as of the vesting date during the fiscal years ended December 29, 2024, December 31, 2023 and December 25, 2022 was$13.7 million, $6.3 million, and $15.3 million, respectively.

Performance stock units

In October 2021, the Company granted 2,100,000 PSUs to each founder (the “founder PSUs”) for a total of 6,300,000 PSUs, under the 2019 Equity Incentive Plan. The founder PSUs vest upon the satisfaction of a service condition and the achievement of certain stock price goals. The founder PSUs are excluded from common stock issued and outstanding until the satisfaction of these vesting conditions and are not considered a participating security for purposes of calculating net loss per share attributable to common stockholders.

The founder PSUs are eligible to vest beginning on theone-year anniversary of the effective date of the registration statement of the Company’s IPO, and expireten years after the IPO date. The founder PSUs are comprised ofseven tranches that are eligible to vest based on the achievement of stock price goals, ranging from $30.0 - $75.0 per share, measured over a consecutive 90-calendar day trailing trading period during the performance period as set forth below.

The Company estimated the grant date fair value of the founder PSUs based on multiple stock price paths developed through the use of a Monte Carlo simulation model within a hybrid framework withtwo possible scenarios (IPO and Change of Control). A Monte Carlo simulation model also calculates a derived service period for each of theseven vesting tranches, which is the measure of the expected time to achieve each Company stock price target, as described above. A Monte Carlo simulation model requires the use of various assumptions, including the underlying stock price, volatility, expiration term, and the risk-free interest rate as of the valuation date, corresponding to the length of time remaining in the performance period, and expected dividend yield. The derived service period calculation also requires the cost of equity assumption to be used in the Monte Carlo simulation model. Term and volatility are typically the primary drivers of this valuation. An expiration term of 10 years (as defined in the grant agreements) was considered in the IPO scenario while an expiration term of 3 years was considered in the Change of Control scenario. A volatility of 52.0 percent was considered within the IPO scenario consistent with the maximum term to expiration; whereas, a common stock volatility of 90.5 percent was considered in the Change of Control scenario, which is based on the ASC 718 analysis. The weighted-average grant date fair value of the founders PSUs was $16.35 per share. The Company will recognize total stock-based compensation expense of $103.0 million over the derived service period of each tranche, which is between 1.7 to 4.4 years, using the accelerated attribution method as long as the founders satisfy the service-based vesting condition. As of December 29, 2024 unrecognized compensation expense related to PSUs was $9.8 million and is expected to be recognized over a weighted average period of 0.72 years.

During the fiscal year ended December 29, 2024, the service condition and stock price goal for the first two tranches were met, resulting in 600,000 PSUs vesting and being released for each founder during that period (for a total of 1,800,000 PSUs vesting). The fair value of the total shares released as of the vesting date during the fiscal year ended December 29, 2024 was $67.8 million, solely related to the founder PSUs, and the Company incurred $1.1 million in payroll taxes associated with the transactions which are included in general and administrative expenses within the accompanying consolidated statement of operations.

Subsequent to the Company’s IPO, the Company issued 321,428 PSUs to the Spyce founders (“Spyce PSUs”) based onthree separate performance-based milestone targets. The Company will recognize stock compensation expense related to each performance-based milestone target as it becomes probable of occurring, based on the stock price on the date of grant. During the fiscal year ended December 29, 2024, the Company modified the number of shares underlying these grants and the vesting terms to remove the performance-based component, resulting in the total number of shares decreasing to 85,395, all of which are scheduled to vest on March 15, 2025. The expense related to these RSUs is included within the RSU section above.

During the fiscal years ended December 29, 2024 and December 31, 2023 the Company didnot issue any PSUs. As described above, the Company granted a total of 6,621,248 PSUs during the fiscal year ended December 26, 2021 with a weighted average grant date fair value of $15.56. There were no grants, forfeitures, cancellations, or expirations since the grant date, and the founder PSUs released during the fiscal year ended December 29, 2024 are described above and summarized below.

The following table summarizes the Company’s PSU activity for the fiscal year ended December 29, 2024:

A summary of stock-based compensation expense recognized fiscal years ended December 29, 2024, December 31, 2023 and December 25, 2022 is as follows:

11. INCOME TAXES

The Company’s entire pretax loss for the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022 was from its U.S domestic operations. For the fiscal years ended December 29, 2024, December 31, 2023 and December 25, 2022, the Company recorded an income tax (benefit) expense of $(1.3) million, $0.4 million, and $1.3 million, respectively.

The components of the provision for income taxes for the fiscal year ended December 29, 2024, December 31, 2023, and December 25, 2022 are as follows (in thousands):

A reconciliation of the Company’s statutory income tax rate to the Company’s effective income tax rate is as follows:

Components of the Company’s net deferred tax (liabilities)/assets consisted of the following:

As of December 29, 2024 and December 31, 2023, Company management assessed the realizability of deferred tax assets, in order to determine the need for a valuation allowance. As of the fiscal years ended December 29, 2024 and December 31, 2023, the Company is in a net deferred tax asset position of $202.7 million and $184.9 million, respectively. The deferred tax assets consist principally of net operating loss carryforwards. The future realization of the tax benefits from existing temporary differences and tax attributes ultimately depends on the existence of sufficient taxable income. In assessing the realization of the deferred tax assets, management considers whether it is more likely than not that some portion or all of the deferred tax assets will not be realized. Management assesses the available positive and negative evidence to estimate if sufficient future taxable income will be generated to use the existing deferred tax assets.

In concluding on its evaluation, Company management placed significant emphasis on guidance in ASC 740, which states that “a cumulative loss in recent years is a significant piece of negative evidence that is difficult to overcome.” Such objective evidence limits the ability to consider other subjective evidence, such as the Company’s projections for future growth. On the basis of this evaluation, as of December 29, 2024 and December 31, 2023, a full valuation allowance of $202.7 million and $184.9 million, respectively, has been recorded against the deferred tax assets, which represents an increase of $17.8 million year over year.

As of December 29, 2024, the Company had U.S. Federal net operating loss carryforwards of $794.8 million, of which $692.9 million may be carried forward indefinitely, and the remaining carryforwards $101.9 million expire at various dates from 2029 through 2037. As of December 29, 2024, the Company had state net operating loss carryforwards of $682.6 million, of which $80.4 million may be carried forward indefinitely, and the remaining carryforwards of $602.2 million expire at various dates from 2024 through 2044.

The future realization of the Company’s net operating loss carryforwards and other tax attributes may also be limited by the change in ownership rules under the U.S. Internal Revenue Code Section 382. In general, under Section 382 of the Internal Revenue Code (Section 382), a corporation that undergoes an ownership change is subject to limitations on its ability to utilize its pre-change net operating loss carryovers and tax credits to offset future taxable income. The Company completed a Section 382 analysis to evaluate whether any ownership changes and related limitations impacted the Company’s ability to utilize net operating loss carryforwards or other attributes prior to their expiration dates. The Company’s existing net operating loss carryforwards and tax credits are subject to annual limitations arising from ownership changes which occurred in previous periods. Currently, the limitations imposed by Section 382 are not expected to impair the Company’s ability to fully realize its net operating losses. Future changes in the Company’s stock ownership, some of which are outside of the Company’s control, could result in an additional ownership change under Section 382 of the Code; if that occurs, the Company’s ability to utilize net operating losses could be further limited. Furthermore, the Company’s ability to utilize net operating losses of companies that we may acquire in the future may be subject to limitations under Section 382 of the Code.

The Company files income tax returns in the U.S. federal jurisdiction and in various state and local jurisdictions in which it operates, and therefore is subject to tax examination by various taxing authorities. The Company is not currently under examination and is not aware of any issues under review that could result in significant payments, accruals or material deviation from its tax positions. As of December 29, 2024, tax years from 2019 to present remain open to examination under the statutes applied by the relevant taxing jurisdictions in which the Company files tax returns. Additionally, to the extent the Company utilizes tax attribute carryforwards, such as net operating losses, the tax years in which the attribute was generated may still be adjusted upon examination by the Internal Revenue Service and state and local tax authorities.

The calculation and assessment of the Company’s tax exposures generally involve the uncertainties in the application of complex tax laws and regulations for federal, state and local jurisdictions. A tax benefit from an uncertain tax position may be recognized when it is more likely than not that the position will be sustained upon examination, including resolutions of any related appeals or litigation, on the basis of the technical merits. As of December 29, 2024 and December 31, 2023, the Company had approximately $0.1 million and $0.4 million of unrecognized tax benefits, respectively. Due to the valuation allowance position, none of the unrecognized tax benefits, if recognized, will impact the Company’s effective tax rate. The Company recognizes accrued interest and penalties, if any, related to uncertain tax positions in income tax provision in its financial statements, if applicable. The Company did not have any accrued interest of penalties associated with any uncertain tax positions, andno interest expense was recognized during the fiscal years ended December 29, 2024 and December 31, 2023. The following table summarizes the activity related to the Company’s gross uncertain tax positions for the fiscal years ended December 29, 2024 and December 31, 2023:

On March 27, 2020, President Trump signed into law the CARES Act (as defined below). Intended to provide economic relief to those impacted by the COVID-19 pandemic, the CARES Act includes provisions, among others, to enhance business’ liquidity and provide for refundable employee retention tax credits, which could be used to offset payroll tax liabilities. On March 11, 2021, President Biden signed the American Rescue Plan Act (“ARPA”). The ARPA includes several provisions, such as measures that extend and expand the employee retention credit, previously enacted under the Coronavirus Aid, Relief and Economic Security Act (“CARES

Act”), through December 31, 2021. The ARPA did not have a material impact on the Company’s consolidated financial statements. As there is no authoritative guidance under U.S. GAAP on accounting for government assistance to for-profit business entities, the Company accounts for the Employee Retention Credit “ERC” by analogy to International Accounting Standard (“IAS”) 20, Accounting for Government Grants and Disclosure of Government Assistance. In accordance with IAS 20, management determined it has reasonable assurance for receipt of the ERC and recorded the ERC benefit of $1.8 million within Labor and other related expenses and $5.1 million, within general and administrative expenses in the Consolidated Statement of Operations for the fiscal year ended December 31, 2023 as an offset to Social Security tax expense. As of December 31, 2023 the Company received $3.4 million cash payment reducing the ERC receivable within other current assets on the Consolidated Balance Sheet to $3.6 million. No additional cash payments receipts have been received to date.

12. NET LOSS PER SHARE

During the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022, the rights, including the liquidation and dividend rights, of the holders of Class A and Class B common stock were identical, except with respect to voting. As the liquidation and dividend rights were identical, the undistributed earnings were allocated on a proportionate basis and the resulting net loss per share attributable to common stockholders were, therefore, the same for both Class A and Class B common stock on an individual or combined basis.

The following table sets forth the computation of net loss per common share:

The Company’s potentially dilutive securities, which include options to purchase common stock, have been excluded from the computation of diluted net loss per share as the effect would be antidilutive. Therefore, the weighted-average number of common shares outstanding used to calculate both basic and diluted net loss per share is the same. The Company excluded the following potential common shares, presented based on amounts outstanding at each period end, from the computation of diluted net loss per share for the periods indicated because including them would have had an anti-dilutive effect:

13. RELATED-PARTY TRANSACTIONS

The Company’s founders and Chief Financial Officer each hold indirect minority passive interests in Luzzatto Opportunity Fund II, LLC, an entity which holds indirect equity interests in Welcome to the Dairy, LLC, which is the owner of the property leased by the Company for the Company’s principal corporate headquarters. For the fiscal years ended December 29, 2024, December 31, 2023, and December 25, 2022 total payments to Welcome to the Dairy, LLC, totaled $3.9 million, $4.2 million, and $5.2 million, respectively.

14. COMMITMENTS AND CONTINGENCIES

Lease Commitments

The Company is obligated under various operating leases related to its office facilities, restaurant locations, and certain equipment under non-cancelable operating leases that expire on various dates. Under certain of these leases, the Company is liable for contingent rent based on a percentage of sales in excess of specified thresholds and typically responsible for its proportionate share of real estate taxes, CAMs and other occupancy costs. Refer to Note 8, Leases, for additional information.

Purchase Obligations

Purchase obligations include agreements to purchase goods or services that are enforceable and legally binding on us and that specify all significant terms. The majority of the Company’s purchase obligations relate to amounts owed for supplies within its restaurants.

Litigation

The Company is subject to various claims, lawsuits, governmental investigations and administrative proceedings that arise in the ordinary course of business. The Company does not believe that the ultimate resolution of any of these matters will have a material effect on the Company’s financial position, results of operations, liquidity, or capital resources. However, an increase in the number of these claims, or one or more successful claims under which the Company incurs greater liabilities than the Company currently anticipates, could materially and adversely affect the Company’s business, financial position, results of operations, and cash flows.

15. Reportable Segment

The Company’s operations are conducted asone operating segment andone reportable segment. The Company’s chief operating decision maker (“CODM”) is the chief executive officer. The Company defines its segments based on the way the Company’s internally reported financial information is regularly reviewed by the CODM to analyze financial performance, make decisions, and allocate resources. The Company has one revenue stream, which is derived from retail sales of food and beverages by company-owned restaurants within the United States. The Company’s approach to designing its menu and related food and beverage offerings are consistent throughout the United States. Additionally, the Company’s food ethos, manners in which stores are operated and available channels are consistent throughout the United States. Based on these factors, the CODM manages business activities, allocates resources and assess financial performance on a consolidated basis. The accounting policies are the same as those described in the summary of significant accounting policies. Sweetgreen does not have intra-company sales or transfers.

The CODM assesses performance for Sweetgreen and decides how to allocate resources based on Net loss as reported on the Consolidated Statement of Operation. The CODM uses Net loss to monitor budget versus actual results as well as benchmarking Sweetgreen to its competitors. The competitive analysis along with the monitoring of budgeted versus actual results are used in assessing performance of Sweetgreen. The assets of the Company are managed centrally and are reported internally in the same manner as the consolidated financial statements. Therefore, no further information is disclosed herein.

Other than certain disaggregated expense information provided in relation to General and Administrative expense (“G&A”), significant expenses regularly provided to the CODM is presented on the face of the statement of operations. The CODM is also regularly provided disaggregated expense information for G&A, which is disaggregated between operating support center cost, stock-based compensation, all of which was included within G&A (see note 10), and other expenses, as shown below:

(1)Operating support center costs consist primarily of operations, technology, finance, legal, human resources, administrative personnel, and other personnel costs that support restaurant development and operations, as well as brand-related marketing.

(2)Other expense typically includes expenses recorded for accruals related to legal settlements, one-time costs incurred to acquire Spyce, amortization costs associated with the implementation of our Enterprise Risk Management system and the employer portion of the founder performance stock unit payroll tax.

Additionally, the CODM regularly reviews interest income, interest expense, depreciation and amortization and income tax expense, which are included on the face of the income statement.